After a delay of eight years, SEBI took action against stock broker BMA Wealth for trading with unauthorised persons and violation of Money Laundering Act. On Friday, SEBI said it had barred BMA Wealth for six months from taking new clients.
“There were serious lapses in the functioning of the noticee (BMA Wealth), including weak internal control, dealing with unregistered sub-brokers, delay in passing on the corporate benefits to its clients, indulging in client funding, lacunae in redressing investor complaints, non-settlement of running accounts, etc, and recommended that the noticee be prohibited from registering fresh/new clients,” SEBI order said.
In 2019, the NSE suspended BMA Wealth for diverting client funds. Retail investors who traded using services of BMA Wealth in 2019 filed complaints with the police, SEBI and exchanges.
In 2013 SEBI had issued a show cause notice to BMA Wealth for violation of several serious broker and securities law done in February 2012. But a final inquiry report against the broker was filed only in 2017 according to as per SEBI’s own submission. The final action came after eight years for violations in 2012. But before the regulator took any action against the broker, huge complaints piled up against BMA Wealth in 2019. Complaints and inquiry based on which the NSE suspended BMA show that the broker had moved client money through 13 entities. The promoter used client money to buy real-estate and property. NSE suspended BMA Wealth in October 2019.
SEBI’s submission shows that in 2012 it found BMA was carrying out trades through unregistered and unauthorised persons by entering into franchisee agreement with them. SEBI also found that then BMA acted through unregistered sub-brokers. In 2012, BMA had over 2 lakh registered clients in capital market segment and executed over 70,000 trades on an average in a day. The average turnover of the brokerage stood at ₹1,100 crore per day in 2012. Then, SEBI found that the broker was also in violation of prevention of money laundering (PMLA) norms as it had failed to categorize ‘clients of special category’ in line with the PMLA requirements. SEBI Inspection revealed that the broker could not give details pertaining to non-resident clients, high net worth individuals, trusts, charities, NGOs, politically exposed persons, etc.
SEBI also found that BMA Wealth in 2012 had failed to maintain logs of access to systems, database, network and applications, all of which allows tracing of money trail. In 2012 BMA did not address investor complaints against it.
Source- Business Line.