Capital markets regulator Sebi on Monday fined Keshav Securities Ltd Rs 16 lakh for misusing clients’ securities and funds. The order comes after the regulator inspected Sebi-registered stockbroker Keshav Securities from April 2020 to September 2021.

In its order, the Securities and Exchange Board of India (Sebi) found that the advising party (Keshav Securities) used the funds of its credit balance customers for settlement obligations of its debit balance customers or its own purposes.

The estimated value of the funds misused by the noticee was Rs 1.75 crore.

Additionally, the regulator found that Keshav Securities failed to comply with market norms in delaying the settlement of its client’s funds.

The regulator also observed that client securities held in the back office did not match those in DP (deposit participant) accounts, amounting to Rs 1.50 crore in 12 instances.

“The notified parties did not submit correct details regarding monitoring of client assets in exchange for an enhanced regulatory framework. It was also observed that credit balance client funds were used for settlement/margin obligations in proprietary accounts,” said Adjudicating Officer Barnali Mukherjee of Sebi in the order.

In addition, the noticee was also observed to make loans to other entities, reported incorrect loan values, and defended its actions by saying that it did not know it could make loans to the sister company.

“A person cannot justify his illegal actions by stating that he did not know that his actions were illegal, even if he sincerely believed that they were not. Therefore, the noticees’ argument is untenable,” Mukherjee said.

Such conduct by Keshav Securities violated market norms.

Meanwhile, in a separate order, the regulator revoked Corptree Commodities’ certificate of registration for National Spot Exchange Limited (NSEL) for violating regulatory norms.

The lawsuit stems from the regulator’s investigation into Corptree Commodities’ investigation of “pairing contract” transactions between September 2009 and August 2013.

The regulator sent a show cause notice to the noticee in September 2018. The broker is a member of NSEL and facilitates the trading of paired contracts on the NSEL platform.

In September 2009, NSEL introduced the concept of “pairing contracts” on its platform: buying and selling the same commodity at two different prices, in which investors can purchase short-term contracts and sell long-term contracts simultaneously, and vice versa.