The Securities and Exchange Board of India (Sebi) has imposed a ₹1 lakh penalty on SMC Global Securities for regulatory compliance failures. According to reports from The Economic Times, the penalty was levied for failing to comply with norms on maintaining client order-placement records and supervision of an authorised person. The order was passed on Thursday following a thematic inspection conducted by Sebi. As per Sebi adjudicating officer Amit Kapoor, SMC was under statutory obligation to comply with applicable regulations, with non-compliances deserving suitable penalty as the purpose is to deter wrongdoing and promote ethical conduct in the securities market.
Sebi's examination, covering the period from January to September 2024, focused on unauthorised trading complaints and client order placement. The market watchdog found that SMC Global Securities had not maintained appropriate pre-order placement records for certain clients and could not provide relevant records for multiple orders. The inspection also revealed that SMC received 322 complaints relating to unauthorised trading and misappropriation of clients' funds or securities during FY 2024-25, with 279 complaints received between June and September 2024. Of 343 active clients mapped to authorised person Amit Lilhare, a pattern of fixed payouts was found in the ledgers of 161 clients, with these clients having invested a total of ₹6.11 crore for fixed payouts between April 1, 2022 and June 30, 2024, while total fixed payouts stood at ₹1.85 crore.
The inspection revealed concerning patterns in client transactions involving Amit Lilhare, who operated in the Bhilai and Rajnandgaon regions of Chhattisgarh. According to Sebi's findings, fixed monthly payouts were made to 16 clients in the first week of every month, with 99 percent of orders placed by these clients originating from a single dealer ID. SMC argued that clients were walk-in clients who placed verbal orders at the AP's office and that Lilhare had produced a visitor register, but Sebi rejected this argument, noting that brokers must maintain evidence of client orders including physical records signed by clients, telephone recordings or emails from authorised email IDs. The regulator found deficiencies in monitoring bank accounts receiving commissions and verifying payout requests from clients, with Lilhare receiving commission on such fixed payouts through payments made by clients to his bank accounts or through UPI. As per Rediff Moneynews, the order specifically noted that 161 of 343 active clients showed suspicious fixed payout patterns, with total payouts exceeding ₹1.84 crore during the inspection period.
SMC Global Securities operates as a Sebi-registered stock broker and maintains membership with major Indian exchanges including BSE, NSE, MCX and NCDEX. As reported by The Economic Times, the company engages with various stock exchanges across India and is subject to Sebi's regulatory framework. The penalty reflects Sebi's enforcement action against violations of Stock Brokers Regulations and other market norms. According to the adjudication order, SMC had been penalised several times earlier for violations of various provisions of the SEBI Act and regulations. The NSE inspection covered April 1, 2022 to June 30, 2024, while the SEBI inspection covered January 1, 2024 to September 30, 2024, with SEBI proceedings being adjudication proceedings that could result in monetary penalty while NSE proceedings were disciplinary.
