The Securities and Exchange Board of India (SEBI) has fined IIFL Securities ₹3 lakh for lapses in due diligence and care in its role as a market intermediary. This penalty was imposed due to the mishandling of client data related to domicile information, which affected stamp duty obligations.
From July 2020 to June 2022, IIFL Securities reported 12,101 instances of mismatched client data on the Multi Commodity Exchange (MCX), accounting for 2.95% of its client base. Among these discrepancies, 18 clients were incorrectly listed as domiciled in Sikkim—a state where residents are exempt from paying stamp duty on commodity derivative transactions.
SEBI’s investigation revealed that while there was no evidence of disproportionate gain or unfair advantage resulting from these errors, they indicated a lack of due care.
The MCX had noted that IIFL Securities improperly uploaded data in the Unique Client Code (UCC) Database during the examination period. Although IIFL Securities attributed these errors to technical issues with the data provided by MCX, SEBI found that the errors highlighted a broader problem with internal controls and oversight.
According to Clause A(2) of the Code of Conduct in Schedule II of Regulation 9(f) of the SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992, stock brokers are required to exercise due skill, care, and diligence in all business activities.
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