SEBI Fines IIFL Securities ₹3 Lakh For Mishandling Client Data
Rajesh Kumar
2 Aug 2024 2:00 PM GMT
The Securities and Exchange Board of India (SEBI) has imposed a fine of ₹3 lakh on IIFL Securities for failing to maintain due diligence and care in its role as market intermediaries. This penalty arose from the mishandling of client data related to domicile information which impacted stamp duty obligations.
Between July 2020 and June 2022, IIFL Securities registered 12,101 instances of mismatched client data on the Multi Commodity Exchange (MCX) which represented 2.95% of its total client base. Among these discrepancies were 18 clients incorrectly listed as domiciled in Sikkim. This classification error was significant because residents of Sikkim are exempt from paying stamp duty on commodity derivative transactions.
SEBI's investigation noted that while there was no evidence of disproportionate gain or unfair advantage due to these errors, the mishandling indicated a lack of due care.
During the examination period, the MCX observed that IIFL Securities incorrectly uploaded data in the UCC (Unique Client Code) Database.
The company contended that the errors were technical and arose from issues with the data provided by MCX. However, SEBI noted that the errors reflected a broader issue of inadequate internal controls and oversight.
According to Clause A(2) of the Code of Conduct as outlined in Schedule II of Regulation 9(f) SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992, stock brokers must exercise due skill, care, and diligence in conducting all their business activities.
