The Securities and Exchange Board of India (SEBI) has imposed a penalty of ₹10 lakh on Axis Securities for several violations of stockbroker regulations. This action follows an inspection that took place between April 2021 and November 2022. SEBI discovered numerous compliance issues, including misreporting, mishandling of client funds, and a lack of response to customer grievances.
What are the key violations SEBI found in Axis Securities?
SEBI’s inspection revealed discrepancies in reporting, mismanagement of client funds, and improper penalty allocation.
Reporting Discrepancies: Axis Securities did not keep accurate records in the enhanced supervision reports it submitted to stock exchanges. SEBI discovered discrepancies between the stock statements and the actual holdings in depository accounts, highlighting issues with compliance.
Mishandling of Client Funds: The company did not settle client funds and securities according to the preferences set by customers. It also failed to provide necessary retention statements with account details. SEBI noted that Axis Securities transferred client securities with credit balances to a “client unpaid securities account,” which is a regulatory violation.
Improper Penalty Allocation: SEBI observed that penalties imposed on Axis Securities for short collection of margins were passed on to clients, which violates stockbroker rules. Brokers are required to bear such penalties instead of shifting them to investors.
Inadequate Grievance Redressal: The firm also failed to address customer complaints effectively, reflecting weaknesses in its compliance framework. SEBI considers grievance redressal a key responsibility of brokerage firms to maintain investor confidence.
