On Wednesday, August 21, 2024, the Securities and Exchange Board of India (SEBI) imposed a ₹11 lakh penalty on IIFL Securities Limited. This penalty was levied after an inspection of the company’s operations from April to July 2022 revealed multiple compliance issues.
During the inspection, SEBI identified that IIFL Securities was not adhering to the prescribed rules. On April 15, 2024, SEBI issued a show cause notice to the firm. A comprehensive 35-page order outlined various operational deficiencies. IIFL Securities acknowledged some issues, particularly with the settlement of client funds and securities, attributing these problems to a technical malfunction. However, SEBI’s adjudicating officer, Barnali Mukherjee, emphasized that brokers are required to settle accounts and dispatch statements in a timely manner.
One key issue was the company’s failure to regularly reconcile client accounts. Reconciliation is essential for ensuring that transaction records are consistent between the brokerage and clients, and the lack of it could lead to financial discrepancies for clients.
Additionally, SEBI found that IIFL Securities had insufficient measures in place to protect client securities, leaving them vulnerable to potential risks. The firm also delayed sending crucial information to clients, such as account statements and confirmations, which are vital for making informed decisions.
Other concerns included incorrect reporting of shares in weekly statements and inadequate explanations for penalties imposed on clients due to short reporting of upfront margins, totaling ₹85.41 lakh across various market segments.
This penalty from SEBI underscores the importance of strict adherence to regulatory standards for brokerage firms. It serves as a significant reminder for IIFL Securities and other firms to comply with SEBI’s regulations and prioritize the protection of client interests.
