Sebi fines Choice Equity Broking for violations committed by entity and its authorised persons

The investigations also showed that one of the APs of the brokerage was transferring funds to the client.

Choice Equity Broking has been fined Rs 2 lakh by the market regulator for violations committed by the brokerage and its authorised persons (APs).

According to an order issued by the Securities and Exchange Board of India (Sebi) on October 9, the brokerage failed to report clients mapped to the APs correctly to the exchanges, there was movement of funds between its AP and the client the AP services in three instances and APs' terminals were used by unauthorised people.

Sebi's investigations showed that one of the APs had not reported 226 clients to the exchange, another 118 clients and a third seven clients. The brokerag submitted that this was because of human error and that processes were updated to avoid repetition of the error.

The investigations also showed that one of the APs of the brokerage -- Grow Capital Finance Services --was transferring funds to the client. The brokerage submitted that this was part of an arrangement that the AP had with the client in a personal capacity, where the AP would repay a part of the brokerage earned by the AP from the trades of the client.

Sebi's order, issued by the Adjudicating Officer Amar Navlani, said that the brokerage's contention is "devoid of merit and not acceptable".

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The order cited the provisions of a circular issued in 2021: "the Authorised Person is prohibited from accepting any receipt or payment/delivery of funds & securities of the clients and the Authorised Person shall not collect or receive any funds or securities from the clients and shall not charge any amount from the clients, directly or indirectly, for the services rendered on behalf of the Member as an agent."

The order said, "Further, I note that the transaction with respect to the refund of brokerage is in relation to the services rendered on behalf of the Member as an agent. Therefore, the Noticee’s (brokerage's) contention is devoid of merit and not acceptable."