Sebi bans IIFL Securities from onboarding new clients for two years

Brokerage was mixing clients' funds with proprietary funds, says Sebi order

The Securities and Exchange Board of India (Sebi) on Monday banned IIFL Securities from onboarding new clients for two years for alleged misuse of client funds.

As per the Sebi order, IIFL Securities was mixing clients’ funds with its own funds before using those mixed funds for its own proprietary usage.

“In the end, it was using funds of its credit balance clients to not only fund trades of its debit balance clients but also to fund its own trades,” the markets regulator said in an order. The case dates back to the 2013-14 period.

The Sebi order said it had found no instances of misuse of clients funds by IIFL Securities subsequent to implementation of enhanced supervision circular on September 26, 2016. 

Sources said the company may appeal against the Sebi order before the Securities Appellate Tribunal.

For the case, the market watchdog issued two showcause notices to IIFL Securities, one in May 2017, and the other in October 2021.

The regulator had conducted an inspection of the brokerage’s books of accounts between January 30 to February 3, 2014 after which the records and the processes of the stock broker – for the period between April 1, 2011 and December 31, 2013 -- were inspected.

The purpose was to examine whether the firm was working in compliance with certain provisions of circulars of the regulator. 

But, it was noticed that the actions of IIFL were not in tune with some provisions of a circular issued by Sebi.