Mumbai: The capital market regulator Securities and Exchange Board of India (SEBI) imposed penalties on Kolkata-based GRD Securities Ltd of Rs nine lakh for alleged multiple regulatory violations. The violations include improper reconciling stock mismatch alerts, incorrect reporting, short collection of margins, and lapses in the client registration process, including know-your-customer (KYC) and KYC registration agency (KRA) compliance.
The broker did not settle client funds and securities in nine instances totalling Rs6.41 crore, failed to send retention statements to 37 clients in 60 cases and delays in settling funds for 66 clients across 104 cases. GRD Securities incorrectly reported end-of-day margin collections totaling Rs 25.14 lakh in eight instances and admitted to uploading incorrect holding statements and failed to auction client shares within the required timeframe, citing an internal policy that conflicted with SEBI regulations.
The broker GRD attributed the issues to a technical glitch but could not explain failure to report 23 stock mismatch alerts of the which 14 were accepted, while five were attributed to software glitches without evidence while incorrectly reported end-of-day margin collections totaling Rs 25.14 lakh in eight instances.
The market regulator SEBI had conducted a joint inspection with the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) to review broking activities of GRD Securities and found that GRD Securities had transferred Rs 9.49 crore from client accounts to its proprietary account through a settlement account on 15 occasions between April 2021 and March 2022 but failed to provide supporting documents of proper segregation and reconciliation of funds claimed by the broker.
The market watchdog noted deficiencies in verifying email addresses, mobile numbers and the unique client code (UCC), segregation of client funds and securities, failure to comply with monthly and quarterly settlements of funds and securities by GRD Securities.
"GRD Securities was under a statutory obligation to comply with applicable circulars, rules, and regulations. The purpose of these regulations is to deter wrongdoing and promote ethical conduct in the securities market. Therefore, such non-compliance deserves and necessitates a suitable penalty,” states the order of Barnali Mukherjee, SEBI's adjudicating officer.
The probe into verification of client registration documents revealed several discrepancies, including signed running account authorisations, client signatures on blank pages and missing contact details for which the broker claimed that outdated forms were used due to clerical errors and asserted that no client securities were misappropriated.
The verification of UCC details for GRD Securities revealed mismatches, including one PAN mismatch, eight email ID mismatches, and seven mobile number mismatches.
