Sebi conducted an inspection of IIFL Securities between August 18 and August 25, 2022 to look into various compliance requirements for the period beginning April 1, 2022 to July 31, 2022 and found certain alleged noncompliances of SEBI (Stock Broker) Regulations, 1992.
The violations were pertaining to monthly and quarterly settlement of funds and securities, stock reconciliation, closure of client collateral account and passing of penalty on short reporting of margin among others.
It was also alleged that IIFL Securities had generated and sent incorrect retention statements to client code ‘SWATIJNN’ as the payment of July 7, 2021 for Rs 18 crore reflected in the retention statement on July 6, 2021. However the receipt on July 7, 2021 was not shown by the company.
The regulator appointed an adjudicating officer following which a show cause notice (SCN) was issued to IIFL Securities on April 15, 2024.In its reply to the regulator on June 6, 2024, on the issue of settlement of accounts, IIFL said that the instances recorded in the SCN were “extremely negligible and do not form a martial part of the entire activity as it involves only 29 clients which comes to a negligibly small 0.003% of the total settlement done by us during the IP”.The company also denied failing to carry out reconciliation as was alleged in the SCN. It had also rejected allegations of wrong margin collection, saying that there was no wrong reporting. Further, in case of payout not done to 338 inactive clients, the IIFL submitted that the requirement was not valid for 330 clients as they were exclusively MF clients. In regard to 4 clients , the payout was not done due to issues with their bank accounts and in the case of 4 clients due to technical reasons.
In its investigation, the Sebi adjudicating officer found IIFL in violation of all the allegations made against the company in the SCN.
The adjudicating officers also held that the company was engaged in fund based activity other than broking activity.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)