SEBI Slaps ₹9 Lakh Fine on Reliance Securities for Rule Breaches

India’s market regulator, the SEBI (Securities and Exchange Board of India), has fined Reliance Securities ₹9 lakh for not following stock broker regulations and market norms.

The penalty follows an inspection by SEBI and the stock exchanges NSE and BSE. The inspection aimed to review the records, books of accounts, and documents of Reliance Securities’ authorised persons (APs). This review was conducted between April 2022 and December 2023 to ensure compliance with rules governing stock brokers, NSE Capital Market (CM) regulations, and NSE Futures & Options (FO) trading norms.

Regulatory Actions

After identifying violations during the inspection, SEBI issued a show-cause notice to Reliance Securities on August 23, 2024. Following the response, SEBI imposed a fine for non-compliance with the prescribed standards.

SEBI Imposes Penalty on Reliance Securities

In a detailed 47-page order, SEBI highlighted several violations by Reliance Securities Ltd (RSL) and its authorised persons (APs). The lapses included inadequate systems for recording client orders, unauthorised terminal operations, and failure to maintain proper segregation at shared offices.

Key Violations Identified

1. Poor Record Maintenance
   RSL failed to keep proper records of offline client order placements linked to its APs, Jitendra Kambad and Naitik Shah. SEBI mandates brokers to maintain verifiable evidence of client orders to ensure transparency and prevent unauthorised trades.
2. Unauthorised Terminal Operations
   The inspection revealed that terminals were operated by unapproved personnel, violating rules requiring only authorised users to handle trading terminals. While RSL admitted the issue and deactivated the unauthorised terminals, SEBI flagged this as a serious compliance failure.
3. Lack of Office Segregation
   SEBI found that some RSL APs shared premises and infrastructure with APs of other brokers, breaching rules designed to prevent conflicts of interest and maintain operational integrity.

The inspection also uncovered instances where RSL’s APs accepted client payments for non-broking purposes, a clear violation of market regulations. SEBI noted that inadequate supervision allowed these unauthorised activities to occur.

Corrective Steps Not Enough

Although RSL claimed to have taken corrective measures, including deactivating unauthorised terminals and strengthening internal controls, SEBI rejected these defences. The regulator emphasised that brokers are required to maintain continuous compliance and that fixing issues after being caught does not excuse previous violations.

By failing to comply with stock broker rules, NSE Capital Market (CM) regulations, and NSE Futures & Options (FO) norms, Reliance Securities faced regulatory action and a ₹9 lakh penalty.

About Reliance Capital

Reliance Capital Ltd, founded in 1986, is involved in finance and investment activities. The company is part of the Anil Ambani Group and acts as a holding company for various financial services businesses within the group. It is a Core Investment Company (CIC) registered as a Non-Banking Finance Company (NBFC) – Core Investment Company – Non-Deposit Taking Systemically Important. The company holds investments in subsidiaries, associates, and other group companies in the financial services sector.

Over the past 52 weeks, the Reliance Capital share price has hit a high of ₹15.16 and a low of ₹7.60.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.