SAT sets aside Sebi order prohibiting IIFL Securities from taking new clients

Mumbai: The Securities Appellate Tribunal (SAT) has set aside the Securities Exchange Board of India's (Sebi)’s order restraining IIFL Securities from taking new clients for a period of two years and has reduced the penalty imposed on the brokerage firm to Rs 20 lakh from Rs 2 crore.

SAT, in an order issued on Thursday, said that there had been no misuse of client funds, and by wrongly considering the non-funded portion of the bank guarantee as per the 2016 circular, an attempt has been made out to show that there was a misuse of client funds.

"On account of the aforesaid, the direction of the whole-time member debarring the appellant (IIFL Securities) under the Intermediaries Regulations from taking new clients for a period of two years cannot be sustained", said the order.


In June, Sebi barred the brokerage from taking new clients for two years for violating regulations that pertain to the segregation of clients' funds.

The tribunal, in its order, also reduced the penalty imposed on the brokerage from Rs 1 crore to Rs 20 lakh, citing there was no misuse of the client’s funds.

“We find that the appellant (IIFL Securities) has failed to change the nomenclature of the bank accounts of the client as required to be done under the 1993 circular. Considering the aforesaid that it is only a technical breach, we are of the opinion that in the given circumstances for the two show cause notices, a penalty of Rs. 20 lakhs in total would be sufficient for the purpose of this case,” said the order.

IIFL Securities shares, which rallied 52% in the last three months, gained 2% on Thursday to close at Rs 117.90.