SEBI imposes ₹9 lakh penalty on Reliance Securities for breaching market, stock broker norms
- SEBI's order came after NSE and BSE conducted a thematic onsite inspection of the books of accounts, records, and other documents of authorised persons of Reliance Securities Ltd
Capital markets regulator Securities and Exchange Board of India (SEBI) on Friday, November 29, penalized Reliance Securities with ₹9 lakh for flouting market norms and stock broker rules. The order came after the regulator and exchanges, NSE and BSE, conducted a thematic onsite inspection of the books of accounts, records, and other documents of authorised persons (APs) of Reliance Securities Ltd (RSL), a SEBI-registered stock broker.
The inspection was conducted from April 2022 to December 2023 to ascertain whether the same are being maintained in the manner required by RSL with respect to provisions of stock brokers' rules, NSEIL Capital Market (CM) regulations, and NSE Future & Options (FO) trading norms. Under the inspection findings, SEBI issued a show-cause notice to RSL on August 23, 2024.
SEBI imposes penalty on Reliance Securities
In a 47-page order, SEBI found multiple violations committed by RSL and its authorised persons, including non-maintenance of adequate systems for recording client order placements, discrepancies in terminal locations, and lack of segregation at offices shared with other brokers.
The inspection also found that RSL failed to maintain the order placement records for offline clients mapped to its APs, namely Jitendra Kambad and Naitik Shah. SEBI has mandated brokers to retain verifiable evidence of client orders to ensure transparency and prevent unauthorised trades.
However, the order said RSL admitted to lapses but stated corrective measures had been undertaken, including deactivating terminals operated by unapproved users. Further, SEBI has flagged unauthorised personnel operating these terminals, breaching norms requiring terminals to be handled only by approved users.
The inspection also exposed inadequate segregation at the offices of RSL's authorised persons. At some locations, SEBI found that RSL APs shared premises and infrastructure with APs of other brokers, thereby violating rules.
The regulator noted that the lack of proper supervision allowed APs to engage in unauthorised activities, including receiving client payments for non-broking purposes. RSL contended that certain discrepancies were inadvertent. It submitted that it took remedial steps, such as deactivating unapproved terminals and enhancing internal controls.
However, the regulator rejected these arguments, stating that brokers must always maintain compliance and that corrective measures post-inspection do not negate past violations. Reliance Securities contravened NSEL CM regulations, Stock Brokers, and NSEL FO norms by indulging in these activities.
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