The Securities and Exchange Board of India (SEBI) has imposed a penalty of Rs 7 lakh on Motilal Oswal Financial Services for alleged lapses related to collecting client margins and incorrect disclosures among other things and violating the regulations laid down for stock brokers.
In an order issued on Thursday, the capital market regulator said that it conducted an inspection of the broking firm during the period starting April 1, 2021 till June 30, 2022. Thereafter, a show cause notice was issued to the broking firm on July 4, 2024.
The key allegations mentioned in the SEBI notice were: wrong reporting & short collection of margin, incorrect data of cash & cash equivalent balances in 57 instances, engaging in businesses other than that of securities involving personal financial liability, and incorrect reporting on margin trading funding.
The SEBI notice also alleged that more than 300 – 334 to be precise -- complaints received on SCORES platform and directly from exchanges were pending with for more than 30 days and that the market intermediary did not maintain the accounts properly.
Meanwhile, Motilal Oswal Financial Services, in its reply to the SEBI show cause notice, mentioned that some of the alleged violations mentioned were “purely accidental” and “not an intentional misreporting”.
It further said that while there were a few “technical issues” as well that led to the violations, and those have already been rectified.
For instance, as per the order, SEBI, during the inspection, observed that narrations of the transactions were not correctly captured in the bank books and headers of the bank books were incorrect - payments entries were entered under the receipt column and receipt entries were entered under the payment column
In its reply, Motial Oswal Financial Services said that, “during the Inspection Period, narrations in respect of transactions for fund transfers were mapped manually which may have contributed to grey areas or inability to identify certain transactions.”
In this regard, MOFSL has taken corrective action by enabling maker / checker mechanism to ensure correctness of narrations, it added.
Meanwhile, the SEBI order has also mentioned that there is no material to prove that the market intermediary made any unlawful gains as such.
“In the instant case, I note that the material available on record does not quantify any disproportionate gain or unfair advantage or consequent loss caused to an investor or group of investors as a result of the violations committed by the Noticee,” stated the SEBI order.
“I further note that Noticee being a SEBI registered Stock Broker and Depository Participant was required to comply with the applicable provisions of securities laws, which it had failed to comply with, as dealt with and brought out in the foregoing and which SEBI is duty bound to enforce compliance of. Such failure and non-compliances accordingly needs to be dealt with suitable penalty,” it added.
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