The Securities and Exchange Board of India (SEBI) on Thursday imposed a penalty of Rs 1 crore on HDFC Bank for invoking securities pledged by BRH Wealth Kreators, which is a violation of the regulator’s interim order. The regulator has also directed the private bank to transfer Rs 157.68 crore along with 7% interest per annum from October 14, 2019, till date to an escrow account till the issue of settlement of clients securities is not reconciled.
In October 2019, SEBI had barred BRH Wealth Kreators from the market. The regulator had also directed depositories and banks not to make debits from the Demat and bank accounts of the stockbroker.
HDFC Bank had granted credit facilities worth Rs 191.16 Crore to BRH and Rs 26.61 Crore to BRH Commodities, out of which an amount of Rs 87.75 Crore was granted as LAS.
The invocation of the pledge of client securities available in the two Demat accounts of BRH, by HDFC Bank, was allegedly not in conformity with the directions contained in the Interim Order, the order said.
“It was alleged that as HDFC Bank did not conduct adequate due diligence to verify that securities pledged in its favor actually belonged to clients of BRH having the debit balance at the time of the creation of pledge, the pledge created on the securities.. was invalid and the subsequent invocation of such pledge by HDFC, was therefore illegal. Had the pledge not been invoked, the securities belonging to clients would have been available for restitution/settlement of claims of the clients of BRH,” SEBI whole-time member G Mahalingam said in his order.

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