The Securities and Exchange Board of India (Sebi) has levied a ₹10 lakh penalty on brokerage firm Anand Rathi Share and Stock Broker for breaching stock broker regulations. After a detailed inspection covering the period from April 2022 to October 2023, the regulator identified multiple instances of non-compliance, including failure to properly collect margins and not reporting technical glitches. Anand Rathi refuted the claims but failed to provide adequate supporting documentation, leading to the enforcement action. Sebi also penalized another brokerage firm, Nirmal Bang Securities, for separate regulatory breaches, continuing its strict oversight of market participants.

Sebi's Findings of Regulatory Non-compliance

Following an extensive inspection of Anand Rathi Share and Stock Broker Ltd from April 2022 to October 2023, Sebi identified several instances of non-compliance with stock brokers' regulations. These violations included improper collection of margins and failure to report technical glitches, which contravenes Sebi's circulars and rules laid down by the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). The regulator’s findings were critical in establishing that Anand Rathi failed to adhere to established industry standards.

Margin Shortfall and Failure to Provide Supporting Documentation

During the inspection, Sebi noted that in 55 instances, Anand Rathi had a shortfall in margin/Mark-to-Market (MTM) collection, amounting to ₹33.16 lakh. Despite Anand Rathi's claim that margins were adequately collected from clients and that the firm adhered to regulatory guidelines, no supporting documentation was provided to substantiate this assertion. Consequently, Sebi ruled that the brokerage had breached stock broker regulations, as the firm’s contention could not be validated.

Unreported Technical Glitches Highlight Operational Failures

Another key violation identified was Anand Rathi's failure to report 10 technical glitches that occurred during the inspection period between April 2022 and October 2023. According to Sebi’s regulations, brokers must report such disruptions to the relevant stock exchanges—such as the Multi Commodity Exchange (MCX)—within one hour of their occurrence. Anand Rathi’s non-compliance in this regard represents a significant breach of its statutory obligations, indicating operational lapses in adhering to real-time reporting requirements.

Breach of Code of Conduct and Regulatory Directives

Sebi concluded that Anand Rathi Share and Stock Broker contravened the Code of Conduct for Stock Brokers, which mandates strict compliance with regulatory circulars issued by the Securities and Exchange Board of India (Sebi) and other exchanges. The firm's inability to provide documentary evidence and its failure to report technical disruptions has led to the imposition of a ₹10 lakh fine, underscoring the regulator's zero-tolerance policy toward lapses in market conduct.

Separate Fine Imposed on Nirmal Bang Securities

In a parallel action, Sebi imposed a ₹2 lakh penalty on Nirmal Bang Securities Pvt Ltd, another brokerage firm. This penalty stemmed from violations identified during a thematic inspection of its books of accounts, conducted between April 2022 and May 2023. The inspection revealed discrepancies in the verification of authorized persons, adding another example of the watchdog's increased vigilance in regulating compliance among stock brokers.

Sebi’s Continued Emphasis on Regulatory Compliance

These enforcement actions reflect Sebi’s commitment to ensuring market participants comply with strict regulatory frameworks. The penalties imposed on Anand Rathi and Nirmal Bang Securities are intended to signal the importance of adhering to margin collection norms, reporting obligations, and ensuring transparency in stock brokerage operations. Sebi’s actions are critical in maintaining investor confidence and safeguarding market integrity.