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SEBI prohibits a stock broker from onboarding new clients for 2 years

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SEBI Whole Time Member yesterday issued an order restraining a stock broker from onboarding new clients for 2 years on the allegations of failure to segregate its own funds from clients’ funds, misuse of the credit balances in clients’ funds for the benefit of clients having debit balances, and inappropriate designation of client bank accounts.

In the instant matter, SEBI undertook a thematic inspection and alleged that the stock broker acted in flagrant disregard to the basic due diligence expected from a stock broker registered. SEBI further alleged that the Company failed to assign proper nomenclature wherein it was keeping client funds without labelling them as “client account”.

The SEBI WTM in his order noted that even though the stock broker has now taken corrective steps to stop the alleged violations, the stock broker had acted in violation of the prudent market practices in the past and thus, the directions were issued.

The securities laws for intermediaries, globally and consistently, prohibit commingling of a customers’ securities and funds with that of others.

The complete order is enclosed for reader’s views.

Readers can also share their views with Regstreet Law Advisors on info@regstreetlaw.com

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