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SEBI on Thursday issued an order confirming its ban against stock broker BMA Wealth for alleged misappropriation of client securities worth ₹93 crore. The preliminary facts show that around ₹93.31 crore worth of client securities were misappropriated by BMA, SEBI said.
NSE has found that BMA has failed to report the complete list of DP accounts operated by it to the stock exchanges. The ban has also been imposed against other entities linked to BMA including Shiv Kumar Damani, Anubhav Bhattar, Murgesh Devashrayi, BHR Commodities and three others.
SEBI observed that client securities lying with a stock broker are not permitted to be pledged/ transferred for raising funds by the stock broker. The regulator said that BMA did not comply with SEBI circulars and said that complaints had shown that clients had not authorised BMA to pledge client securities and refused to accept BMA’s arguments that it had deemed consent of its client to pledge their shares.
Unauthorised share pledging by stock brokers was recently highlighted after Karvy said to have defaulted on client payments. SEBI made the depositories to transfer client securities that were further pledged by Karvy to respective clients who had paid full money on it.
‘Failed to comply with norms’
“At the first instance BMA was not authorised to use POA unless there was a trade executed on the instruction of clients. BMA should have taken first opportunity to comply with the requirements of the circular dated June 20, 2019, and in any case not later than September 30, 2019.
“Therefore, from June 20, ,2019 and till September 30, 2019, BMA had sufficient time to take steps to unpledge the clients securities, however, instead of showing proof for any such steps taken by it, BMA is taking refuge under its said letter dated September 30, 2019. Therefore, said contention of BMA does not absolve it from its liability for failure to comply with the said circular and prima facie allegations levelled against noticees in the interim order holds good,” SEBI said.
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