Sebi Bars Prabhudas Lilladher From Onboarding New Clients For 7 Days: Here's The Reason

Securities and Exchange Board of India (Sebi) has barred Prabhudas Lilladher Private Limited (PL), a registered stockbroker, from taking up any new assignment or contract for 7 days, effective from December 15. It came after the regulator’s enquiry finding several violations across client-fund handling, margin reporting, and account settlement processes. The order followed a joint inspection conducted by SEBI and stock exchanges between November 2 and 8, 2022, covering the period from April 2021 to October 2022.
According to the order, the inspection flagged misuse of client funds on three dates in July 2021, where the broker’s “G-value”, a key indicator used to detect shortfall in client funds, turned negative, reflecting a shortfall of Rs 2.70 crore. SEBI held that the broker failed to provide any credible explanation and that the deficit amounted to misutilisation of client money.
“the Noticee i.e., Prabhudas Lilladher Private Limited, SEBI Registration No: INZ000196637, be prohibited from taking up any new assignment or contract or launching a new scheme, in so far as may be applicable to the Noticee as a SEBI registered Stock Broker, for a period of 15 days in terms of Regulation 26(1)(iv) of SEBI (Intermediaries) Regulations, 2008,” Sebi said in the order.
The regulator also found large-scale delays in quarterly and monthly settlement of client accounts. Funds belonging to 1,283 non-traded clients, 677 monthly-settlement cases, and three traded accounts were not settled within mandated timelines, violating multiple circulars issued between 2009 and 2022.
SEBI said delays in settling client accounts cannot be justified by later corrections or the absence of investor complaints, noting that settlement rules exist to prevent the possible misuse of idle client funds.
Further, SEBI recorded incorrect reporting of end-of-day and peak margins across nine instances and a confirmed short-collection of peak margin worth Rs 55.46 lakh for one client. The broker was also found to have passed on margin-shortfall penalties to clients in violation of NSE rules prohibiting such recoveries for upfront margin shortfall.
Other lapses included delayed KRA uploads, inaccurate reporting of client funds, incorrect ledger balance reporting, transfer of securities to the “client unpaid securities account” in 91 cases, excess brokerage collection from four clients, and failure to close two demat accounts within deadlines.