Motilal Oswal Financial Services Fined Rs3 Lakh for Violations in Terminal Usage, Control over Authorised Persons

Moneylife Digital Team 09 June 2025

Investor Interest

Market regulator Securities and Exchange Board of India (SEBI) has imposed a penalty of Rs 3 lakh on Motilal Oswal Financial Services Ltd (MOSFL) following a thematic inspection that uncovered violations related to terminal usage and inadequate control over authorised persons (APs). The inspection, conducted between 1st March and 4 March 2024, found multiple breaches, including unauthorised fund-based transactions and improper monitoring of AP activities.

In an order, Amit Kapoor, SEBI’s adjudicating officer (AO), noted that as a registered intermediary, MOSFL is legally bound to comply with applicable circulars, rules, and regulations aimed at deterring wrongdoing and promoting ethical conduct in the securities market. Violations by the company, he said, warrant appropriate penalties.

MOSFL, a member of BSE and National Stock Exchange (NSE), was found to have 13 NSE and 9 BSE terminals operating from locations not declared to the regulator. Several terminals were actively used from an unreported branch in Delhi, which MOSFL disclosed only after the inspection.

Additionally, some terminals were operated by former employees, contravening SEBI’s norms on terminal access. The inspection also revealed the use of terminals by unauthorised individuals, including employees without valid National Institute of Securities Markets (NISM) certifications and ex-staff.

SEBI’s probe highlighted MOSFL’s failure to adequately monitor and report fund-based transactions involving its APs, Triventure Services Pvt Ltd and Merit Capital Market Services Pvt Ltd. Significant fund movements involving loans, consultancy fees, salaries, referral commissions and unlisted share dealings went unflagged despite internal checks.

The APs engaged in activities prohibited by SEBI, such as making or accepting payments directly to clients, entering into undocumented loan agreements and conducting transactions outside official stockbroker accounts. Documentation was often incomplete or missing, raising serious regulatory concerns.

Further, employees of APs were found to have traded using clients’ login credentials, violating security protocols. One case involved trading by an AP employee on behalf of a client closely related to the AP’s managing director (MD) without proper safeguards, breaching SEBI and NSE circulars aimed at protecting client interests.

SEBI concluded that MOSFL failed to exercise sufficient control over its APs and did not comply with regulations governing authorised terminal usage and fund-based transactions. The violations breach the SEBI Stock Brokers Regulations, SEBI Certification Regulations and multiple circulars issued by SEBI and NSE.

Earlier this year, Motilal Oswal Financial Services Ltd was slapped with a Rs7 lakh penalty by SEBI. These violations arose from issues related to margin reporting, collection violations, and other regulatory lapses uncovered during a joint inspection conducted in collaboration with stock exchanges and depositories.

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