Sebi fines Composite Investments for misuse of clients' funds

It was found that Dakshin Mercantile did not complete the acquisition of shares of LKP Finance as per the share purchase agreement, which was in violation of Sebi norms, and accordingly levied the penalty. Separately, the regulator levied a fine of Rs 2 lakh on Alang Industrial Gases Ltd and an individual, Dilip Sheth, for disclosure lapses.

Regulator Sebi on Tuesday imposed a penalty of Rs 5 lakh on stock broker and depository participant Composite Investments Pvt Ltd for misusing credit balance clients' funds. The Securities and Exchange Board of India had carried out a comprehensive joint inspection with exchanges and CDSL (Central Depository Services Ltd) of Composite Investments Pvt Ltd (noticee) for the period from April 2017 to August 31, 2018.

During the inspection, it was found that the noticee had provided funding to two clients beyond the stipulated period on two instances, Sebi said in an order on Monday. Besides, the stock broker did not settle the balance of its inactive clients, thereby violating SCRA (Securities Contracts Regulation Act) norms, it said.

The regulator, accordingly, levied a penalty of Rs 5 lakh on Composite Investments. In a separate order, Sebi slapped a penalty of Rs 5 lakh on stock broker Dakshin Mercantile Pvt Ltd for violating takeover norms in the matter of LKP Finance Ltd.

During an examination, the watchdog observed that the entity had entered into a share purchase agreement in May 2018 with LKP Finance and some others to acquire equity shares. It was found that Dakshin Mercantile did not complete the acquisition of shares of LKP Finance as per the share purchase agreement, which was in violation of Sebi norms, and accordingly levied the penalty.

Separately, the regulator levied a fine of Rs 2 lakh on Alang Industrial Gases Ltd and an individual, Dilip Sheth, for disclosure lapses. Through another order, Sebi imposed Rs 2 lakh fine on Subash Menon and Kivar Holdings Pvt Ltd for violating insider trading norms in the matter of Subex Ltd.

Sebi said Menon and Kivar Holdings had made an off-market inter-se transfer in the scrip of Subex without obtaining pre-clearance and also failed to make disclosures in this regard..