For violating a number of operational guidelines and circulars in its role as a stock broker and a depository participant, the Securities and Exchange Board of India (SEBI) fined Angel Broking Limited Rs 10 lakh.
While the fine may not be significant for a listed broker like Angel Broking, the attention given to the broking firm’s operational weaknesses does raise larger questions about broking firms and their operational procedures.
Based on the findings of a thorough joint examination that examined the activities of exchanges and depositories between December 7, 2020, and January 28, 2021, the market regulator filed actions against the stock broker. In September 2022, a showcause letter was sent to Angel Broking.
According to SEBI, Angel Broking exploited the money raised by pledging the securities of its clients for purposes other than those related to their obligations to those clients. Angel Broking has pledged securities of clients who had a credit balance in their ledger, and the misutilization was Rs. 32.97 crore, according to the adjudicating officer Amit Kapoor.
During the inspection period, SEBI noted that Angel Broking did not actually settle the funds of inactive clients. The market regulator noted 300 of these cases, with a non-settled total of Rs. 43.96 lakh.
Additionally, SEBI noted that Angel Broking did not actually settle the funds of customers who had not traded in the previous three months. The 1081 incidents were discovered by the market regulator, and the unpaid sum was Rs 16.65 lakh.
After January 16, 2020, it was found that Angel Broking kept the value of funds and securities to the extent of the value of turnover conducted on the day of settlement in the cash market segment (85 out of 200 occurrences were found to be not settled, with a total amount of Rs 10.26 crore being declared unsettled).
Angel Broking was found by SEBI to have neglected to perform regular reconciliation between DP accounts and back office data. With an absolute value of Rs. 1226.73 crore, there was a total quantity differential of 44.72 lakh.
Despite the non-recovery of debit balances, Angel Broking had provided exposure to the client beyond T+2+5 days in the amount of Rs 2.10 crore.
The broker informed the inspection team that MTM from the derivative segment position was taken into account when giving exposure. Angel Broking, however, could not offer any supporting documentation for its claims.
According to SEBI, there were 35,179 instances of PAN mismatch between TM back office records and UCC (unique client code). In 2,227 cases, it was found that the client email addresses in Angel Broking’s database did not correspond to the information in the exchange database. 2,336 instances of client phone numbers in Angel Broking’s database not matching the information in the exchange database were noted.
Additionally, for the month of October 2020 Angel Broking reported incorrect ledger balances for 30,602 clients to the exchange, with a net difference of Rs. 340.81 crore.
