Mumbai: The Securities and Exchange Board of India, or Sebi, settled a dispute with Reliance Securities Ltd (RSL) with a consent order on Thursday, under which the brokerage will spend Rs1 crore within six months on investor education and not add any new clients for 45 days starting 15 June.
The brokerage will also pay Rs25 lakh towards settlement charges.
The order follows a Sebi investigation into RSL’s books and accounts for fiscal 2007 and fiscal 2008, which said that it had allegedly violated various clauses of Sebi stock brokers and sub-brokers regulations.
“Consent (was) arrived at voluntarily without admission or denial of guilt,” an RSL spokesperson said. “Existing customers will continue to trade on (the) company’s platforms. RSL has voluntarily agreed it will not register new clients for 45 days.”
The Sebi inquiry had cited 20 irregularities, including the brokerage not informing clients about various charges at the time of opening accounts.
It also said that RSL sought power of attorney in the name of Reliance Commodities Ltd from clients and used this to debit clients’ bank accounts, purchase and sell post office deposits and government of India bonds among other transactions.
The regulator also said that the brokerage, not fully equipped to handle its customer base at the time, used the name Reliance Money at all its offices and on employee visiting cards, instead of Reliance Securities, which was the registered trading member, leading to confusion.
The Sebi investigation had said the brokerage was found to have received funds from other client bank accounts other than the ones available to it, thus failing to have a sound third-party check on the receipt of payments.
The regulator’s inquiry also said that RSL did not update client details despite the stock exchanges pointing this out in their inspection reports.
The Sebi inquiry had said RSL also collected higher securities transaction tax from its clients in 2006-2008, allotted more than one terminal in the same segment for a single user, and also collected cheques in the name of Reliance Money.
It also said that the brokerage did not maintain clear segregation between broking and other activities of group companies.
Further, the regulator’s probe said that there were frequent disruptions in the brokerage’s trading platfrom, which showed connectivity problems at the applicant’s end.
Vikrant Gugnani, executive director, Reliance Money and CEO, international business, said a number of dedicated outlets had to be shut down as they could not get a leased line connectivity at those sites. In the absence of such bandwidth, Reliance Securities was unable to offer direct, real-time services on its platform, he added.