Shares of IIFL Securities plunged 19.24% on Tuesday’s intraday trades to reach an intraday low of ₹ 57.50 apiece on the National Stock Exchange (NSE) after the Securities and Exchange Board of India (SEBI) barred the company from onboarding new clients for the next two years in respect of its business as a stockbroker.
IIFL Securities is the Stock Broking arm of the IIFL Group. It provides retail and institutional equities, financial products distribution and currency and commodity broking. Moreover, it provides investment banking, financial planning and wealth management services to retail and institutional customers across the country.
The regulator said that IIFL Securities has acted in a manner which by no stretch of moderation can be called careful and diligent. It has acted in flagrant disregard of basic due diligence expected from a stockbroker registered with the SEBI.
The order stated that the brokerage has continuously been found involved in the unauthorized use of credit clients’ funds for meeting obligations arising out of proprietary trades and the trades of debit balance clients.
IIFL Securities in an exchange filing said that the order pertains to inspections carried out for different periods from April 2011 to January 2017, which was prior to the issuance of Enhanced Supervision Circular dated September 26, 2016, which was made effective from July 1, 2017. SEBI’s order applies the said Circular retrospectively even while confirming that after the Circular became effective there has been no non-compliance with the same.
Moreover, the brokerage added that the order does not affect the existing business with its existing clients. IIFL Securities is in the process of preferring an appeal against the said order before the Securities Appellate Tribunal.
SEBI pointed out that despite the findings of misuse of credit funds, IIFL Securities did not even make an attempt to correct its wrongdoings and the same wrongdoings were spotted again. The regulator stated that due to the fungibility of money, it is not possible to clearly identify the usage of client funds out of mixed funds by IIFL Securities for its own purposes.
IIFL Securities is a small-cap company with a market capitalization of ₹ 2,176 crores. It has an ideal return on equity of 19.76% and an ideal debt-to-equity ratio of 0.36. Moreover, it has a high dividend yield of 5.27%. Retail investors hold a 52.38% stake in the company followed by promoters with 31.14% and foreign institutions with 16.48%.
Written by Simran Bafna
Disclaimer
The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Dailyraven Technologies or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
