The Securities and Exchange Board of India (SEBI) has levied a penalty of Rs 6 lakh on Angel One, a stock brokerage firm, due to its failure to maintain due diligence concerning its authorized person (AP).

This AP was discovered to be sharing office space with an unregistered advisory entity, Ravindra Bharti Education Institute Private Ltd (RBEIPL), which had previously been prohibited from participating in the securities market. This arrangement raised serious compliance concerns, particularly as the AP’s dealers were employed by the unauthorized advisory, resulting in a violation of established regulatory standards.

The SEBI ruling underscored that both the AP and the advisory operated from the same location, allowing the advisory to access client information from the AP to promote its investment services.

Evidence from call recordings indicated that RBEIPL employees reached out to clients linked with the AP to recommend trades, which were subsequently validated by the AP, highlighting a significant lapse in oversight and governance. The adjudicating officer acknowledged that while it was challenging to quantify the financial repercussions of these infractions on clients, the brokerage had a legal responsibility to comply with applicable regulations.

The ruling stressed that these regulations are designed to deter misconduct and foster ethical practices within the securities market. Although Angel One had not previously incurred penalties for similar infractions, the breach warranted an appropriate fine, which was influenced by a prior penalty of Rs 50,000 imposed by the National Stock Exchange (NSE) for an unrelated issue concerning delayed reporting of a technical malfunction.

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