SEBI Fines IFGL Rs. 4 Lakh For Regulatory Breaches And Deficient Investor Grievance System

SEBI conducted an inspection of IFGL which uncovered regulatory breaches. The primary issues identified included IFGL's engagement in fund-based activities and multiple deficiencies in its investor grievance redressal system. IFGL was found to have taken unsecured loans amounting to Rs. 7.81 crore including Rs. 4.49 crore from six registered clients. IFGL contended that these loans were from associate companies and permissible under BSE and NSE circulars.

IFGL's violations included the misuse of a personal email account for investor grievances and insufficient transparency on their website. SEBI mandates that stock brokers must provide a designated email ID exclusively for investor grievances, yet IFGL used the personal email of its CEO and compliance officer, Rajneesh Kumar, for this purpose.

During the inspection, SEBI was denied access to this email account which hindered the examination of complaints. Further, the company's website lacked critical information such as the investor charter for stock brokers and updated data on investor complaints. SEBI requires stock brokers to disclose such data by the 7th of each succeeding month which IFGL failed to do.

Rule 8(3)(f) of the Securities Contracts (Regulation) Rules, 1957 (SCRR) restricts members of a stock exchange from engaging in any business other than that of securities or commodity derivatives without personal financial liability.

The NSE Circular NSE/COMP/50957 dated January 07, 2022, and BSE Notice No.20220107-45 provides an illustrative list of activities that constitute non-compliance with Rule 8(3)(f). These circulars state that borrowing funds or loans from registered clients is not permitted.

Further, Regulations 21(1), 21(2), and 21(4) of the SEBI (Stock Brokers) Regulations, 1992 outline obligations of stockbrokers during inspections by SEBI. These regulations require stockbrokers to produce documents allow access to premises and records and assist the inspecting authority.

Clause A(2) of the Code of Conduct under Regulation 9 of SEBI (Stock Brokers) Regulations, 1992 mandates that stockbrokers act with due skill, care, and diligence in their business conduct, while Clause A(5) requires compliance with all provisions of the SEBI Act, rules, regulations, and directions issued by SEBI and stock exchanges.

Clause 3 of SEBI Circular SEBI/HO/MIRSD/DOP/P/CIR/2021/676 dated December 02, 2021 mandates stockbrokers to disclose data on complaints received and their redressal on their websites by the 7th of each succeeding month.

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