Markets regulator Sebi on Thursday confirmed its interim order barring stock broker BRH Wealth Kreators and seven entities, including three individuals, from the securities market.
BRH Wealth Kreators Ltd was formerly known as BMA Wealth Creators Ltd.
Besides BRH Wealth, Shiv Kumar Damani, Anubhav Bhatter, Murgesh Devashrayi, BRH Commodities Pvt Ltd — formerly BMA Commodities Pvt Ltd — Prosperous Vyapaar Pvt Ltd, PoloSetco Tie Up Pvt Ltd and Parton Commercial Pvt Ltd have also been restrained from accessing the securities market.
“Stock Exchanges (BSE and NSE) are directed to take further necessary action against the member ie BMA, in accordance with their bye-laws,” Sebi said.
The regulator in October 2019 had said that these entities have been “prohibited from buying, selling or otherwise dealing in securities, either directly or indirectly, or being associated with the securities market in any manner whatsoever, till further directions”.
The prima facie allegations against the broker were that it had failed to segregate securities of clients, furnished misleading information to the exchange, failed to unpledge and return the securities to the clients upon fulfilment of pay-in obligation and made unauthorized transfer of shares from the client’s demat accounts.
As per the interim order, the regulator received an e-mail from the NSE about significant mismatches and inconsistencies in the balances reported by BMA. A shortfall of around Rs 100 crore worth of client securities was observed as compared to the actual records and BMA, in its communication to the exchange, had attributed the shortfall to software issue.
“NSE had further observed that out of the securities that were short, securities worth more than Rs 60 crore were prima facie used for meeting the pay in obligation of certain related clients indicating possible misappropriation of client securities.
“NSE stated that BMA has not provided any satisfactory explanation with regard to the shortfall and BMA has maintained the stance that the shortfall is due to software issue,” Sebi had noted.
In October 2019, the bourse forwarded a report of its preliminary observations of BMA to Sebi and it was observed that the entity prima facie failed to comply with Sebi regulations.
In its latest order passed on Thursday, Sebi apart from confirming its orders noted that the entities in interim order were directed to provide a full inventory of all their assets and said “the stock exchanges and the clearing corporations are directed to ensure that shortfall of clients funds are made good through realization of funds through these assets”.
The securities of the clients of BMA were misappropriated through the accounts of Prosperous Vyapaar, Polo-Setco Tie Up and Parton Commercial.
In this regard, Sebi said forensic audit shall also look into the diversion of the funds from misappropriation of securities and thereafter the stock exchanges and the clearing shall take appropriate steps to realize the same and proceeds shall also be utilized for the purpose of meeting investors claims whose securities have been misappropriated.