Sebi fines IIFL Securities 5 paisa for client data errors

Stockbrokers IIFL Securities and 5 Paisa Capital have been fined Rs 3 lakh and Rs 2 lakh respectively, in two separate orders, for failing to act with due diligence and care as market intermediaries.

The orders, dated July 30, were approved by the Securities and Exchange Board of India (Sebi) which had scrutinized the operations of the two brokerages with respect to incorrect uploading of unique customer codes (UCCs) on the Multi-Commodity Exchange of India (MCX) platform.

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According to the orders, the brokerage firms were accused of loading incorrect client data into the UCC database.

The details of some of the clients were entered erroneously to reflect that they were domiciled in Sikkim. Residents domiciled in Sikkim are exempt from paying stamp duty on commodity derivatives transactions they undertake.

IIFL had wrongly registered 18 clients as domiciled in Sikkim and 5 Paisa had done the same for 22 clients.

There were also other entries that did not match.

During the review period, between July 2020 and June 30, 2022, IIFL Securities had made mismatched entries for 12,101 investors or 2.95 per cent of its clients on MCX, including 18 misidentified as being from Sikkim; and 5 Paisa had made mismatched entries for 14,494 clients or 4.81 per cent of its clients on MCX, including 22 misidentified as being from Sikkim.

The orders noted that the material available on record has not quantified the quantum of disproportionate gain or unfair advantage, if any, obtained by the brokerage firms and the regulator has not alleged the same either.

The order issued against IIFL Securities noted that the brokerage firm “has been penalized earlier for violation of the provisions of the code of conduct under the Stock Brokers Regulations, 1992” and therefore, “the violation is repetitive in nature.”

The order issued against 5 Paisa was slightly different as it noted that the brokerage had not been penalized earlier for violation of the provisions of the Stock Brokers Regulations and therefore “the violation is not repetitive in nature.”

But both orders stated that as Sebi-registered intermediaries, they were expected to act “with due skill, care and diligence in the conduct of their business”.