The Securities and Exchange Board of India (SEBI) imposed a fine of ₹9 lakh on Reliance Securities for violating market norms and stock broker rules, as announced on Friday. This action followed an inspection conducted by the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) on the accounts and documents of Reliance Securities’ authorized persons (APs). The purpose of the inspection was to ensure compliance with stock broker regulations, NSEIL Capital Market (CM) guidelines, and NSE Future & Options (FO) trading norms, covering the period from April 2022 to December 2023.
Based on the inspection findings, SEBI issued a show cause notice to Reliance Securities on August 23, 2024. In its 47-page order, SEBI identified multiple violations, including inadequate systems for recording client orders, discrepancies in terminal locations, and insufficient segregation in offices shared with other brokers. The inspection also found that Reliance Securities failed to maintain the necessary order placement records for offline clients associated with its APs, Jitendra Kambad and Naitik Shah.
SEBI emphasized the requirement for brokers to maintain verifiable evidence of client orders to ensure transparency and prevent unauthorized trades. Reliance Securities admitted to the lapses but stated that corrective measures, such as deactivating terminals operated by unapproved users, had been taken. SEBI flagged these unauthorized terminals as violations of rules that require terminals to be handled only by approved users.
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The inspection also revealed issues with inadequate segregation at Reliance Securities’ AP offices. At certain locations, APs were found sharing office space and infrastructure with APs from other brokers, violating regulations. Furthermore, SEBI observed that the lack of proper oversight allowed APs to engage in unauthorized activities, including receiving payments from clients for non-broking services.
While Reliance Securities argued that some discrepancies were inadvertent and claimed to have implemented corrective actions, SEBI rejected these defenses. The regulator stated that “brokers are required to maintain compliance at all times, and corrective measures post-inspection do not negate past violations.” The actions of Reliance Securities were deemed violations of NSEL CM regulations, Stock Brokers, and NSEL FO norms.
