The Securities and Exchange Board of India (SEBI) has levied a fine of Rs. 9 lakh on Berkeley Securities Ltd, a SEBI-registered stock broker, for multiple infractions of regulatory norms.
Berkeley Securities was found to have misused credit balance client funds on several occasions. This misuse involved utilizing funds meant for credit balance clients to meet obligations of debit balance clients or for the firm’s internal purposes. The amounts misused ranged significantly, from Rs. 1.97 lakh to Rs. 81.83 lakh per instance. This action violated Section 23D of the SCR Act, 1956 which mandates strict segregation of client funds.
Additionally, Berkeley Securities failed to adhere to SEBI guidelines regarding the naming of bank accounts. While acknowledging oversight in one instance, the firm’s responses were inadequate for other accounts. Clause 2.3 of SEBI Circular SEBI/HO/MIRSD/MIRSD2/CIR/P/2016/95 requires stock exchanges and/or depositories to ensure that all existing demat accounts maintained by stock brokers are assigned appropriate nomenclature within three months from the date of the circular.
The SEBI order also highlighted discrepancies in Berkeley Securities’ handling of client funds which included delays in fund settlements for both active and inactive clients. These discrepancies, coupled with errors in stock reconciliation and inconsistencies in margin reporting, further compounded regulatory concerns.
Berkeley Securities also faced allegations of passing penalties to clients for upfront margin shortfalls. The firm’s explanations of system errors and delays in client fund transfers were held to be insufficient by SEBI.
The order also stated lapses in Berkeley Securities’ client registration processes, including failures to conduct Comprehensive Know Your Customer (CKYC) for designated clients and incomplete documentation of regulatory actions.
Further, SEBI identified inaccuracies in Berkeley Securities’ financial reporting practices which led to an overstated financial position that failed to meet minimum regulatory requirements.
The order also noted discrepancies in the verification of email IDs and mobile numbers. This impacted client communication and contract note issuance.
Berkeley Securities was also found to have overcharged brokerage fees due to clerical errors in software systems.
