SEBI Slaps Rs 9 Lakh Fine on Reliance Securities For Market Norm Violations

In a detailed 47-page order, SEBI identified numerous breaches by Reliance Securities Limited (RSL) and its authorized individuals. These infractions included the failure to keep appropriate systems for recording client orders, inconsistencies in the locations of terminals, and the absence of separation in offices shared with other brokerage firms, Hindustan Times reported.

Notably, the regulator pointed out RSL's inability to retain necessary records for offline clients associated with its authorized persons, Jitendra Kambad and Naitik Shah.

SEBI mandates brokers to preserve verifiable proof of client orders to ensure transparency and forestall unauthorized transactions.

A comprehensive inspection covering the period from April 2022 to December 2023 revealed these shortcomings. Following the inspection findings, SEBI issued a show cause notice to RSL on August 23, 2024. The inquiry aimed to verify compliance with the stock brokers' rules, NSEIL Capital Market (CM) regulations, and NSE Future & Options (FO) trading standards. SEBI's scrutiny unearthed that RSL had not only faltered in maintaining required order placement records but had also allowed unapproved individuals to operate terminals, contravening regulations that demand terminals be managed solely by approved users.

RSL acknowledged these failings, noting however that corrective actions were promptly taken. These included deactivating terminals used by unauthorized operators and improving internal controls. Despite these measures, SEBI remained critical, emphasizing that brokers must maintain compliance consistently and that corrective steps taken after an inspection do not excuse previous breaches. The regulatory body highlighted that such conduct violated NSEL CM regulations, Stock Brokers, and NSEL FO norms.

One significant area of concern was the inadequate segregation at the offices of RSL's authorized persons. In certain instances, SEBI discovered that RSL's APs were sharing premises and infrastructure with APs from different brokerage firms, a clear violation of established rules.

This lack of proper division not only breached regulations but also enabled APs to undertake unauthorized activities, including the receipt of payments from clients for non-broking services. Despite RSL's argument that some discrepancies were unintentional, the regulator dismissed these claims, insisting on the necessity for brokers to always adhere to compliance standards.

The disclosures from this inspection shed light on the importance of stringent adherence to regulatory norms within the brokerage industry. SEBI's findings serve as a reminder of the critical need for transparency, proper documentation, and the strict segregation of operations to safeguard the interests of clients.