IIFL: The new guidelines issued by Securities Exchange Board of India (SEBI) has put the broking industry under significant strain. The board’s decision to ban India Infoline Finance Limited (IIFL) securities from onboarding clients for a period of two years has caused further havoc among the broking community. Some experts perceive the judgement to be a harsh placement of authority. The SEBI’s decision to place the ban is a result of inspection on IIFL Securities from 2011 to 2014. The SEBI has argued that IIFL didn’t maintain proper record of assigning depositors money and labelled them as ‘client accounts.’
‘Suspension of order’
The Securities Appellate Tribunal (SAT) has suspended the order of SEBI to ban IIFL securities. The decision is taken with consideration over environment of panic among major industry stakeholders. Many fear that the magnitude of new guidelines can destroy the industry all together.
SEBI had already issued a fine of rupees 2 crore on IIFL over the same charge. The board has issued multiple loans on different broking firms over the same issue that ranged between 1 lakhs to 35 lakhs.
“Banning business will be deadly for every broker“
Many industry experts and leaders of brokerage firms have termed the ban as draconian and unfair in nature. There have been suggestions that the sort of punishment that IIFL got is too harsh and not reciprocal to the violation committed.
A promoter from a large brokering firm stated “The SEBI order against IIFL seems to be a clear cut instance of punishment grossly exceeding the violation and retrospective in nature.”
A CEO of a brokerage firm has said “The industry will collapse with the regulator goes for such black and white judgements. There are no instances of default of malpractice by brokers including IIFL Securities. This kind of banning business will be deadly for every broker.”
SEBI had not found any trace of actual misuse of clients money by IIFL. SEBI said in IIFL securities order
“I find that the violation by way of assigning wrong nomenclature to the ‘clients accounts’ has been remedied by the Notice (IIFL Securities)… further the violation committed by the way of mixing funds of clients with its own funds has not been observed in March 2017 inspection. Further, I find no instance of misuse of clients’ funds by the notice placed before me which has occurred subsequent to implementation of the Enhanced Supervision Circular dated September 16, 2016.”
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