SEBI imposes INR 5 lakh penalty on Acumen Capital Market (India) Limited

SEBI imposes INR 5 lakh penalty on Acumen Capital Market (India) Limited

The Noticeewas found to have violated the provisions of Regulation 43 of the SEBI (Depositories & Participants) Regulations, 1996.

The Securities and Exchange Board of India (SEBI) has imposed a penalty of Rs5 lakh on Acumen Capital Market (India) Limited for violation of the Securities and Exchange Board of India Act, 1992 (SEBI Act); Section 19G of the Depositories Act, 1996(Depositories Act); and Section 23D of the Securities Contracts (Regulation) Act, 1956 (SCRA).

Herein, the Securities and Exchange Board of India ,the stock exchanges -BSE& NSE and Depositories –NSDL& CDSL conducted a comprehensive inspection of Acumen Capital Market (India) Limited(ACMIL/ Noticee) to examine its compliance with various regulatory norms prescribed by SEBI. The period of inspection was from April 2017 to December 2018(IP).

The violations that were alleged in the show cause notice(SCN) to have been committed by the Noticee included non –segregation of clients fund and Securities, Funds/collaterals of Credit Balance Clients used for Margin Obligations of Debit Balance Clients and Proprietary Trading, incorrect reporting of Margin, details not collected for clients who opted for F & O trading and their running account authorization was also not dated, delay in uploading client details in the CKYC system, discrepancies were observed from details of issuance and execution of DIS and Non dispatch of transaction statement.

It was observed during inspection that out of 92 individual sample clients verified during the inspection, delay was observed in uploading client details in CKYC systems in case of 55 clients. The delay in uploading client details in the said instances varied between 1 day to 338 days. Further, the signing off report of the BSE, duly signed by the Noticee also mentioned the said observations.

In view of the same, it was alleged that the Noticee had violated the provisions of SEBI Circular No. CIR/MIRSD/66/2016 dated July 21, 2016. It was noted that the Noticee had admitted to the delay in uploading the client details in the CKYC system during the IP. Thus, it was found that the Noticee had violated the provisions of the SEBI Circular.

Also, in view of the conclusions arrived at in respect of monthly / quarterly settlement of funds and securities, incorrect reporting of margin, non-availability of call recording system, and delay in upload of client details in the CKYC system, it was concluded that the Noticee was liable for monetary penalty under Section 15HB of the SEBI Act.

The AO also noted that as per the provisions of Circular No. SEBI/HO/MIRSD/MIRSD2/CIR/P/2016/95 dated September 26, 2016, the value of the overdraft account could not be considered. The Noticee had submitted that it had not received any complaint from clients regarding payout delay. However, it was noted that the same did not absolve the Noticee from compliance with the provisions mandated in the aforesaid SEBI circular. It has also been held that in respect of Non segregation of client funds by the Noticee,, it was liable for monetary penalty under Section 23D of the SCRA, 1956.

The Adjudicating Officer(AO) noted that Regulation 43 of the SEBI (Depositories & Participants) Regulations, 1996 casts an independent obligation on the DP(Depository Participant) to provide the statements of account to the BOs(Beneficial Owners) and not on the depository, and thus there was no merit in the Noticee's submission that they were under the impression that CDSL was directly sending the transaction statement to its clients. In view of the above, it was concluded that the Noticee had violated the provisions of Regulation 43of the SEBI (Depositories & Participants) Regulations, 1996.