This brokerage firm was severely penalised by SEBI, and it will be prohibited from adding any new customers for two years

 This brokerage firm was severely penalised by SEBI, and it will be prohibited from adding any new customers for two years

On IIFL Securities, there has been significant news. The company is not allowed to acquire new customers for the next two years, according to the stock market regulator SEBI (SEBI).

In Delhi. The brokerage firm IIFL Securities (previously India Infoline Ltd.) has been prohibited from accepting new clients for two years by the Securities and Exchange Board of India (SEBI). This SEBI directive solely applies to stockbroking operations. Due to misappropriation of customer funds, a negative balance, and disregard for client account regulations, it has been outlawed. Following repeated audits of IIFL's financial records for the period of April 2011 to January 2017, SEBI issued this directive.

In the course of its examination, SEBI discovered that from April 2011 to June 2014, IIFL settled its proprietary trading deals using customer funds that had not yet been spent. According to SEBI, IIFL has violated the 1993 circular's clauses in a number of different ways. Because of this, the company is being subject to heavy punishment.

Using client money

The trades of clients with debit balances were applied to clients with credit balances, according to SEBI's directive. Out of 809 trading days, the corporation completed this work in 795 trading days. SEBI looked into the accounts between April 1, 2011, and June 30, 2014. In the meantime, the brokerage firm engaged in proprietary transactions using the funds of the clients with credit balances. This was done by the brokerage firm throughout 42 trading sessions.

Brokerage firm found accountable

After reviewing all of the information, SEBI whole-time member SK Mohanty wrote in his order, "I have no difficulty in coming to the conclusion that the company has breached the terms of SEBI's 1993 circular by squandering the funds of its clients. Additionally, the business repaid its debts on loans by using money from consumers who had credit balances. The regulator fined IIFL Rs 1 crore in May 2022 for misappropriating client cash.

What impact will it have on customers?

SEBI did not make this judgement on the spur of the moment; rather, the regulator found IIFL accountable for endangering consumers' financial interests from 2011 to 2017 and only then made the difficult decision to halt taking on new clients for a period of two years. This circular makes it abundantly apparent that consumers may conduct business as usual. His service will continue as per the prior regulations.