Capital markets regulator SEBI on Thursday imposed penalties totalling Rs 29 crore on nine entities, including Trading & Investment and Aadya Commodities, for misutilisation of the clients' funds and securities as well as siphoning off funds.
Apart from the two stock brokers, their former and current directors have been penalised by the regulator.
SEBI, which conducted an investigation in the matter for April, 2011 to March, 2017, found that two stock brokers were involved in gross misconduct and fraudulent activity.
They were found to have indulged in non-submission of information sought through summons, non-segregation of clients' funds and securities, selling of clients' securities from the employees account, moving funds and securities to sister concern and transferring funds from business bank account of the Amrapali Aadya Trading & Investment Pvt Ltd (AATIPL).
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In addition, they indulged in activities other than stock broking such as withdrawal/ deposits of cash from various bank accounts and providing assured returns to clients/ investors. In its 76-page order, SEBI revealed that the two stock brokers have sold securities worth Rs 130.85 crore of AATIPL clients during the period from April 1, 2016 to August 10, 2017. Further, they have routed and diverted AATIPL's client money to the tune of Rs 37.69 crore through third parties.
Also, clients' securities amounting to Rs 411.3 crore recorded in the back office books of AATIPL have been found short and clients' securities have been routed out of the system by AATIPL by pledging with NBFCs and by selling the same from its employees account, it added.
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"The clients of AATIPL have suffered huge losses due to the fraudulent act of Noticees No. 1 (Amrapali Aadya) and 2 (Aadya Commodities) and due to the mis-appropriation of clients funds and securities and siphoning off of the clients' funds and securities," Sebi said in its 76-page order.
The seven individuals -- Sanjeeva Kumar Sinha, Sujeet Kumar Sona, Pawan Mishra, Narayan Jee Thakur, Abnish Kumar Sudhanshu, Amita Sinha and Vandana Sinha -- who were part of the management of Amrapali Aadya Trading & Investment and Aadya Commodities are responsible for fraudulent and unfair practices undertaken by the two brokerage houses. Through such acts, they violated the provisions of SEBI Act and Securities Contract (Regulation) Act or SCRA.
Earlier in August 2017, the Securities and Exchange Board of India (SEBI) had received a reference from NSE, wherein, the exchange had forwarded the preliminary findings of inspection of one of the stock broker Amrapali Aadya. After that, Sebi had passed an interim order in August 2017 against the nine entities, whereby the regulator had barred them from the securities markets. These directions were confirmed by SEBI in October 2018.
-With PTI Input
