Arihant Capital Settles Case with SEBI

Arihant Capital Settles Case with SEBI

The Securities Exchange Board of India (SEBI) passed a settlement order in respect of Arihant Capital Markets Limited.

Arihant Capital Markets paid over Rs. 17 lakh as settlement charges to the regulator.

The order came after Arihant Capital proposed to settle the instant proceedings initiated against it, ‘without admitting or denying the findings of facts and conclusions of law.’

The stock broker- Arihant Capital (hereinafter referred to as ‘Noticee’) was involved in a case pertaining to alleged violation of Clause A(2) of Code of Conduct as specified in Schedule II of the Broker Regulations read with regulation 9(f) of the Broker Regulations and provisions of Clauses 1.2 and 1.3 of Code of Conduct as specified in Schedule III of the Intermediaries Regulations read with regulation 16 of the Intermediaries Regulations for failing to file suspicious transaction reports (STRs) to Financial Intelligence Unit- India regarding certain discrepancies noted by the Applicant in the Know Your Customer (KYC) documents of its clients.

Thereafter, the regulator had conducted an investigation from September 2009 to March 2013 and found that shares of 14 companies were acquired in the names of 26 bogus and non-existing entities through transfer of counterfeit physical shares and subsequent DEMAT of these shares in the accounts of these bogus entities.

The same was facilitated by an individual- Arvind Babulal Goyal- and his associates. Through an order passed in March 2021, SEBI directed Goyal to disgorge the ill-gotten gains made by him and debarred Goyal and his associates from the securities market.

Further, two of the clients of Arihant Capital had off-market dealings with those 26 non-existing entities and had traded through them. These clients had received shares of Global Securities (one of the 14 companies whose shares were fraudulently transferred and in their DEMAT account and the same were sold in the market through the Noticee, the regulator observed.

It was also noted that the trades of these clients were not in parity with their declared annual income.

Thereafter, a show cause notice was issued on 6 October, 2022 for the alleged violation of regulatory norms. The settlement application was filed before SEBI on 9 February, 2023 and the High-Powered Advisory Committee of the regulator on February 22, 2023, recommended that the case be settle

A settlement application was filed before SEBI on 9 February, 2023 and the High-Powered Advisory Committee of the regulator on 22 February, 2023, recommended that the case be settled upon payment of the settlement charges.

Accordingly, Arihant Capital paid the respective amount of Rs. 17.50 lakh as settlement charges.

SEBI’s Executive Director Anand R Baiwar in his settlement order observed, “in view of the acceptance of the settlement terms and the receipt of settlement amount as above by SEBI, the instant proceedings initiated against noticee vide SCN dated October 06, 2022 are disposed of in terms of section 15JB of the SEBI Act read with regulation 23(1) of the Settlement Regulations on the basis of the settlement terms.”