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SEBI Fines Motilal Oswal for Disclosure & Margin Reporting Lapses
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The Securities and Exchange Board of India (SEBI) has levied a fine of ₹7 lakh on Motilal Oswal Financial Services for alleged lapses, including improper client margin collection and inaccurate disclosures, among other regulatory violations applicable to stock brokers.
According to an order issued on Thursday, SEBI conducted an inspection of the brokerage firm for the period between April 1, 2021, and June 30, 2022. Following this, a show cause notice was sent to the firm on July 4, 2024.
The primary allegations outlined in SEBI’s notice include incorrect margin reporting and short collection, inaccurate reporting of cash and cash equivalent balances on 57 occasions, involvement in non-securities-related activities that carried personal financial risks, and misreporting in margin trading funding.
Additionally, the notice highlighted that a total of 334 investor complaints—filed via the SCORES platform and directly through exchanges—remained unresolved for more than 30 days. It also pointed out deficiencies in maintaining proper accounts.
In response to SEBI’s notice, Motilal Oswal Financial Services stated that some of the reported violations were “purely accidental” and not cases of intentional misreporting. The company also attributed certain issues to “technical errors,” which it claims have now been rectified.
For instance, SEBI’s inspection revealed that transaction descriptions in bank records were inaccurately logged, with payment entries mistakenly recorded under the receipt column and vice versa. The firm explained that, during the inspection period, transaction narrations were manually mapped, leading to potential discrepancies. To address this, it has implemented a maker-checker mechanism to enhance accuracy.
Despite the violations, SEBI noted that there was no evidence indicating that the firm gained any unlawful advantage.
"The available material does not establish any disproportionate gain, unfair advantage, or investor losses resulting from the violations," the SEBI order stated.
However, SEBI emphasized that, as a registered stockbroker and depository participant, the firm was obligated to adhere to securities laws, which it failed to do. Consequently, a penalty was deemed necessary to ensure regulatory compliance.
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