Allegations of Aditya Birla Money's broker regulation violations dismissed by SEBI

19 Jul 2023 , 10:59 AM

In a ruling released on July 18, the market regulator refuted claims that Aditya Birla Money had broken broker laws.

The Securities and Exchange Board of India (SEBI) officers looked into allegations that some organizations used fraudulent paperwork to dematerialize and sell shares in inactive accounts between September 2009 and March 2013.

The brokerage was charged with failing to conduct its business with the appropriate skill, care, diligence, professionalism, and efficiency in reference to the dealings of one of its clients, Abhay Dattatray. The inquiry revealed that the brokerage had not properly checked the client’s email address and mobile number, and that it had not informed the Financial Intelligence Unit (FIU) of the client’s transactions, which were out of proportion to his income.

In light of these, it was claimed that the brokerage had broken clause A(2) of the Code of Conduct, as set forth in Schedule II, when read with regulation 9(f) of the Securities and Exchange Board of India (Stock-Brokers) Regulations, 1992.

In response, SEBI appointed a Designated Authority (DA) to look into these claims. Following an investigation, the DA determined that the first accusation, failing to check client information, was unfounded, but that the second charge, failing to disclose suspicious transactions, had some merit.

The brokerage was required, per SEBI circulars on the prevention of money laundering, to report specific customer transactions to the FIU, ‘which it failed to do,’ the DA claims.

As a result, the DA suggested suspending the brokerage’s Certificate of Registration for three months.

The brokerage received a show-cause notice and submitted its responses.

After taking all of this into account, SEBI issued its final order. The brokerage claimed that the client had acquired the shares under examination through off-market transactions. Accordingly, ‘the noticee, as a broker, could not have been involved in the credit of such shares’ to the client’s account, according to the SEBI order.

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