Capital markets regulator Sebi today imposed a penalty of Rs 30 lakh on Anand Rathi Share and Stock Brokers for violating norms with regard to transfer of client's money from equity broking to commodity broking unit.
A probe by the Securities and Exchange Board of India (Sebi) found that there was transfer of funds between the client bank account maintained by Anand Rathi Share and bank accounts of Anand Rathi Commodities.
Anand Rathi Commodities is a group company of Anand Rathi Share, which deals in commodities market.
The markets regulator said that Anand Rathi Share has completely stopped the practice of funds transfer of clients across the company of Anand Rathi Share to Anand Rathi Commodities since April 21, 2014 and it has even changed its inter-segment and inter-company transfer of funds policy.
In the present case, Sebi said there were 21,198 instances amounting to Rs 220 crore of transfer of funds (payments and receipts) between Anand Rathi Share's client bank account and Anand Rathi Commodities during the financial year 2012-13.
Out of these fund transfers, there were a total of 11,220 instances, amounting to Rs 119 crore, of payments made from Anand Rathi Share's client bank account to Anand Rathi Commodities.
In 9,973 cases, a total of Rs 101 crore were received in Anand Rathi Share's client bank account from Anand Rathi Commodities.
The brokerage firm said that funds were transferred from/to commodities account to securities account to facilitate the client and fulfill his obligation in respective segment for the ease of operation to client who was trading across various segments.
The markets watchdog Sebi said that Anand Rathi Share has followed the practice of transfer of funds between commodities and securities broking companies on a frequent and regular basis.
"If argument put forward by the notice (Anand Rathi Share) that the said transfers are executed with client's consent is accepted, it will also convey a wrong message to the market participants that this practice has been regularised. This may also have wider implications from systemic point of view," Sebi said in an order.
By indulging in such activities, Anand Rathi Share has failed to exercise 'due skill and care' in conduct of its business and has failed to comply with statutory requirements under Sebi (Stock-Brokers & Sub-Brokers) Regulations.
Accordingly, Sebi has imposed a "monetary penalty of Rs 30 lakh on the noticee which will be commensurate with the default committed by it.
