SEBI Imposes Rs6 Lakh Penalty on Shri Venkatesh Stock Broker Services for Regulatory Lapses
Moneylife Digital Team 29 January 2025
Market regulator Securities and Exchange Board of India (SEBI), in collaboration with the Bombay Stock Exchange (BSE), has imposed a penalty of Rs6 lakh on Shri Venkatesh Stock Broker Services India Pvt Ltd for multiple violations of stockbroker regulations. The stockbroker was found to have significant lapses in compliance, including the mis-utilisation and failure to properly segregate client and proprietary funds, as well as delays in the timely settlement of client accounts.
 
In an order, Amar Navlani, adjudicating officer (AO) of SEBI, says, "I note that Shri Venkatesh Stock Broker, being a SEBI registered stock broker was required to comply  with the applicable provisions of securities laws, which it had failed to comply with, as dealt with and brought out and which SEBI is duty bound to enforce compliance of."
 
One of the major violations of Shri Venkatesh Stock Broker identified by SEBI was the misuse of client funds. On more than 50% of the sample dates, the principle of segregating client funds was found to be violated, resulting in the mis-utilisation of Rs8.12 crore. This breach contravened SEBI guidelines regarding the proper handling of client funds. Despite the broker's defence that the issue arose due to delays in recovering debit balances, SEBI found the violation substantiated and proceeded with the penalty.
 
Further scrutiny revealed that the broker had extended loans or provided advances amounting to Rs3.13 crore that were unrelated to its securities or commodity derivatives business, violating SEBI regulations on the segregation of client and own funds. Additionally, Shri Venkatesh Stock Broker failed to provide daily reconciliation statements for 229 out of 6,223 bank book transactions, raising concerns about its financial oversight.
 
SEBI investigation also uncovered that the stockbroker failed to settle inactive clients' accounts on 10 occasions, totalling Rs54.7 lakh. SEBI regulations stipulate that accounts of inactive clients should be settled within three working days. The broker's defence, which included citing client requests to withhold funds for future trades and admitting to inadvertent errors, was not supported by evidence, resulting in a confirmed violation.
 
In addition, Shri Venkatesh Stock Broker was found to have reported erroneous data regarding margin utilisation and collateral deposits on two separate occasions in January and May 2023. SEBI determined that these reporting errors violated enhanced supervision requirements. The broker admitted to a system issue and a clerical mistake but could not escape the violation.
 
Lastly, a verification of the broker's net worth as of 31 March 2023 revealed discrepancies in the reported figures. Shri Venkatesh Stock Broker failed to correctly account for doubtful debts and advances, resulting in a net worth certificate that was inaccurate by over Rs1.82 crore. This error was deemed a violation of SEBI's regulations which further supported the penalty.
 
Comments
RBI To Inject Liquidity in Banking System
Moneylife Digital Team 28 January 2025
The Reserve Bank of India (RBI) has announced three measures to inject liquidity into the banking system, including open market operations (OMO) purchase auctions of government securities worth Rs60,000 crore, swap auction of US$5bn...
Front-Running Case: SEBI Bans 8 Entities, Impounds Rs4.82 Crore Earned Illegally
Moneylife Digital Team 28 January 2025
Market regulator Securities and Exchange Board of India (SEBI) has barred eight entities from the securities market and impounded Rs4.82 of illegal gains made from front-running activities involving Gagandeep Consultancy Pvt Ltd. The...
RBI Slaps Rs7 Lakh Penalty on 2 Gujarat-based Cooperative Banks
Moneylife Digital Team 28 January 2025
The Reserve Bank of India (RBI) has imposed a total penalty of Rs7 lakh on Gujarat-based Marketyard Commercial Cooperative Bank Ltd and Kheralu Nagrik Sahakari Bank Ltd for failing to follow directions issued by the banking...
Research Analyst Punit Kumar of Shrimoney Slapped with Rs10 Lakh Penalty by SEBI
Moneylife Digital Team 28 January 2025
Market regulator Securities and Exchange Board of India (SEBI) has imposed a penalty of Rs10 lakh on Punit Kumar, proprietor of Shrimoney, a SEBI-registered research analyst (RA), for violations involved misleading clients with...
Array
Free Helpline
Legal Credit
Feedback