SEBI had conducted am inspection in March 2024 on the theme “Control over Authorized Persons” covering the period from April 2022 to January 2024.
The Securities and Exchange Board of India (SEBI) has imposed a penalty of ₹3 lakh on Motilal Oswal Financial Services Ltd (MOFSL) for multiple regulatory violations, including failure to ensure control over trading terminals and fund-based activities carried out by its authorised persons (APs).
The order was passed on June 9 by Adjudicating Officer Amar Navlani.
SEBI had conducted am inspection in March 2024 on the theme “Control over Authorized Persons” covering the period from April 2022 to January 2024. Based on its findings, the regulator initiated adjudication proceedings under Section 15HB of the SEBI Act. The order states,
“13 terminals (NSE) were not found at the reported location…trades have been executed from 5 out of 13 terminals…4 trading terminals (BSE) were operated by other than approved users…Mr. Aditya Singh, Mr. Ayush Mishra, and Mr. Manwek Jha have terminals registered in their names (BSE); however, they do not have valid NISM Certification.”
SEBI also observed that the APs of Motilal Oswal engaged in fund-based activities. For instance,
“AP of Noticee viz Triventure Services Pvt Ltd had fund based relationship with 36 registered clients wherein 18.31 crores have been received and payments amounting to Rs. 1.24 crores have been made.”
On these grounds, SEBI held that Motilal Oswal violated provisions of the Master Circular for Stock Brokers, the Stock Brokers Regulations, and the Certification of Associated Persons Regulations.
MOFSL denied any deliberate wrongdoing and argued that at most, there were procedural lapses. It contended that the disputed terminals were located at a newly added branch of Merit Capital in New Delhi, which had subsequently been approved by the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
Regarding users without valid certification, the company submitted that such users were no longer associated with the respective AP as of March 5, 2024, leading to the deactivation of their terminals. On the issue of fund transactions, it said:
“These transactions are non-trading in nature and relate to legitimate business dealings such as loan agreements, consultancy service agreements, referral fees, and employee payments.”
After reviewing the submissions, the SEBI adjudicating officer held that violations had occurred.
“In view of the facts and circumstances of the case, I find that a penalty of Rs. 3,00,000/- (Rupees Three Lakh Only) is commensurate with the violations committed,” the order states.
The penalty is to be paid within 45 days of receipt of the order.
Motilal Oswal was represented by Regstreet Law Advisors.