Market regulator Sebi on Thursday agreed to settle a probe against Reliance Securities for a suspected breach of regulations, after the Anil Ambani group firm offered to pay Rs 25 lakh among various settlement terms. Brokerage firm Reliance Securities will also not register any new clients for the next 45 days and would spend Rs 1 crore on investor education and awareness programs, as per the terms of the settlement with Sebi.
The company was being probed for alleged violations of rules concerning code of conduct for brokerage entities between the period from April 2007 to March 2009.
Sebi said that its inspection of the books of Reliance Securities (RSL) for the aforesaid period prima facie revealed various irregularities.
These included lack of documentary proof for a branch office, collection of excess securities transaction tax and collection of cheque in the name of Reliance Money (another group company), among other irregularities.
Reacting to the Sebi consent order, an out-of-court like settlement procedure, the company said that the consent was reached at voluntarily without admission or denial of guilt.
The company adopted the consent route voluntarily to avoid long drawn litigation, legal costs, etc, Reliance Securities said, while adding that the order would not have any impact on its existing customers.
It also said that it voluntarily agreed to all the terms of the settlement.
“RSL voluntarily agreed to spend Rs one 1 crore on investor education and awareness programs. RSL has already announced extensive Investor Awareness Program to cover over 1.5 lakh investors across 200 cities in India within this year,” it added.
Earlier in January, two other Anil Ambani group firms Reliance Infra and RNRL had reached a settlement with Sebi after paying consent charges of Rs 50 crore for settling a probe into alleged unfair market dealings by the two firms.
Besides, the two companies also agreed to abstain from investing in secondary market till 2012, while their top officials, including Chairman Anil Ambani, agreed to abstain from investing in secondary market till December 2011.
Sebi said that its probe into Reliance Securities also prima facie found irregularities like the company not informing its clients about changes in their registration, which led to large number of investor complaints.
Also, frequent disruptions were noticed in internet trading platform, while the company was found to be equipped for handling only 50% of its customer base, while it issued undated letters at times to different organisations.
Also, RSL did not update its client master data despite being pointed out by the stock exchanges BSE and NSE and took power of attorney in the name of Reliance Commodities.
In other suspected violation of rules, RSL did not maintain clear segregation between broking and other activities of the group, did not take adequate steps to redress complaints within 30 days, outsourced its call centre activities for calls related to phone trading.
Also, the company used the name ‘Reliance Money’ at various places, thus creating a confusion about the identity of the registered entity.
After noticing these irregularities, Sebi began its enquiry as also cease and desist proceedings and a show cause notice was issued on August 31, 2010.
Subsequently, RSL requested on September 14, 2010 for a settlement through a consent order and later submitted its revised settlement offer on December 7, 2010.
A high-powered advisory committee of Sebi accepted the terms of conditions for the settlement and the same was informed to the company on April 19, 2011.
The company paid Rs 25 lakh towards settlement fees and expenses on June 1, paving the way for the consent order being passed today, Sebi said.
The regulator said that the consent order was without prejudice to its right to take enforcement action, including commencement or reopening of the pending proceedings, against the company.