Markets regulator Sebi has slapped a penalty of Rs 20 lakh on stock broker Bonanza Portfolio Ltd for misusing clients' funds and securities, among other issues. The regulator carried out a multi-theme inspection of books of accounts of Bonanza Portfolio (noticee) during May-July 2018 and found that the broker misutilised client funds.
It was observed that the misutilisation of the clients' funds by Bonanza (broker) is in the range of Rs 9.6 crore to Rs 45 crore from December 2017 to January 2018, and the average misutilisation amounted to Rs 24.91 crore.
The inspection report has shown a mismatch between the clients' funds available with the noticee and the total credit balance of clients, indicating that funds of the clients with credit balance were being used for meeting obligations of clients with debit balance which is not permissible under the Sebi's guidelines.
Further, it was revealed that the broker had not segregated securities of clients from own and other clients' securities, and securities of the clients have been used for purposes other than that for respective clients, thereby violating the provisions of SCRA (Securities Contracts Regulation Act) norms. Besides, Sebi noted that client funds from various client bank accounts were transferred to the noticee's overdraft account and were further transferred to the noticee's subsidiary account.
Also, it had not settled the credit balance of inactive clients within the specified time and had funded its clients beyond the stipulated period, as per the order passed on Friday. The broker raised funds by pledging clients' securities in excess of their obligations.
While imposing the fine, Sebi said broker Bonanza Portfolio has not exercised due skill, care and diligence in its operations and failed to comply with norms prescribed for stock brokers. Through a separate order, the regulator has levied a fine of Rs 2 lakh on Rosita Rabindra for violating insider trading norms in the matter of NIIT Technologies Ltd.Rabindra, who was the chief people officer of NIIT Technologies, had failed to disclose the sale transactions carried out by her in the scrip of the company during the period from February 23, 2015 to March 13, 2015. It was found that Rabindra had failed to disclose to the company and the stock exchange about the sale transaction in the scrip of the company, which amounted to Rs 7.18 lakh, which was more than Rs 5 lakh in value, thereby violating the provisions of PIT (prohibition of insider trading) Regulations.