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of <h1>Stockbroker penalized Rs. 15 lakhs for misusing client funds and providing excessive exposure beyond T+2+5 days</h1> <h3>Beeline Broking Ltd. And Beeline Commodities Pvt. Ltd. Versus Securities and Exchange Board of India</h3> Beeline Broking Ltd. And Beeline Commodities Pvt. Ltd. Versus Securities and Exchange Board of India - TMI The appeal before the Securities Appellate Tribunal at Mumbai involved allegations of violations by a SEBI registered stockbroker and a commodities company. The core issues considered in the judgment were the misuse of clients' funds, funding clients beyond the permissible period, and failure to issue contract notes. The Tribunal heard arguments from both parties and examined the evidence presented.In the analysis of the first charge of misusing clients' funds, it was found that the appellants had utilized credit balance clients' funds for settling debit balance clients' obligations. The inspection revealed instances of misutilization ranging from Rs. 88,000 to Rs. 2.48 crores. Despite infusing Rs. 1 crore into the system, the G value remained negative. The Tribunal noted the instances of misutilization and the appellant's acknowledgment of the negative G value.Regarding the second charge of providing exposure beyond the permissible period, the appellants did not dispute the allegation but attributed it to a computer system bug. The overexposure was approximately Rs. 39.13 lakhs, as detailed in the records.The third charge of non-issuance of contract notes was contested by the appellant, who argued that there was no requirement to provide proof of delivery of contract notes regularly. The Tribunal found this charge untenable based on the absence of a specific provision mandating the submission of such proof.In assessing the proportionality of the penalties imposed, the Tribunal referenced a previous case involving Angel Broking Limited, where a penalty of Rs. 10 lakhs was imposed for misutilization of funds amounting to Rs. 32.97 crores. The Tribunal acknowledged the appellant's status as a repeat offender but emphasized the need for consistent regulatory treatment. Considering the facts and the penalties in comparable cases, the Tribunal reduced the penalty to Rs. 15 lakhs, upholding the findings but modifying the penalties against the noticees.In conclusion, the Tribunal partially allowed the appeal, upholding the findings but reducing the penalties imposed. The penalty was modified to Rs. 15 lakhs, payable by the first noticee due to the merger with the second noticee. No costs were awarded in this matter.
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