IIFL Securities has been fined Rs 11 lakh by the capital markets regulator for breaking several guidelines and rules stipulated in the Securities Contracts (Regulations) Rules, including borrowing money from customers.
The Securities and Exchange Board of India declared in an order dated August 21 that the broker had paid 136 clients a total of Rs 17.43 crore in order to advance a “fund-based agreement” that appeared to include borrowing money from the clients.
It was discovered that the broker was keeping two ledgers: a trading ledger and a margin deposit ledger. When Sebi authorities examined a sample of 20 clients and the first ledger, they discovered that the broker was collecting money from each client on a regular basis and giving them interest at a rate that was mutually agreed upon.
According to the decision, the sample of 20 clients received payments totaling Rs 15.51 crore, with interest rates ranging from 4% to 5% annually.
Although it was discovered that the client was giving the broker instructions to set up a fixed deposit, the ledgers revealed that no such deposit had been made.
The money that clients deposited in the Trading Ledger appeared to be used for both trading and satisfying margin requirements; the clients were being compensated by the broker for their usage of this money.
It was also discovered that some clients were paying the same amount to the broker and receiving monies from IIFL Finance (NBFC). According to the order, the broker was paying about 11% in interest for the use of these assets.
