Market regulator SEBI has levied a total penalty of Rs. 25 lakh on Svarn Financial Services and Sunflower Broking for violating regulations for stock brokers.
In an order, SEBI said that a fine of Rs. 15 lakh has been slapped on Svarn Financial Services for not settling the funds and securities of its clients for two quarters in 2011, had not removed period of revocation from ‘running account authorisation’ form even after NSE observations.
It had also made fixed monthly payments in form of interest to 10 clients for about 10 months after borrowing money from them. “Thus, noticee had indulged in a lending business, which is not within the stock broking business,” the SEBI order dated May 28 said.
Though Svarn Financial Services had surrendered its membership with NSE, it did not “absolve” the broker from the violation and default committed by it during its operation, it said.
In a separate order, the SEBI imposed a penalty of Rs. 10 lakh on Sunflower Broking for delay in compliance with the regulator’s circular relating to running account authorisation and quarterly/ monthly settlement of funds and securities. “The noticee (Sunflower Broking) by not settling the client accounts at periodic intervals and delayed in implementing the SEBI circular has exhibited low standards of integrity and fairness in the conduct of its business,” the watchdog said in an order dated May 28.
“It did not exercise due skill and care, thereby failing in its duty towards the investors thereby violating clauses ...of Broker regulations,” it added.
SEBI in its circular had asked brokers to implement the norms and ensure its full compliance in respect of all clients by March 31, 2010. However, Sunflower Broking only implemented the norms in February 2012.