New Delhi: Capital markets regulator SEBI has imposed a penalty of Rs 10 lakh on brokerage firm Angel Broking Ltd for alleged violation of regulatory norms. Angel Broking Limited (now known as Angel One Limited) is a SEBI-registered stock and commodity broker. The firm is listed on both the exchanges – BSE and NSE.
The order comes after SEBI along with the stock exchanges and depositories conducted a comprehensive joint inspection of the functioning of Angel Broking Limited (ABL). The period of inspection was from April 2019 to December 2020. Based on the findings of the inspection, the market watchdog initiated judicial proceedings against ABL.
Sebi, in its 78-page order, found that ABL has pledged securities of customers who have credit balance in the account and the misappropriation was to the extent of Rs 32.97 crore. Further, the regulator found that the payees of notices (ABLs) did not actually settle funds of dormant customers during the inspection period in 300 cases and the non-settlement amount was Rs 43.96 lakh.
Further, in 1,081 cases, ABL did not actually settle funds of customers who did not trade in the last three months and the non-settled amount was Rs 16.65 lakh. ABL retained 85 times the value of funds and securities to the extent of the value of turnover executed on the date of settlement in the cash market segment after January 2020 and the unsettled amount was deemed to be Rs 10.26 lakh, thereby violating the rules happened.
Sebi, in an order passed on Friday, said the noticee had not reconciled the depository participant accounts and back office records in a timely manner and there was a difference of Rs 44.72 lakh in aggregate amount, amounting to Rs 1,226.73 crore. Despite non-recovery of the debit balance, the regulator also observed that the noticeee has provided exposure to the customer in excess of T+2+5 days, amounting to Rs 2.10 crore. The noticee informed the inspection team that MTM (mark-to-market) exposure arising out of the position in the derivatives segment was considered to be given.
However, it failed to provide any evidence to corroborate its submission and thus the regulations were not followed, the regulator said. It was also observed that ABL reported incorrect ledger balances of 30,602 customers to the Exchange for the month of October 2020 and a net difference of Rs 340.81 crore and there was a mismatch between fund balances as per the ledger and daily margin statement. Under the rules, a stock broker shall maintain high standards of integrity, exercise reasonable skill and care and comply with statutory requirements, which were not followed by ABL. Therefore, ABL did not exercise due skill and care with respect to the maintenance of records of the clients, thereby violating the Code of Conduct of Brokers Rules.