Sebi imposes Rs 10 lakh penalty on Share India Securities

Sebi imposes Rs 10 lakh penalty on Share India Securities

Market watchdog Sebi today slapped a fine of Rs 10 lakh on Share India Securities for allegedly failing to comply with stock broker norms.

"A penalty of Rs 10 lakh on the noticee (Share India Securities) ... imposed on the noticee is commensurate with the defaults committed by it," said an order by the Securities and Exchange Board of India (Sebi).

The regulator, in its show cause notice, alleged that Share India (formerly known as FMS Securities) had dealt with Rishabh Shares and Securities Ltd (RSSL)and PSV Enterprises who were not registered with Sebi as sub-brokers to trade on the stock exchange.
It was also alleged that Share India knowingly traded on behalf of clients of Rishabh Shares and through RSSL and allowed its sister concern (MG Capital) to settle accounts with RSSL.

These transactions of money were not done through banking channel and therefore, Share India failed to deliver security or make payment due to clients within the prescribed time and manner stipulated by the regulator.

The brokers' regulations prohibit any stock broker from dealing with any person as a sub-broker unless that person is registered with Sebi as sub-broker.

"...noticee had knowingly dealt with Rishabh Shares, who is an unregistered sub-broker, by trading on behalf of its clients.

"Further the noticee had knowingly dealt on behalf of the clients of Rishabh Shares through Rishabh Shares and allowed its sister concern to settle/ adjust accounts/funds with Rishabh Shares and such money transactions was not done through the banking channel. Thus violated Sebi brokers regulations," Sebi said today.

In a separate order, Sebi said it has disposed of a case against JRG Securities for alleged violation of broker norms.

It was alleged that JRG Securities had pledged securities of certain clients in October 2009, with the clearing member (Stock Holding Corporation of India Ltd -SHCIL) for availing overall exposure in the Future & Option (F&O) segments.

The securities pledged were of Bharti Airtel, HUL, ICICI Bank, ITC, Reliance Industries, Suzlon Energy Ltd and Tata Steel among others.

It was also alleged that the broker had pledged securities belonging to its clients, without their knowledge.

"I am compelled to conclude that the allegation that the noticee had pledged the securities of its clients without the knowledge of its clients does not stand established, especially since the clients have authorised the noticee to pledge the securities," Sebi Adjudicating Officer D Sura Reddy said in an order.

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