SEBI Cancels Registration of 39 Stock Brokers, Seven Commodity Brokers, and 22 Depository Participants

Introduction

In a significant regulatory move, the Securities and Exchange Board of India (SEBI) has cancelled the registrations of 39 stock brokers, seven commodity brokers, and 22 depository participants. This decision, announced on Friday, was driven by the failure of these entities to comply with the necessary registration requirements, thus ensuring the protection of investors and maintaining market integrity.

Why SEBI Cancelled Registrations

The primary reason behind SEBI’s decision is to prevent entities from misusing their SEBI registration without being active participants in a recognized stock exchange or affiliated with a depository. SEBI’s orders aim to protect unsuspecting investors from potential malpractices by non-active brokers and participants. Despite losing their registration, these entities remain accountable for any actions taken or omitted in their roles as brokers or depository participants. They are also required to settle all outstanding dues, fees, and interest owed to SEBI.

Brokers No Longer Meeting Regulatory Requirements

SEBI’s regulations mandate that stock brokers maintain membership in recognized stock exchanges to retain their registration. The 39 stock brokers and seven commodity brokers in question were originally granted registrations with conditions, including maintaining such memberships. However, SEBI noted that these brokers had been expelled from their respective exchanges, which was promptly communicated to the affected entities.

SEBI stated, “Since the notices are no longer holding membership of any recognized stock exchange, they no longer fulfill the conditions stipulated under Broker Regulations, 1992.” As a result, after adhering to the proper procedures outlined in the Intermediaries Regulations, 2008, SEBI proceeded to cancel their registration certificates.

Termination of Registration for Depository Participants

The regulatory crackdown also extended to 22 depository participants who had their agreements terminated with the depositories they were associated with. According to SEBI, these participants no longer meet the registration requirements as outlined in the DP Regulations, 2018. Consequently, SEBI cancelled their registrations following the due process specified in the Intermediaries Regulations, 2008.

Responsibilities of Cancelled Entities

Even after the cancellation of their registrations, these brokers and depository participants are required to fulfill certain obligations. SEBI has mandated that all affected entities must:

• Maintain and preserve records and other documents as required under the relevant regulations.
• Address any investor grievances promptly.
• Transfer client records, funds, or securities as necessary.
• Ensure continuity of service to clients and take appropriate actions concerning any pending defaults or unresolved issues.

List of Affected Entities

The list of stock brokers whose registrations have been cancelled includes prominent names like Bezel Stock Brokers, Reflection Investments, Sumpoorna Portfolio, and Quantum Global Securities, among others. The cancellation impacted seven commodity brokers, including Wealth Mantra Commodities, Sumpoorna Comtrade, and Chaitanya Commodities, among others.

Similarly, among the 22 depository participants, notable names include Moongipa Investments, ASL Capital Holdings, Wealth Mantra, and Punjab and Maharashtra Co-Operative Bank.

Conclusion

SEBI’s decisive action against these market participants underscores its commitment to maintaining market integrity and protecting investors. By ensuring that only active and compliant entities participate in the market, SEBI aims to enhance transparency and trust in the financial ecosystem. The message is clear: regulatory compliance is not optional, and SEBI will not hesitate to act against those failing to meet the stipulated requirements.

This regulatory sweep serves as a reminder to all market participants to remain vigilant in adhering to SEBI’s regulations, emphasizing the importance of maintaining membership and active participation in recognized stock exchanges and depositories.

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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.