Sebi Tuesday restrained stock broker CPR Capital Services, its six present and past directors and a group firm from the securities market till further directions in a matter related to misutilisation of client securities.
While the present directors are Pawan Kumar Garg, Anuj Garg and Dinesh Kumar, the past ones are Shashi Garg, Vijay Pal Singh and Anita Mann. The group firm is CPR Commodities Services, according to a Sebi order.
CPR and the seven other entities have also been directed to provide a full inventory of all their assets, whether movable or immovable or any interest or investment or charge in any of such assets in five working days.
In October 2015, the NSE carried out an inspection of CPR for the period from April 2014 to August 2015 and forwarded its observations to the Securities and Exchange Board of India (Sebi), following which the markets regulator carried out an examination of the stock broker for the period from April 2015 to December 2016.
Subsequently, another inspection of CPR from March 2016 to February 2017 was carried out by the NSE in March 2017 wherein several non-compliances were observed.
During the first inspection, the NSE observed that CPR as on August 31, 2015 had misutilised client securities amounting to Rs 26.18 crore through its director Anuj Garg and group companies -- CHP Finance, IFL Promoters and CPR Commodities Services -- by pledging them for margin and to raise funds.
In the second inspection, the exchange observed that client securities worth Rs 118 crore had been moved to CHP and IFL or sold by these group companies during the entire examination period from March 2016 to February 2017 without holding those shares.
Till February 28, 2017, the amount of securities of CPR clients received by CHP and IFL off-market from the stock broker or sold by the group companies without possessing the same was Rs 4.13 crore (Rs 2.77 crore by CHP and Rs 1.36 crore by IFL), as per the order.
The regulator had also carried out an an inspection of CPR for the period from April 2015 to December 2016, wherein it observed that there was "prima facie" misutilisation of client securities by the stock broker.
"... CHP, IFL and CPR Commodities had directly/ indirectly aided and abetted CPR and its directors in mis-utilisation of clients' funds/ securities, non-settlement of clients' funds/ securities and non-segregation of clients' funds/ securities," Sebi said.
Accordingly, CPR, its present and past directors and CHP have been restrained from accessing the securities market and prohibited from buying, selling or otherwise dealing in securities, either directly or indirectly, or being associated with the market in any manner whatsoever, "till further directions".
They have also been directed not to dispose of or alienate any assets, whether movable or immovable, except with the prior permission of Sebi.
Besides, CHP and IFL have been ordered to deposit Rs 2.77 crore and Rs 1.36 crore, respectively, in an interest bearing escrow account held with a nationalised bank, within 30 days from the date of receipt of the order.
However, if CHP and IFL fail to comply with the regulator's direction, they will be restrained from the securities market "till further directions".
"The findings recorded in the order are based on the prima facie examination of facts and prima facie violation of law," Sebi said.
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