http://www.financialexpress.com/news/Sebi-fines-HSBC-broking-arm-for-misusing-client-funds/622005/
Saturday, May 22, 2010 at 2224 hrs IST
Mumbai: Stock market regulator Securities & Exchange Board of India has imposed a penalty of Rs 40 lakh on HSBC InvestDirect Securities
for misusing clients funds and securities. The regulator, during its inspection, had found HSBC InvestDirect (formerly known as IL&FS Investmart Securities) guilty on several accounts
failure to segregate its own fund from that of its clients, not delivering securities as well as payments to its investors and for misuse of its clients funds and securities.
HSBC Securities & Capital Markets and HSBC Violet Investments Mauritius holds a stake of 46.49% and 43.4%, respectively, in the stock broking arm. The final order came after HSBC sought settlement of enforcement actions by the regulator through a consent application. Just a month back, Sebi had pulled up HSBCs mutual fund arm for making fundamental changes to its gilt fund without informing its investors. Sebi had then let it off by just issuing a warning to HSBC mutual fund.
The High Powered Advisory Committee constituted by the regulator considered the terms proposed by the applicant and recommended the case for settlement. According to the terms of the settlement, HSBC will have to reconcile the statements with its clients within two years.
This would include reversing all credits wrongly given to clients, reinstating the debtors and buying back the excess shares sold, as well as reconcile the excess shares and restore the same to the clients.
This is the second time in less than a fortnight that the regulator had penalised a high profile stock broker. Previously on May 10, the regulator had imposed a penalty of Rs 5 lakh as settlement charges on Motilal Oswal Securities, for not exercising due diligence while opening 697 demat accounts.
HSBC has a ignominous history of hidden charges which was amply illustrated in its credit card division which posted substantial losses last quarter. The credit card division was selling unsecured cards recklessly without any client norms in place.