HDFC Bank refuses to entertain BMA clients' plea to return shares

HDFC Bank has refused to entertain a plea by investors to return their shares that were fraudulently pledged by suspended brokerage BMA Wealth Creators. The beleaguered clients of BMA had pleaded with the lender to return the shares to their depository participant (DP) accounts. 

In a letter to BMA’s clients, HDFC Bank said it was well within its legal rights to sell shares pledged by the brokerage under the loan agreements. It further claimed that BMA had “expressly represented” that it owned the shares pledged.

The clients’ letter stated that they were in possession of a document written by BMA where it clearly stated that the pledged shares belonged to clients and requested HDFC Bank not to sell them, which the bank did not agree with. 

“With regard to BMA Wealth, we would like to state that the bank has followed the necessary process. On the letter by purported investors, the bank has sent an appropriate response. Beyond this, we have nothing to add,” said an official of the bank.

Some investors had even threatened to move Reserve Bank of India (RBI) and Securities Appellate Tribunal (SAT) against HDFC Bank, if it didn’t return the shares.

HDFC Bank said: “If you persist in proceeding with any of the misconceived actions threatened by you, the bank shall defend the same strongly.” In October, the Securities and Exchange Board of India (Sebi), in an interim order, barred BMA over irregularities. 

Allegations against the broker were that it furnished misleading information to the exchange, did not segregate securities of clients, and failed to unpledge as well as return securities to clients upon fulfilment of pay-in obligation. It made an unauthorised transfer of shares from client demat accounts.

The Sebi order mentions an e-mail from the National Stock Exchange (NSE) regarding significant mismatches and inconsistencies in the balances reported by BMA. 

A shortfall of close to ~100 crore worth of client securities was observed as compared to the actual records, the order stated. In the final order, Sebi asked BMA to provide a full inventory of all its assets. 

The stock exchanges and clearing corporations were directed to ensure that shortfall of client funds are made good through realisation of funds from these assets.

The Sebi order mentions an e-mail from NSE regarding significant mismatches and inconsistencies in the balances reported by BMA.