This comes after SEBI conducted a thematic inspection of the books of accounts of IIFL during the period of January 30 to February 3, 2014, wherein the records and the processes of IIFL during the period of April 1, 2011, to December 31, 2013, were inspected.
The regulator noticed that the actions of IIFL were not in compliance with the provisions of the code of conduct for stock brokers as stipulated by the Securities and Exchange Board of India (Stock Broker) Regulations, 1992.
SEBI found that IIFL failed to segregate its own funds from clients' funds, misused the credit balances in clients' funds for the benefit of clients having debit balances, and inappropriately designated the client bank accounts.
Further, the regulator decided to do a comprehensive inspection of the books of accounts of IIFL, which was conducted on a series of dates, including August 7, 12-13, 21-22, 26, 27, and September 19, 2014, simultaneously at four different offices of IIFL, including at its corporate office, two branch offices and the office of a sub-broker of IIFL.
According to the final SEBI order, out of the 45 client bank accounts examined during inspections, 26 client bank accounts were not titled as ‘client accounts’ by IIFL Securities. It was seen that funds were regularly being transferred from client bank accounts and clients’ dividend accounts to the control accounts of IIFL, which were managed and controlled by IIFL as its own bank account.
