Sebi Imposes Rs 3 Lakh Penalty on Motilal Oswal Financial Services for Stock Broker Norm Violations

The fine needs to be paid within 45 days, the Securities and Exchange Board of India (Sebi) said in its order.

The regulator conducted a thematic inspection of Motilal Oswal Financial Services Limited on the theme ‘Control over Authorized Persons’ for the period from April 2022 to January 2024.

In its probe, Sebi found that trading terminals were not found at authorised places.

“During inspection, 13 terminals (NSE) were not found at the reported location. Further, on verification of trade data as on 04-03-2024, it was observed that trades have been executed from 5 out of 13 terminals, 9 terminals (BSE) were not found at the reported location, and trades have been executed from 1 terminal,” Sebi said.

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During inspection on Verification of terminals (NSE), it was observed that 4 terminals were not operated by approved users to whom the terminals were allocated. Also, it was observed that 4 trading terminals (BSE) were operated by users other than the approved users, it added. Under the rule, a stock broker’s hall will be liable for a monetary penalty in respect of extending the use of trading terminals to any unauthorised person or place. Also, Sebi noted that Motilal Oswal Financial Services had conducted the onsite inspection of two APs (Authorised Persons) and had submitted the inspection report to BSE and NSE. However, it failed to identify fund-based activities during AP inspection and did not report fund-based activities between AP and the client to NSE in the MIS (Margin Intraday Square off) report.

Motilal Oswal Financial Services’ AP — Triventure Services — had fund-based relationships with 36 registered clients, wherein 18.31 crore have been received and payments amounting to Rs 1.24 crore have been made. In case of another AP — Merit Capital Market Services, 99 clients’ transactions were observed out of total transactions with 228 entities, amounting to Rs 5.69 crore payment to clients and Rs 5.06 crore received from clients.

“Both the APs had a fund-based relationship with the clients. Thus noticee (Motilal Oswal Financial Services) did not ensure that its APs are engaged only in permitted activities and are not undertaking any business which are disallowed under the Byelaws, Rules & Regulations and circulars of Sebi/exchanges,” Sebi said in its order.

Through such activities, Motilal Oswal Financial Services violated stock brokers’ rules and accordingly imposed a penalty of Rs 3 lakh for the violations.