SEBI Penalizes Goldenmaple Commodities For Misappropriation Of Client Funds And Lapses In Maintaining Records

SEBI Penalizes Goldenmaple Commodities For Misappropriation Of Client Funds And Lapses In Maintaining Records

The Securities and Exchange Board of India (SEBI) has fined Goldenmaple Commodities Pvt Ltd and its directors, Sanjay Kumar Mishra and Rupesh Kumar, Rs. 3 lakh each for breaching regulatory protocols. These breaches Included Misusing Client funds and neglecting to uphold adequate records for client order placements.

In its adjudication, SEBI emphasized Goldenmaple Commodities’ mishandling of client funds and dismissed the firm’s justification of the pandemic and a promoter’s demise as excuses for non-compliance. SEBI clarified that pandemic conditions did not exempt Goldenmaple Commodities from adhering to specific guidelines and circulars.

Goldenmaple Commodities was found to have misused client funds in 18 sampled cases, where the ‘G’ parameter indicated negative balances, suggesting the diversion of credit balances from some clients to fulfil obligations of other clients or internal purposes. The misused amounts ranged from ₹ 42.94 lakh to ₹ 46.53 lakh, averaging ₹ 44.52 lakh.

Additionally, in 12 out of 18 sampled instances, the ‘I’ parameter indicated misuse of client funds and securities to cover proprietary trading margin requirements. These amounts ranged from ₹ 1.96 lakh to ₹ 3.51 lakh, with an average of ₹ 2.41 lakh.

Moreover, SEBI noted Goldenmaple Commodities’ failure to retain call recordings for order placements in 21 out of 25 sampled trades and the absence of proper order placement records for all 25 sampled trades. These shortcomings reflected inadequate diligence and raised concerns about the company’s compliance with regulations, particularly amid the COVID-19 pandemic.

Per the SEBI Act and the Securities Contracts (Regulation) Act (SCRA), directors are responsible for a broker’s conduct and violations.

SEBI cited Circular SEBI/HO/MIRSD/MIRSD2/CIR/P/2016/95, dated September 26, 2016, which stipulates that a stockbroker’s total available funds should always equal or exceed clients’ funds as per ledger balance. A negative ‘G’ value indicates misappropriation of clients’ funds. Goldenmaple Commodities consistently displayed negative ‘G’ values across 18 sampled dates, confirming fund misuse.

SEBI emphasized that misusing client funds is a severe infraction, as client account funds should solely satisfy clients’ obligations per SEBI regulations. The failure to maintain proper records and call recordings exacerbated the seriousness of the violations.

Goldenmaple Commodities’ failure to uphold call records and proper order placement records constituted significant negligence.