Market regulator Securities and Exchange Board of India (SEBI) has imposed a penalty of Rs6 lakh on Angel One Ltd following an inspection that revealed significant lapses in the company's operations, including failures in client fund settlements, technical glitches, and inadequate oversight of its authorised persons (APs).
In an order, Barnali Mukherjee, adjudicating officer (AO) of SEBI, says, "As a SEBI registered intermediary, Angel One was under statutory obligation to comply with the applicable circulars, rules and regulations. The very purpose of the said regulations is to deter wrong doing and promote ethical conduct in the securities market. Therefore, such non-compliance deserves and attracts a suitable penalty."
SEBI's inspection, conducted between 15 January 2024 and 19 January 2024, focused on two key aspects: adherence to regulatory requirements related to client fund settlement and Angel One's response to technical issues.
SEBI's investigation revealed that Angel One failed to settle client funds in 252 cases, affecting 76 clients and totalling Rs12.77 crore, violating SEBI Circular SEBI/HO/MIRSD/DOP/P/CIR/2021/577. This circular mandates the settlement of funds for inactive clients within three working days of the last transaction.
Angel One cited reasons like incorrect bank details, blocked accounts, and rejected settlements, but SEBI maintained that these did not excuse the delays. The brokerage also acknowledged an unsettled internal account, attributing it to a misunderstanding, yet SEBI stressed that all accounts must be settled promptly.
In addition to client fund settlement issues, SEBI found that Angel One had experienced technical glitches on its trading platform between May and June 2023. These glitches, however, were not reported to the stock exchanges within the stipulated time frame.
One particular incident on 8 May 2023 was reported with a delay of over two hours, breaching SEBI's guideline to report technical issues within one hour of occurrence. Such lapses in reporting technical glitches can compromise the integrity and reliability of trading systems, making it imperative for stock brokers to adhere strictly to reporting requirements to maintain transparency and protect investors' interests, the market regulator says.
SEBI's inspection of Angel One revealed significant deficiencies in its oversight of APs. The company failed to inspect its APs properly and did not maintain adequate segregation between broking and non-broking activities. This led to violations at three APs, raising concerns about Angel One's internal controls.
Notably, AP Rajesh S Sagvekar failed to provide pre-order trade confirmations, citing technical issues. However, SEBI found the post-trade confirmations inadequate and lacking evidence. Additionally, AP Vijay Babaji Bonte failed to display the required regulatory documents, highlighting the need for brokers to better oversee APs.
The inspection also uncovered a severe violation involving AP Balu Motiram Bharti, who allowed employees of Ravindra Bharti Education Institute Pvt Ltd (RBEIPL), an unregistered investment adviser, to interact with clients. These employees urged clients to execute certain trades, thus violating SEBI regulations that prohibit APs from dealing with unregistered intermediaries.
This breach was particularly troubling because Angel One internal audits had failed to identify the violation. The lack of proper segregation of broking and non-broking activities in AP offices and the involvement of unregistered entities in advising clients emphasises the need for stricter compliance monitoring by stockbrokers to avoid regulatory breaches.
Given the seriousness of the violations, SEBI imposed a penalty of Rs6 lakh on Angel One for its failure to comply with stockbroking regulations.
