The Securities and Exchange Board of India (SEBI) has fined Angel Broking Limited Rs 10 lakh for failing to comply with various operational regulations and circulars as a stockbroker and depository participant.

While the fine may not be significant for a listed broking firm like Angel Broking, focusing on its operational failures raises greater concerns about the broking and its operating protocols.

The market watchdog instituted proceedings against the stockbroker due to a comprehensive joint inspection of the operations of exchanges and depositories between December 7, 2020, and January 28, 2021. A show-cause notice was sent to Angel Broking in September 2022.

SEBI found that Angel Broking used funds raised by pledging client securities for purposes other than fulfilling their respective client obligations. The Adjudicating Officer Amit Kapoor stated that Angel Broking had pledged customers’ securities with credit balances in its ledger, misusing an amount of Rs 32.97 crore.

SEBI observed that Angel Broking did not physically settle the funds of inactive clients during the inspection period. The market watchdog recorded 300 such instances with a non-settled amount of Rs 43.96 lakh.

SEBI also observed that Angel Broking did not perform actual settlement of funds for customers who had not traded in the past three months. The market watchdog found 1,081 instances with a non-settled amount of Rs 16.65 lakh.

Angel Broking has been observed to retain the value of funds and securities within the value of turnover executed on the settlement date in the cash market segment after January 16, 2020 (85 instances out of a total of 200 were observed and deemed non-settlement amount of Rs 10.26 crore).

SEBI found that Angel Broking did not regularly reconcile DP accounts and back office records. The total volume difference is Rs 44.72 lakh having an absolute value of Rs 1,226.73 crore.

Despite not recovering the debit balance, Angel Broking exposed the client for more than T+2+5 days amounting to Rs 2.10 crore. Brokers submitting MTMs arising from derivatives tranche positions to the inspection team are considered to grant exposure. However, Angel Broking failed to provide any evidence to substantiate its submission.

SEBI observed 35,179 instances of PAN mismatch between UCC (Unique Customer Code) and TM background records. In 2,227 instances, customers’ email IDs in Angel Broking’s database did not match the details in the exchange’s database. It was observed 2,336 times that the client’s mobile numbers in Angel Broking’s database did not match the details in the exchange database.

Angel Broking also reported to the exchange misled ledger balances of 30,602 clients in October 2020 (net difference of Rs 340.81 crore).