Brokers under SEBI's scanner for moving investors' money abroad

At least five stock brokers have come under regulatory scanner for siphoning off securities and funds worth over Rs 500 crore from investor accounts for personal gains to foreign locations, including Switzerland and Singapore, as also for private ventures like running a spa.

Interestingly, all the five brokers are based in the national capital region and at least two of them have already faced market regulator Sebi's ire for various discrepancies.

In a similar modus operandi, these brokers diverted the money from the accounts of their clients for personal gains, while one of them is believed to have been running an internet-based scam for luring investors with promise of huge returns in less time, a senior official said.

Sebi suspects that the top executives of these brokerage firms could have been hand-in-glove with the promoters in siphoning off the investors' money, as many of them have become untraceable and the show-cause notices served to them have returned undelivered.

The regulator and the exchanges have stepped up their efforts in the recent past to check the instances of brokers diverting the funds and securities from the investor accounts. In one such case, Sebi late last month barred a broker, Kassa Finvest, and its top executives from capital markets, while asking them to provide details of their assets and funds.

The regulator has also asked the general public to report any violation by Kassa, which has been found to have diverted investors' money for funding other business ventures. It was alleged that the margin money of clients of Kassa may have been used to directly or indirectly fund companies namely, Sinia Global (registered in Singapore), Mystic Cures Ltd (a spa in Mehrauli) and Midas Global Fund (mutual fund registered in Singapore) where a related party was a director. Sebi is further probing the case.

Kassa had also failed to honour undertakings given to the National Stock Exchange for settling all the pending claims with the bourse and its clients, while it also failed to resolve a large number of investor complaints.

Last month, NSE had also said it has received a large number of investor complaints for non-receipt of funds and securities against some members brokers. The National Stock Exchange (NSE) had issued a circular to "alert" its members against any non-adherence to norms about timely settlement of funds and securities in the investor accounts, after its inspections and internal audits found some of them were not "diligently adhering" to such guidelines.

Sebi subsequently decided to thoroughly look into the matter to ensure that investors are not taken for a ride and their grievances are addressed effectively. Some brokers have not fulfilled the arbitration awards decided against them, while collaterals given by them have also been found to be inadequate.