Sebi bars SMC Global from taking up new assignment for 3 months
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Market watchdog Sebi today barred SMC Global Securities Ltd from taking up any new assignment for three months for violations related to reporting of margin and delay in collection of dues from trading members.
The Securities and Exchange Board of India(Sebi), in its order, prohibited "the noticee, SMC Global Securities Ltd from taking up any new assignment or contract or launch a new scheme for a period of three months."
The order would come into force immediately on expiry of 21 days, the regulator said.
In 2009, two stock brokers -- Sunchan Securities Ltd (SSL) and Ganga Yamuna Finvest(GYF) -- had defaulted in their settlement obligations to the National Stock Exchange (NSE) and had raised concerns over the clearing and risk management operations of their clearing member SMC Global.
After receiving complaints from investors, Sebi had directed NSE to examine the matter. Besides, the regulator had also initiated a probe.
Sebi, in its initial investigation, observed that SMC Global had collected margins in non-permissible forms from its trading members including SSL and GYF, which resulted in short collection alongwith wrong reporting of margins.
This shortfall in the collection of required margins from trading members indicated that the same was funded by SMC Global to maintain the margin obligations, it added.
The regulator said that SMC Global failed to collect the requisite margin from its trading members and this had allowed them to take additional positions and risk in the derivative segment.
The position taken by SSL and GYF without payment of adequate margin had resulted in heavy losses when market moved adversely and thereby resulted in defaults in fulfilling their obligations. These brokers were declared defaulters and expelled as members of stock exchanges.
"The noticee (SMC Global) being a clearing member has not only failed to collect the margin in the approved form/mode, it has also made wrong reporting to the exchanges and thus had failed to fulfil his duty in the proper collection and reporting of margins, as required under law," Sebi said in its order. (Economic Times)
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