A day after the SEBI order, IIFL Securities has filed an appeal before the Securities Appellate Tribunal (SAT) against the market regulator order banning it from on-boarding new clients for two years.
The company has filed an appeal against the said order before SAT, said IIFL Securities.
According to IIFL, the SEBI order pertains to inspections carried out for different periods from April 2011 to January 2017, which was before the issuance of the enhanced supervision circular dated September 26, 2016, by SEBI, which was made effective from July 1, 2017.
The SEBI order applies the said circular retrospectively, even while confirming that after the implementation of circular, there was no non-compliance.
The said SEBI order records, “I find no instance of misuse of clients funds by the Noticee placed before me, which has occurred subsequent to implementation of enhanced supervision circular,” said IIFL.
The broking firm also said that there will be no financial impact due to the order.
Earlier in his order, SK Mohanty, whole-time member, SEBI, said “...while action against IIFL Securities is necessary to be taken in the light of the gravity of violations committed by it, a direction for the cancellation of certificate would be too disproportionate a punishment for not only IIFL Securities itself but also to its clients, both retail and institutional, as well as act antagonistic to the development of the securities market at a whole.”
Client accounts
SEBI found that out of the 45 client bank accounts examined during inspections, 26 client bank accounts were not titled as ‘client accounts’ by IIFL Securities despite a warning issued by the BSE.
It was found that funds were regularly transferred from client bank accounts and clients’ dividend accounts to the pool or control accounts of IIFL Securities, which were managed and controlled by IIFL Securities as its own bank account, SEBI had said.
At the same time, funds were transferred from IIFL Securities’ own bank accounts to the same control accounts, where clients’ funds were also being collected and then to the settlement account of the stock exchange and clearing house, it added.