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SEBI Slaps Rs6 Lakh Penalty on Junjharji Investment for Multiple Regulatory Violations
Moneylife Digital Team 05 February 2025
Investor Interest
Market regulator Securities and Exchange Board of India (SEBI), has imposed a penalty of Rs6 lakh on Junjharji Investment Pvt Ltd (JIPL) for multiple regulatory violations, including the misuse of client funds, false margin reporting, failure to settle funds, improper handling of client securities and other significant violations.
 
In an order, Amar Navlani, adjudicating officer (AO) of SEBI, says, "I note that Junjharji Investment, being a SEBI registered intermediary, was required to comply with the applicable provisions of securities laws, which it had failed to comply with, as dealt with and brought out in the foregoing and which SEBI is duty bound to enforce compliance of."
 
SEBI, in collaboration with the National Stock Exchange (NSE), conducted a detailed inspection of Junjharji Investment covering the period from April 2021 to December 2022.
 
SEBI's investigation revealed that Junjharji Investment misused client funds on 38 different occasions, ranging from Rs80,000 to Rs1.03 crore. Furthermore, there were 12 instances where funds were misused for margin obligations, with amounts between Rs5.70 lakh and Rs2.92 crore. Additionally, funds were transferred between client and proprietary accounts in 87 instances, violating Section 23D of the SC(R) Act, 1956. 
 
The broker response, which claimed that periodic settlement and retention statements were provided, was deemed insufficient as the submitted documents lacked supporting evidence, such as bank statements, to confirm the claims. As a result, it was determined that Junjharji Investment failed to settle funds in 62 cases, did not send retention statements in 123 instances, and delayed them in five cases, thereby violating SEBI's circulars from 2016, 2009 and 2021.
 
In addition to these issues, SEBI found that Junjharji Investment falsely reported margins to the exchange in seven sampled instances, amounting to Rs14.02 lakh. Despite the broker's assertion that margin reporting was automated, SEBI concluded that the regulatory responsibility rested with the broker, and the false margin reporting was substantiated. 
 
SEBI also noted that the broker funded two out of 10 sampled clients beyond the allowed T+2+5 days, with a total funding of Rs7.15 lakh, violating SEBI's funding regulations. Junjharji Investment's explanations for these discrepancies were deemed vague and unsubstantiated by the market regulator and the violation was upheld.
 
SEBI's inspection also revealed that Junjharji Investment allowed unauthorised individuals to operate terminals in the names of Aditya Karwa and Kamal Kishore Karwa, in violation of the Code of Conduct Regulations. Additionally, the broker failed to comply with SEBI's circular by not displaying the investor charter at its office or on its website. Despite the broker's claim that the investor charter was available online, SEBI found no supporting evidence during the inspection to confirm this.
 
Moreover, Junjharji Investment was found to have no system in place to record or preserve client calls. The broker's arguments that it had systems in place to store client orders, including voice recordings, were unsupported by evidence. 
 
SEBI also discovered that the broker failed to prove the existence of adequate cybersecurity measures, such as CCTV surveillance and two-factor authentication, violating SEBI's cybersecurity regulations.
 
SEBI then imposed a penalty of Rs6 lakh on Junjharji Investment, highlighting numerous lapses by the broker in adhering to key regulations.
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