Shares of IIFL Securities plunged as much as 24 per cent in the morning trade on Tuesday after market regulator Sebi on Monday barred the company from onboarding clients for 2 years.
In the intraday session, IIFL Securities Ltd’s stock plunged 23.8 per cent on NSE to touch a low of Rs 57.50. On BSE, the stock touched an intraday low of Rs 58, down 22.6 per cent.
The markets regulator said IIFL flagrantly violated the provisions of SEBI 1993 Circular in various ways to clearly disregard the basic premise of the said circular both in letter and spirit in complete defiance of regulatory instructions.
The IIFL, the order stated, firstly did not assign its accounts appropriate nomenclature wherein it was keeping clients’ money so as to clearly label them as ‘client accounts’. Additionally, it said, it was mixing clients’ funds with its own funds before using those mixed funds for its own proprietary usage.
“In the end, it was using funds of its credit balance clients to not only fund trades of its debit balance clients but also to fund its own trades. This clearly demonstrates an utter disregard to the provisions of SEBI 1993 Circular by the Noticee at least during the period of April 01, 2011, to January 31, 2017.”
The order stated that IIFL claims itself to be a large broker having thousands of retail clients and a number of institutional clients, to whom it provided services. In such a case, the order said, responsibility to follow the provisions of Securities Laws falls all the more on its shoulders as the final consequences of misuse of funds of its clients by a large broker like the IIFL would have been far graver as compared to the violations committed by some small level brokers.
IIFL Securities, in an exchange filing, said that SEBI had applied its rules retrospectively and hence, the company is in the process of putting an appeal against the said order before the Securities Appellate Tribunal.
“The SEBI order applies the said norms retrospectively even while confirming that after the rules becoming effective there has been no non-compliance with the same,” IIFL Securities stated in the exchange filing.
The company also highlighted that the ban will not impact its business with the existing clients.
Moreover, the company has also restructured its business by hiving off its investment-related activities from its stock broking business.
Other group companies, 5paisa Capital, IIFL Finance and 360 ONE WAM were down 1-5 per cent while rival Angel One rose over 2 per cent.
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