The market regulator - SEBI - has fined Choice Equity Broking Rs 2 lakh for violations committed by the brokerage and its authorized persons (APs). According to an order issued by the Securities and Exchange Board of India (Sebi) on October 9, the brokerage failed to correctly report clients mapped to the APs to the exchanges, funds were moved between its AP and the client using the AP services in three instances, and AP terminals were used by unauthorized people.
Sebi's investigations revealed that one of the APs failed to report 226 clients to the exchange, another 118 clients, and a third seven clients. The brokerag stated that this was due to human mistake and that protocols had been modified to prevent the issue from occurring again.
The investigations also revealed that one of the brokerage's APs - Grow Capital Finance Services - was transferring funds to the client. The brokerage claimed that this was part of a personal arrangement between the AP and the customer in which the AP agreed to reimburse a portion of the brokerage received on the client's trades. According to Sebi's order, delivered by Adjudicating Officer Amar Navlani, the brokerage's case is "devoid of merit and not acceptable".
The order referred to the following sections of a circular from 2021: "the Authorized Person is prohibited from accepting any receipt or payment/delivery of funds & securities of the clients and the Authorized Person shall not collect or receive any funds or securities from the clients and shall not charge any amount from the clients, directly or indirectly, for the services rendered on behalf of the Member as an agent."
The order stated, "Furthermore, I note that the transaction involving the refund of brokerage is related to the services rendered on behalf of the Member as an agent." As a result, the Noticee's (brokerage's) claim is without merit and unacceptable."
