SEBI Fines Motilal Oswal & Anand Rathi | Find Out Why

Following inspections for suspected violations of stock broking regulations, the Securities and Exchange Board of India (Sebi), the market watchdog, on Thursday levied fines of Rs 7 lakh and Rs 5 lakh on Motilal Oswal Financial Services (MOFSL) and Anand Rathi Share & Stock Broking, respectively.

MOFSL received the penalty during an examination covering the period from April 1, 2021, to June 30, 2022. Anand Rathi's inspection window, meanwhile, ran from April 1, 2020, to October 31, 2021.

The MOFSL Case

"In the exercise of the authority granted to me under Section 15-I of the SEBI Act, 1992 r/w Rule 5 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, I hereby impose a penalty of Rs 7,00,000 (Rupees Seven Lakhs Only), as per Table below, on the Noticee for the aforementioned violations, as discussed in this order, after taking into account the facts and circumstances of the case, materials available on record, the Noticee's submissions, and the factors mentioned in the preceding paragraphs. According to me, the aforementioned punishment will be appropriate for the Noticee's infractions," the 62-page ruling said.

Sebi discovered infractions pertaining to reporting and short-collection of margin during its examination.

Additionally, the market watchdog found that the brokerage had posted weekly cash and cash equivalent balance data incorrectly in 57 cases.

Additionally, it was determined that the broker had violated the rules pertaining to arbitration and complaints against the trading member. In this context, it was noted and stated that 334 complaints that were received directly from exchanges and on SCORES were outstanding with the trading member for over 30 days throughout the inspection period.



Additionally, Sebi's investigation revealed insufficient bank book maintenance, including faulty transaction narrations and inappropriate bank book headings.

MOFSL has forty-five days to pay the sum.

The Case of Anand Rathi

On October 11, 2023, Sebi sent Anand Rathi a Show Cause Notice (SCN) asking for an explanation of why the brokerage should not be subject to an investigation and a penalty for the infractions it had committed.

During its assessment, Sebi discovered that the business had misused money. In 6 out of 43 sample cases, consumers with credit balances had their money improperly used to pay debts owed to clients with debit balances or for other reasons. The misappropriation varied from Rs 16.36 crore to Rs 22.07 lakhs. One case included the improper use of credit balance customers' cash for proprietary margin obligations and debit balance clients' margin obligations.

Additionally, throughout the inspection period, the trading members of the firm failed to preserve the daily reconciliation statement.

Furthermore, the business failed to follow up with untraceable customers to address disputes over money.

Unauthorized trading and daily margin statement verifications were the additional infractions.