Broker claims 1,103 dependent children accounts; Sebi slaps Rs 9 lakh fine

Sebi had carried out a detailed and thematic inspection of the Stocking Services Limited with the theme 'Multiple UCCs mapped to common email ID or common mobile number'

In a unique case, market regulator Security and Exchange Board of India (Sebi) stumbled upon and examined more than 1,100 client accounts linked to a single stock broker. The accounts raised concerns as clients categorised their relationship status as ‘dependent children’, a classification that contravenes SEBI’s regulations. Strangely, these account holders are aged between 34 to 100 years, according to the report by The Economic Times. 

 

These accounts are associated with stock broker ‘Stocking Services Limited’. For the violation of norms, Sebi has fined the stock broker with a penalty of Rs 9 lakh. 

What Sebi’s inspection says

According to the news report, during the period of April 1, 2022 to June 20, 2023, Sebi carried out a detailed and thematic inspection of Stocking Services Limited with the theme ‘Multiple UCCs mapped to common email id or common mobile number’. In its inspection, Sebi found that this particular stock broker did not comply with the due diligence while collecting the relationship data from 1,103 UCC (unique client code). 

 

 

Additionally, Sebi identified other violations related to client mapping. For instance, for 13 clients, the relationships recorded in the back office did not match the details provided in the KYC forms and consent letters. In the case of four clients, the relationship information was missing entirely from the KYC forms.

 

Sebi also discovered irregularities involving 234 clients whose email IDs were linked to multiple accounts, and 177 clients whose mobile numbers were similarly mapped to multiple accounts. In both instances, the relationships recorded in the back office were deemed irregular.

 

The brokerage firm has been directed to pay the penalty within 45 days.

 

Defence from stock broker

In its defense, Stockholding Services argued that the clients seemed to lack clarity regarding the declaration of mobile numbers, email IDs, and the provision of relationship details.

 

“We have a number of large old accounts of many senior citizens and others who did not have their individual email ID and mobile numbers at the time of account opening, when the regulatory requirements of exchanges were not applicable; hence it took time to get these rectifications. As regards these instances, we are in the process of promptly rectifying the observations,” the broker said.