SEBI imposes ₹10 lakh penalty on Angel Broking for violating regulatory norms

Market regulator Securities Exchange Board of India (SEBI) imposed a penalty of ₹10 lakh on brokerage firm Angel Broking Ltd (ABL) for alleged violation of regulatory norms. The order came after a comprehensive joint inspection by SEBI, stock exchanges, and the depositories. The investigation revealed that the SEBI-registered stock and commodity broker pledged securities of clients with a credit balance and the mis-utilization was about ₹32.97 crore.

In a 78-page order, SEBI said that it was observed in 300 instances that the ABL did not do the actual settlement of funds of inactive clients. The marker regulator mentioned the non-settled amount at ₹43.96 lakh.

Additionally, in 1,081 cases, ABL failed to carry out the actual settlement of funds belonging to clients who had not engaged in any trading activity during the past three months, resulting in an outstanding amount of ₹16.65 lakh.

ABL also violated the regulations by retaining the funds and securities worth the turnover executed on the settlement date in the cash market segment after January 2020 in 85 cases, amounting to ₹10.26 lakh, which was deemed non-settled.

According to the order issued by SEBI on Friday, it was found that ABL had neglected to conduct regular reconciliations between their depository participant accounts and back office records. As a result, there was a total discrepancy of 44.72 lakh in terms of quantity, which had an absolute value of ₹1,226.73 crore.

In addition, SEBI also noted that the Noticee had given exposure to clients beyond T 2 5 days, amounting to ₹2.10 crore, despite the non-recovery of debit balances.

ABL informed the inspection team that exposure was granted based on MTM (Mark-to-Market) generated from the position held in the derivative segment. However, the regulator pointed out that the Noticee was unable to provide any evidence to support this claim, and therefore was not in compliance with the regulations.

“It also observed that the ABL had reported incorrect ledger balances of 30,602 clients and a net difference of ₹340.81 crore to the exchange for the month of October 2020 and there was a mismatch between fund balances as per ledger and daily margin statement, it added. Under the rules, a stock broker shall maintain high standards of integrity, exercise due skill and care and comply with statutory requirements, which were not followed by ABL. Therefore, ABL did not exercise due skill and care with regard to maintenance of clients records, thereby flouting the Code of Conduct of broker regulations,” SEBI order added.

(With agency inputs)

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