The Securities and Exchange Board of India (SEBI) has fined IL&FS Securities Services Ltd and Allied Financial Services Pvt Ltd (AFSPL) over involvement in fraudulent transfer of mutual fund units from client's accounts.
The SEBI has imposed a total penalty of Rs 26 crore on IL&FS Securities Services Ltd.
In a separate order, the capital market regulator has imposed penalties of Rs 3 crore on AFSPL and another Rs 3 crore on its MD, Awanish Kumar Mishra. It has also imposed fines of Rs 14 lakh and Rs 7 lakh on its directors Himanshu Arora and Jitendra Kumar Tiwari.
The capital market regulator has also restrained IL&FS Securities from acquiring any new clients till a period of two years.
Further, the IL&FS arm would also undertake a comprehensive overhaul of all its procedures and policies, especially its Risk Management Policy and implement necessary corrective measures to ensure that the violations observed are not repeated, the regulator said.
It, however said that the order shall be subject to any order passed by the Supreme Court, while enforcement of the liability and the order shall also be subject to the orders of the National Company Law Tribunal and National Company Law Appellate Tribunal.
In 2019, Finsec Law Advisor on behalf of clients Dalmia Cement East Limited and OCL India Limited alleged fraudulent transfer of mutual fund units worth Rs 344.07 crore by AFSPL. Further, Dalmia Group also alleged that ILFS Securities Services Limited, a clearing member of NSE Clearing Limited, was also involved in the fraudulent transfer of MF Units from the accounts of DCEL and OCL.
The SEBI has noted that IL&FS Securities Services Ltd has admitted to committing serious lapses in risk management.
"I note that in view of the facilitation of fraud being a fraudulent and unfair trade practice, the notice (IL&FS Securities Services) is liable for monetary penalty under Section 15HA of the SEBI Act," said the order by Madhabi Puri Buch, Whole Time Member of SEBI.
In April, cement major Dalmia Bharat said that securities worth Rs 344 crore were credited back to the demat account of its arm by IL&FS Securities Services following Supreme Court order.