SEBI Bans IIFL Securities, Restricts New Clients for 2 Years
MUMBAI – In a significant move, the Securities and Exchange Board of India (SEBI) has sanctioned a two-year ban on IIFL Securities, prohibiting them from accepting new clients due to violations of stock broker code of conduct regulations.
SEBI’s action comes after a comprehensive investigation, encompassing six inspections, conducted by the regulatory body into the operations of IIFL Securities. In his official order, S.K Mohanty, a wholetime member of SEBI, announced the resolution of the two inquiry proceedings initiated against the brokerage.
The genesis of the issue dates back to 2014 when SEBI conducted an audit of IIFL Securities’ book of accounts to assess compliance with regulations. The investigation revealed that IIFL Securities failed to segregate their own funds from those of their clients, thereby misusing credit balances in clients’ accounts to benefit clients with debit balances.
Subsequently, SEBI undertook a series of inspections and initiated two separate inquiry proceedings against the brokerage. During these investigations, SEBI discovered a regular transfer of funds from client bank accounts and clients’ dividend accounts to IIFL’s pool accounts, which were treated as the company’s own bank accounts.
Mohanty stated in the final order, “Upon uncovering evidence of fund mixing and the utilization of funds from such mixed accounts for the Noticee’s proprietary use, it became crucial to investigate whether clients’ funds were being misused following such mixing.”
SEBI issued two showcause notices to IIFL Securities, the first in May 2017 and the second in October 2021. After an extensive examination of the matter over a period of six years, SEBI has deemed IIFL Securities guilty and has imposed a ban on the brokerage from acquiring new clients.
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Mohanty emphasized, “It is evident that the Noticee has blatantly violated the provisions of the SEBI 1993 circular in various ways, completely disregarding the fundamental principles outlined in the circular, both in letter and spirit, in defiance of regulatory instructions.”
In light of these findings, SEBI’s decisive action against IIFL Securities underscores the importance of upholding integrity and compliance within the stock brokerage industry.
About IIFL Securities:
IIFL Securities Limited, previously known as India Infoline Limited, boasts a rich history of nearly twenty years in the field of retail broking and the distribution of financial products. As one of India’s foremost independent providers of comprehensive retail and institutional broking services, they have established themselves as a prominent name in the industry.
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