Background

1. The present matter emanates from show cause notice dated February 1, 2021 (hereinafter referred to as “SCN”) issued to Ficus Securities Pvt. Ltd. (hereinafter referred to as “Ficus / Noticee”) under regulation 27(1) of SEBI (Intermediaries) Regulations, 2008 (hereinafter referred to as “Intermediaries Regulations”). Ficus is registered with SEBI as a Stock broker and its registration details are as follows:

Table No. 1

Noticee Name	Exchange	Segment	Registration No.
Ficus Securities Pvt. Ltd. - Stock broker	NSE	Currency derivative	INE231298630
		Equity derivative	INF231298630
		Equity	INB231298630
	BSE	Equity derivative	INF011298636
		Equity	INB011298636
	MSEI	Equity derivative	INF261298633
		Equity	INB261298633
		Currency derivative	INE261298630
		Interest Rate Derivative	INE261298630

2. Vide the above mentioned SCN, Ficus was called upon to show cause as to why action as recommended by the Designated Authority (hereinafter referred to as “DA”) or any other direction as deemed fit should not be issued/imposed on it in terms of regulation 27 of the Intermediaries Regulations. The issued SCN enclosed therewith the report of the DA dated December 31, 2020 made with respect to Ficus.

3. The DA in his report had observed the following against Ficus:

3.1. Failure to furnish information to SEBI;

3.2. Misuse of client’s funds and securities;

3.3. Transferred funds to its associate company;

3.4. Failed to redress investor grievance;

3.5. Failed to disclose all the details regarding its depository participant accounts.

4. Based on the aforesaid finding the DA held that Ficus has violated the following provisions of law during the period April 1, 2015 to January 23, 2018 (hereinafter referred to as the "inspection period”):

4.1. SEBI Circular no. SMD/SED/CIR/93/23321 dated November 18, 1993.

4.2. SEBI circular no. SEBI/HO/MIRSD/MIRSD2/CIR/P/2016/95 dated September 26, 2016.

4.3. SEBI Circular no. MIRSD/SE/Cir-19/2009 dated December 3, 2009.

4.4. Clauses 15 and 33 of Rights and Obligations document for Stock Broker, SubBrokers and Clients as prescribed in Annexure 4 of the SEBI Circular no. CIR/MIRSD/ 16/2011 dated August 22, 2011.

4.5. Regulations 3(a),(b),(c) and (d) of theSEBI(Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (hereinafter referred to as “PFUTP Regulations”).

4.6. Conditions of registration as specified under Regulation 9(e) of the Stock Brokers SEBI (and Sub Brokers) Regulations, 1992 hereinafter referred to as “Stock Brokers Regulations”).

4.7. Regulation 21 of Stock Brokers Regulations.

4.8. Clauses A (1), (4) and (5) of the Code of Conduct prescribed for the Stock brokers under Regulation 9 of Stock Brokers Regulations.

5. The DA in his report has also made the following recommendation:

“In view of the above observations and the gravity of the violations committed by the Noticee and also the fact that Noticee has been expelled as a stock broker / trading member by the stock exchanges, in terms of Regulation 27 of the Intermediaries Regulations, I hereby recommend that the certificate of registration of Noticee viz. Ficus Securities Private Limited, as a stock broker (Registration nos. as mentioned in Table below), may be cancelled…”

6. As stated above that a SCN based on the Enquiry Report was issued to Ficus. However, the said SCN sent to the address of Ficus at Barakhamba Road, New Delhi address could not be served upon it. Therefore, the SCN was affixed at the aforementioned address on November 12, 2021. Thereafter a personal hearing was schedule on August 02, 2022 at 2:30 pm. The hearing notice along with theSCN was served on Ficus by serving it on the Promoter - Director of Ficus, Mr. Vinod Bansal vide an email dated July 18, 2022.

7. On the day of the scheduled hearing, Mr. Vinod Bansal appeared for the hearing via Webex. He reiterated his submissions earlier made by him in the course of a separate proceedings being pursued by SEBI against him under Section 11B of Securities and Exchange Board of India Act, 1992. Post the personal hearing, Mr. Vinod Bansal was given additional time to make further submissions, if any in the present matter. It is however noted from the available records that no additional submissions have been received from him in the matter.

Consideration of Issues and Findings

8. I have carefully perused the post Enquiry SCN including the Enquiry Report served on the Noticee and other materials/information submitted by the Noticee including Mr. Vinod Bansal’s submissions made in the course of 11B proceedings initiated in the same subject matter and other relevant materials available on record. After considering the allegation levelled against the Noticee in the instant matter as spelt out in the post Enquiry SCN, the issue which arises for my consideration in the present proceeding is whether the Noticee has violated various provisions of the SEBI Act, Rules, regulations and circulars issued by SEBI from time to time relating to its broking operations.

9. In order to address the issue at hand, it would be relevant to first highlight the findings of the inspection carried out by SEBI into the affairs of Ficus during the inspection period, which are as follows:

9.1.Non-settlement of claims of clients

Before proceeding, I would like to refer to the applicable provisions of SEBI circulars which are alleged to have been violated by Ficus while settling the clients’ accounts and the same reads as under:

SEBI Circular no. MIRSD/SE/Cir-19/2009 dated December 3, 2009

Running Account Authorization

…

12. Unless otherwise specifically agreed to by a Client, the settlement of funds/securities shall be done within 24 hours ofthe payout. However, a client may specifically authorize the stock broker to maintain a running account subject to the following conditions:

…

(e) The actual settlement of funds and securities shall be done by the broker, at least once in a calendar quarter or month, depending on the preference of the client. While settling the account, the broker shall send to the client a ‘statement of accounts’ containing an extract from the client ledger for funds and an extract from the register of securities displaying all receipts/deliveries of funds/securities. The statement shall also explain the retention of funds/securities and the details of the pledge, if any.

Rights and Obligations document for Stock Broker, Sub-Brokers and Clients as prescribed in Annexure 4 of the SEBI Circular no. CIR/MIRSD/ 16/2011 dated August 22, 2011

33. The stock broker shall make pay out of funds or delivery of securities, as the case may be, to the Client within one working day of receipt of the payout from the relevant Exchange where the trade is executed unless otherwise specified by the client and subject to such terms and conditions as may be prescribed by the relevant Exchange from time to time where the trade is executed It was noted at the time of inspection that Ficus has not done actual settlement of funds and securities (on monthly / quarterly basis) in case of 87 instances out of a total number of 100 instances verified (during inspection) pertaining to 50 clients. An illustrative list highlighting a few of such instances is reproduced hereunder:

Table No. 2

S.No.	Client Code	Client Name	Period of settlement	Settlement date	Retention sheet / Statement issued- Date	Financial balance as on date of settlement	Securities valuation as on date of settlement	Total amount not settled
1	C0277	Gaurav Credits Private Limited	Jul16- Sep16	Not settled	Not send	25,80,181.20	68,52,561.00	94,32,742.20
2	MUM070	Geeta Prakash Shah	Jul16- Sep16	Not settled	Not send	-	42,08,428.75	42,08,428.75
3	VR050	Jatinder Bhasin	Jul16- Sep16	Not settled	Not send	68,00,238.67	21,67,510.90	89,67,749.57
4	C0080	Amg Mercantile Pvt Ltd	Jul16- Sep16	Not settled	Not send	92,748.99	-	92,748.99
5	C0031	Ontime Consultants India Private Limited	Jul16- Sep16	Not settled	Not send	18,22,119.68	-	18,22,119.68

Further on verification of trial balance and register of securities as on December 31, 2016 it was observed that Ficus has not settled the clients’ accounts having credit balances of funds and securities, who were inactive for more than 3 months in 106 instances amounting to INR 52.79 lakh. An illustrative list highlighting a few such instances is reproduced hereunder:

Table No. 3

S. No.	Account Head Name	Credit Closing Bal as on 31-12-16	Security valuation as on 31-12-16	Total	Last Trade Date
1	Mukesh Kumar Garg	1132969.98	553776.2	1686746.18	16/09/2016
2	Satvik Bansal	270504.36	0	270504.36	05/08/2016
3	Ravi Khullar	167239.18	220576.2	387815.38	16/05/2016
4	Vijay Kumar Goel	99340.51	0	99340.51	14/03/2016
5	Himanshu Rajnikant Sanghvi	92876.83	0	92876.83	24/06/2016

I note that as perSEBI circular dated December 3, 2009, the actual settlement of funds and securities has to be done by the stock broker, at least once in a calendar quarter or in a month, depending on the preference of the client. However, it is observed from the above tables that during the quarter endingSeptember 2016 and December 2016, there were substantial number of clients having significant outstanding credit balances in their trading accounts that remained unsettled when the law relating to the settlement i.e. SEBI circular dated December 3, 2009 specifically required every stock broker to settle the funds of client at least once in a calendar quarter or in a month, depending on the preference of the client. In this respect, the record before me shows that Ficus instead of taking steps to ensure compliance with the mandatory provisions of SEBI circular dated December 3, 2009, was progressively defaulting in its obligations to comply with the circular. It is pertinent to note that by not receiving the statement of account on time as stipulated by SEBI circular, the clients were kept in dark with respect to the state of affairs in their running accounts maintained with the stock broker, giving rise to the possibility ofthese accounts of such inactive clients being misutilised for unauthorised trading by employees, authorized persons, etc. of the stock broker. Further, clients in general, whether active or inactive, are entitled to receive the settlement statement periodically as per their preference. This is a prudential norm prescribed considering the interest of investors so that their funds are not kept unsettled by the stock broker for indefinite periods on any pretext. I note that the aforesaid circular was issued with a view to instill greater transparency and discipline in the dealings between the clients and the stock brokers and to protect the interests of investors in the securities market. The objective of the mandatory provisions of the circular is not only to keep the investor periodically informed about his/her account, so as to curb any misutilization of funds, but also to inform and update the investors about their respective exposures to the quantum and value of various securities to ensure that the clients periodically monitor their exposure to securities market and assess if their exposure is proportionate to their potential. However, in the instant case such a regulatory intent and mandate has been completely disregarded by Ficus. Hence, I find that the commission of the above acts of not settling the funds and securities of client by and on behalf of Ficus certainly fall within the mischief of clause 12 (e) ofSEBI circular no. MIRSD/SE/Cir-19/2009 dated December 3, 2009 and clause 33 of Rights and Obligations document for Stock Broker, Sub-Brokers and Clients as prescribed in Annexure 4 of the SEBI circular no. CIR/MIRSD/ 16/2011 dated August 22, 2011.

9.2. Misutilisation and Non-availability of client funds

Moving on to this issue, at the onset it would be pertinent to refer to the relevant provisions of the SEBI circular no. MD/SED/CIR/93/23321 dated November 18, 1993, clause 15 of Rights and Obligations document for Stock Broker, Sub-Brokers and Clients as prescribed in Annexure 4 oftheSEBI circular no. CIR/MIRSD/ 16/2011 dated August 22, 2011, clauses A (1), (4) and (5) of the Code of Conduct prescribed for the Stock brokers under regulation 9 of SEBI Stock Brokers Regulations read with regulations 3(a), (b), (c) and (d) of the PFUTP Regulations. The text of the aforesaid provisions is reproduced here under:

SEBI Circular dated November 18, 1993

1. It shall be compulsory for all Member brokers to keep the money of the clients in a separate account and their own money in a separate account. No payment for transactions in which the Member broker is taking a position as a principal will be allowed to be made from the client’s account. The above principles and the circumstances under which transfer from client’s account to Member broker’s account would be allowed are enumerated below.

A] Member Broker to keep Accounts: Every member broker shall keep such books of accounts, as will be necessary, to show and distinguish in connection with his business as a member –

i. Moneys received from or on account of each of his clients and,

ii. the moneys received and the moneys paid on Member’s own account

B] Obligation to pay money into "clients’ accounts". Every member broker who holds or receives money on account of a client shall forthwith pay such money to current or deposit account at Bank to be kept in the name of the member in the title of which the word "clients" shall appear (hereinafter referred to as "clients account"). Member broker may keep one consolidated clients account for all the clients or accounts in the name of each client, as he thinks fit: Provided that when a Member broker receives a

cheque or draft representing in part money belonging to the client and in part money due to the Member, he shall pay the whole of such cheque or draft into the clients account and effect subsequent transfer as laid down below in para D (ii).

C] What moneys to be paid into "clients account". No money shall be paid into clients account other than –

i. money held or received on account of clients;

ii. such money belonging to the Member as may be necessary for the purpose of opening or maintaining the account;

iii. money for replacement of any sum which may by mistake or accident have been drawn from the account in contravention of para D given below;

iv. a cheque or draft received by the Member representing in part money belonging to the client and in part money due to the Member.

SEBI Circular dated August 22, 2011

“TRANSACTIONS AND SETTLEMENTS

15. The stock broker shall ensure that the money/securities deposited by the client shall be kept in a separate account, distinct from his/its own account or account of any other client and shall not be used by the stock broker for himself/itself or for any other client or for any purpose other than the purposes mentioned in Rules, Regulations, circulars, notices, guidelines of SEBI and/or Rules, Regulations, Bye-laws, circulars and notices of Exchange.

Stock Brokers Regulations

CODE OF CONDUCT FOR STOCK BROKERS [Regulation 9]

A. General.

(1) Integrity: A stock-broker, shall maintain high standards of integrity, promptitude and fairness in the conduct of all his business.

…

(4) Malpractices: A stock-broker shall not create false market either singly or in concert with others or indulge in any act detrimental to the investors interest or which leads to interference with the fair and smooth functioning of the market. A stockbroker shall not involve himself in excessive speculative business in the market beyond reasonable levels not commensurate with his financial soundness.

(5) Compliance with statutory requirements: A stock-broker shall abide by all the provisions of the Act and the rules, regulations issued by the Government, the Board and the Stock Exchange from time to time as may be applicable to him.

PFUTP Regulations

3. Prohibition of certain dealings in securities

No person shall directly or indirectly—

(a) buy, sell or otherwise deal in securities in a fraudulent manner;

(b) use or employ, in connection with issue, purchase or sale of any security listed or proposed to be listed in a recognized stock exchange, any manipulative or deceptive device or contrivance in contravention of the provisions of the Act or the rules or the regulations made there under;

(c) employ any device, scheme or artifice to defraud in connection with dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange;

(d) engage in any act, practice, course of business which operates or would operate as fraud or deceit upon any person in connection with any dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange in contravention of the provisions of the Act or the rules and the regulations made there under.

In order to arrive at the findings of misuse of clients’ funds by Ficus, the following information/data were gathered and perused during the course of inspection:

 Trial balance dated January 23, 2018.

 HDFC bank statements for the period of April 1, 2015 to January 31, 2018.

 Total funds available with the clearing member and Exchange.

In the instant matter the following data was collected by the inspection team: As per Ficus’s trial balance dated January 23, 2018, The position with respect to the creditors and debtors was as under: -

Table No. 4

Account Head Name	Amount (INR)
Creditors	36,31,92,591.64
Debtors	1,78,68,292.35

The total availability of funds in broker’s bank a/c(s) as on January 31, 2018 were as follows: -

Table No. 5

Name of the Bank a/c	Bank account no.	Amount (INR)
HDFC NSE Client A/c	00030340030695	124.73
HDFC NSE Business	00030340025552	439.63
HDFC NSE CD Client A/c	0030340036361	148.42
HDFC NSE Clearing A/c	00990610008376	0.00
HDFC Mutual Fund Sett A/C	90090610010177	46.42
HDFC NSE Client A/C	05982340006283	298.55
Total		1057.75

The total funds available with the Clearing Member and Exchange as on January 22, 2018, were as under: -

Table No. 6

Account Head Name	Amount (INR)
NSCCL Security Deposit	1,500,000.00
NSE F&O	2,500,000.00
NSE Security Cash	11,000,000.00
Total (A)	1,50,00,000.00
Funds available with CM	95,226.64
IFSD available with CM	2,00,000.00
FDR available with CM	8,00,000.00
Total (B)	10,95,226.64
Total (A+B)	1,60,95,226.64

The analysis of the aforesaid three tables will lead to an inevitable conclusion that Ficus was not having sufficient funds so as to be in a position to pay to its clients who are shown to be its creditors as Ficus was falling short of funds by a big margin. The total amount of funds shortage with Ficus as at the end of January 2018 was as under:

Table No. 7

	Account Head Name	Amount (INR)
A	Funds with clearing member	10,95,226.64
B	Bank balance as per bank statement	1,057.75
C	Deposit with NSE (Encumbered against IGRP proceedings)	1,50,00,000
D	Total funds available (A+B+C)	1,60,96,284.39
E	Creditors	36,31,92,591.64
	Shortage of funds (D-E)	34,70,96,307.25

The aforesaid factual conclusion that Ficus had a huge shortage of fund, leads to a consequent finding that if the funds which were supposed to be available with Ficus to pay out to the clients with credit balances were not available with it, then the said funds have been diverted and utilised by Ficus for purposes other than for paying to its credit clients. Thus, not only Ficus had comingled its clients’ funds with its own funds but it has also misappropriated / utilised its clients’ funds for its own purposes or for purposes other than the purposes for which such funds were entrusted with it by the clients in connection with their trading activities. Credibility to the aforementioned finding is further adduced from the finding of the forensic auditor appointed by NSE which discovered that during the audit period, INR 0.15 crore was received in client bank account (HDFC 30340030695) and INR 0.01 crore was paid from the same account to certain entities who were not registered as clients of Ficus. It shows that client funds have been routed/diverted to entities that were not associated with Ficus as trading clients and in the absence of any justification furnished by Ficus to substantiate such transactions, it certainly amounts to utilisation of client funds for purposes and reason other than permitted under the regulatory laws.

In this respect, Mr. Vinod Bansal has already candidly admitted that Ficus was in the mode of expanding its business and had opened new offices in few cities across the country for which Ficus was in need of finances. Since, Ficus was in need of money, few clients were approached by it who have helped Ficus financially. In support of his submission, Mr. Vinod Bansal has submitted a list of clients who, as per him knowingly offered to support him financially. Having gone through the record and submission made in this behalf, I note that the regulatory provisions categorically prescribe the purposes for which the funds and securities of clients can be utilized by a stock broker and the alleged acts of appropriating the clients’ securities under the garb of taking financial help from clients with their consent don’t fall in any of the instances / purposes so mentioned under the relevant provisions. Additionally, it is also observed that though Mr. Vinod Bansal claims to have obtained the consent of certain clients to the effect that their securities available with Ficus could be utilized for business expansion of the Ficus, however, the aforementioned submission of Mr. Vinod Bansal is not supported by any third party independent documentary evidence. The clients list submitted by Mr. Vinod Bansal has no evidentiary value as it contains merely a scrip wise demat holding of clients as on January 31, 2018. It does not of its own, demonstrate that the clients whose names appear on the said list have agreed to help Ficus financially. No correspondence either by way of email or physical letter or bank statements showing transfer of funds from clients’ bank accounts to Ficus’s own bank account etc. has been submitted by Mr. Vinod Bansal. The allegation here is about the huge shortage of clients funds / misutislisation of clients funds by Ficus which anyway cannot be responded to, by stating that the clients had agreed to financially help Ficus. As Ficus had a mandatory obligation to settle its clients’ funds first. It should have first settled their accounts, refunded them their credit balances and then, it could have entered into any other financial transaction, with them separately to take financial help from them. If Ficus had settled its clients’ funds, then there would have been no shortage of funds in the records of Ficus. Subsequently, it was always open to Ficus to enter into an independent financial transaction with these entities which is not the scenario in the instant case. Thus, the contention of Mr. Vinod Bansal that clients’ funds were used for business expansion with their consent, is not borne out of the facts and circumstances of the case.

I note that the measures taken by SEBI by issuing various circulars, code of conduct etc., as cited earlier on the issue of Broker – Client transactions, settlement of funds and securities etc., are primarily intended to increase transparency in management of securities of clients and funds by the stock brokers. The funds in the client's accounts cannot be applied for any purpose other than what is permissible under SEBI rules and regulations. The objective of opening and maintaining a separate account for the client's funds is to segregate and identify them separately and to prevent its misuse either for trades of other clients or of the stock broker itself or any other purposes so that they are beyond the reach of the stock broker and / or its employees. The aforesaid actions of Ficus wherein, the stock broker has misused its clients’ funds and has also transferred the funds of its clients’ to entities who are not his clients, as per its own convenience without paying any heed to its statutory obligation to maintain separate account for its client and for itself (proprietary account), cannot be viewed leniently. Thus, I find that Ficus has grossly violated the provisions of SEBI circular no. SMD/SED/CIR/93/23321 dated November 18, 1993, clause 15 of Rights and Obligations document for Stock Broker, Sub-Brokers and Clients as prescribed in Annexure 4 of the SEBI circular no. CIR/MIRSD/ 16/2011 dated August 22, 2011, clauses A (1), (4) and (5) of the Code of Conduct prescribed for the Stock brokers under Regulation 9 of Stock Brokers Regulations and regulations 3(a), (b), (c) and (d) of PFUTP Regulations.

9.3.Non-availability and Misutilisation of client securities

As per SEBI circular no. SMD/SED/CIR/93/23321 dated November 18, 1993, it shall be compulsory for all the member brokers to make payment to their clients or deliver to the clients the securities purchased for them within two working days of pay-out, unless the client has requested otherwise

During the course of inspection, it was observed from the scrip wise breakup of all the securities as per register of securities (hereinafter referred to as “ROS”)thatthere were shortfalls of clients’ securities. Some of such instances as on January 31, 2018 are as follows:

Table No. 8

Scrip	Qty as per ROS	Total Qty available in beneficiary, clearing member and pledge accounts	Difference	Rate	Non- Availability (INR)	As per ROS (INR)
3I Infotech Ltd.	1449	0	1449	8	11592	11592
Alok Industries Ltd	379050	0	379050	3.9	1478295	1478295
Century Plyboards (I) Ltd	1481	2	1479	339.25	501750.75	502429.25
Greaves Cotton Ltd.	200	45	155	137.1	21250.50	27420
GVK Pow & Infra Ltd.	30000	500	29500	18.65	550175	559500

The available records also show the position of securities available with Ficus as on January 31, 2018 as under:

Table No. 9

Account Head Name	Amount (INR)
Value of client securities as per ROS	295,937,882.44
Actual Value of client securities available in beneficiary accounts, clearing member and pledge with NBFC	(974,491.44)
Shortfall of client securities	294,963,391

From the above table it is observed that client securities to the extent of INR 29.50 crore supposedly held in various demat accounts of Ficus as on January 31, 2018, was actually not available in those demat accounts. The same demonstrates that once the securities were purchased, pay-out was not made to the clients within two days, as mandated by SEBI circular dated November 18, 1993. There is no material available on record which would show that the clients of Ficus had requested to it otherwise with respect to the securities that belonged to them nor any submission has been advanced justifying the delay in doing the needful to remain in compliance with the above circular. Consequently, it can be strongly inferred that if the securities were not delivered to the clients on behalf of whom it was bought and the same were also not available with the stock broker in those demat accounts coupled with absence of any plausible explanations by Ficus to explain the absence of those shares from the demat accounts where these shares were supposedly kept on behalf of the clients, it leads to an irresistible conclusion that the securities were misappropriated / misused by the stock broker for the purposes other than for what it was meant for i.e. in sum, these shares have been used by Ficus for its own purpose.

Credence to the aforesaid finding is further lent from the finding of the Forensic Auditor which shows that substantial amounts were raised by Ficus by pledging clients’ securities during the inspection period.

Table No. 10

Pledged	INR in crore
	Paid	Received	Net (Received)/ Paid
ILFS	5.12	32.90	(27.78)
Globe Fincap Ltd	32.14	50.16	(18.02)
Aditya Birla Finance Ltd	3.71	0.03	3.68
Net Amount Paid / (Received)	40.97	83.09	(42.12)

From the aforesaid, it can be observed that funds to the tune of INR 83.09 crore raised by Ficus by pledging clients’ securities and those funds were received in Ficus’s bank account (HDFC Bank a/c:30340025552) instead of clients bank accounts. Moreover, it is observed that on certain instances when the pledged shares were released by the pledger, the said securities were sold through another member Globe Capital Market Ltd. on BSE Ltd. The funds received from the sale of such securities were utilised either for meeting pay-in obligations of the stock broker or for making repayment to the pledger. To illustrate the above, I find it appropriate to take six (6) such sample instances amounting to INR 2.72 crore when Globe Fincap was observed to have released the shares to Ficus's client beneficiary account no. 12020600-00448228 and those shares were onward sold on BSE Ltd. These instances are reproduced below:

Table No. 11

Date	Scrip	Qty sold in BSE through Globe Capital Market Ltd.	Rate (INR)	Amount (INR)	Qty held in PRO code as per ROS on the date of selling
09/09/2016	IBULHSGFIN	3583	799	28,62,817	-989
26/10/2016	IBULHSGFIN	18000	855	1,53,90,000	-3972
17/08/2016	LUPIN LTD.	521	1594	8,30,474	-4800
08/09/2016	INDIABULLS VENTURES	47067	28.5	13,41,409.50	-271305
09/09/2016	INDIABULLS VENTURES	105119	28.5	29,95,891.50	-318372
15/07/2016	SUN PHARMACEUTICAL	5000	770	38,50,000	2964
				2,72,70,592

One must note that the securities lying with the stock broker are held by the stock broker in a fiduciary capacity. The stock broker has to credit the securities to the demat account of its clients if the securities are fully paid. Even for some reason, if the securities of the clients are lying with the stock broker, the stock broker has been prohibited under law from using those securities for its own purpose, which in the instant case as revealed from the aforestated factual finding including the above noted instances of sale of clients shares on BSE Ltd. that the illegal and unauthorised use of clients’ securities by Ficus was not one of instance but had continued for a long time. It has been observed that even after those shares were released from pledge Ficus has been found to be engaged on numerous occasions of illegally pledging the securities belonging to its clients to the lenders. Under the circumstances and considering the materials on record, I am constraint to observe that Ficus has knowingly misrepresented the truth to its clients that it is holding the shares on their behalf in its fiduciary capacity and has also knowingly concealed the fact from its lenders that it was not the actual beneficial holder of those securities that were being pledged by it with the lenders. The acts of Ficus in dealing with the shares of its clients in a deceitful manner by which it has intentionally, being fully aware of the consequences, pledged the shares of its clients lying in its custody, to avail loan and thereby has acted in severe detriment to interest of its clients. Considering the material on record and absence of any evidence suggesting anything contrary to the allegations, I am of the firm view that Ficus has not only defrauded its clients but has also engaged in acts which have severe adversarial ramifications on the business of lending in the financial sector by genuine Lenders. Consequently, I see no hesitation in holding that the above act of Ficus is not in consonance with the securities laws.

Furthermore, on a comparison of the trade data with the transaction statements, it was observed that Ficus has sold securities in its proprietary code without possessing those securities in its proprietary account. Since, Ficus was found meeting its own proprietary pay-in obligations to the Exchanges despite its financial constraints, it can be easily inferred in the absence of plausible explanation of Ficus that client securities were utilised for meeting the pay-in obligations arising out of its proprietary trading. In this respect, 23 such sample instances amounting to INR 1.50 crore as observed in NSE are detailed below:

Table No. 12

Date	Symbol	Settlement Number	Net sell	Rate (INR)	Amount (INR)	Qty as per ROS in PRO after considering opening balance before selling
12-Jul-16	ARVIND	2016130	400	352.95	1,41,180	0
24-Jun-16	BALAJITELE	2016119	1,000	84.15	84,150	0
04-Jul-16	BALAJITELE	2016125	1,000	84.15	84,150	-1000
08-Nov-16	BALKRISHNA	2016210	444	75.15	33,366.60	0

03-Jun-16	EDELWEISS	2016104	20,000	97.6	19,52,000	298
14-Jun-16	EDELWEISS	2016111	1,000	97.6	97,600	-19702
25-Oct-16	KAYA	2016200	2,000	707.5	14,15,000	433
28-Oct-16	KAYA	2016203	100	707.5	70,750	-1567
03-Nov-16	KAYA	2016207	200	707.5	1,41,500	-1667
18-Nov-16	KAYA	2016217	100	707.5	70,750	-1867
26-Aug-16	IBULHSGFIN	2016162	989	650.25	6,43,097.25	3011
27-May-16	POWERGRID	2016099	435	183.5	79,822.50	0
14-Sep-16	TATASTEEL	2016173	2,000	391.25	7,82,500	645
14-Sep-16	TATASTEEL	2016173	955	391.25	3,73,643.75	1045
03-Nov-16	TATASTEEL	2016207	170	391.25	66,512.50	130
27-May-16	IBVENTURES	2016099	4,000	20.5	82,000	0
19-Oct-16	LUPIN	2016196	898	1486.95	13,35,281.10	-5162
30-Mar-16	LUPIN	2016060	191	1486.95	2,84,007.45	9
28-Apr-16	LUPIN	2016078	2,376	1486.95	35,32,993.20	24
10-Jun-16	LUPIN	2016109	86	1486.95	1,27,877.70	-2298
28-Jun-16	LUPIN	2016121	833	1486.95	12,38,629.35	-2384
05-Jul-16	LUPIN	2016126	100	1486.95	1,48,695	-3217
26-Jul-16	LUPIN	2016140	1,500	1486.95	22,30,425	-3517
					1,50,15,931.40

Mr. Vinod Bansal has submitted that if the DIS executed by Ficus’s clients are checked it will reflect that the purpose of shares transfers by the clients was for extending loan / margin support to Ficus. Moreover, there is no allegation by the clients that the shares were taken illegally from their demat account. With respect to the aforesaid submissions of Mr. Vinod Bansal, it is noted that he has not submitted any DIS to substantiate his submission. Even if the bald assertion of Mr. Vinod Bansal is accepted for a moment, it is noted that the purpose mentioned therein (DIS) does not unequivocally brings out that shares were in fact allowed by the clients to be transferred to Ficus’s account for the purpose of loan. The particulars mentioned on the DISas loan / margin which could very well mean that the shares were transferred for the purpose of margin requirement of the clients themselves (and not for proprietary account of Ficus) to enable the clients to trade in the market. Thus, in the absence of any correspondence between the clients and the stock broker to corroborate the above submissions, the particular mentioned on the DIS cannot be taken at face value to mean that the words ‘loan / margin’ mentioned in such DIS only meant that the clients had given those DIS willingly to transfer their shares in favour of the stock broker so as to financially help the stock broker. Further, the submission of Mr. Vinod Bansal that there is no allegation from the clients that shares were transferred illegally from their demat accounts is factually incorrect. It is noted from records that one Mr. Prakash Shah has made a complaint against Ficus that the stock broker has transferred the securities from his account to its own personal demat account to the tune of INR 5 crore. Further, there were several complaints pending in SCORES as on November 13, 2018 which pertained to non-receipt of securities by the clients. Moreover, in the preceding paragraphs it has already been factually demonstrated that Ficus has misappropriated / misused its clients’ securities by pledging them and by using them to meet its own pay-in obligations and there is nothing on record to show that the clients had consented for the aforesaid actions of Ficus. Thus, such actions ofthe Ficus strongly indicate that the securities ofthe clients were used by Ficus illegally to meet its own pay-in obligations and other financial needs.

In view of the aforesaid discussion, I am constrained to hold that on multiple occasions, Ficus has used its clients’ securities for settlement of its own pay-in obligations and has also transferred clients’ securities to other entities or has pledged those securities to avail funds for itself. The numerous instances as highlighted in preceding paragraphs have taken place across months, show that using client’s securities was not a onetime matter or an inadvertent error on the part of the stock broker, rather, Ficus was habitually doing it, in blatant disregard to the securities laws. Such actions of Ficus, which led to non-availability of clients’ securities and misappropriation of clients’ securities not only audaciously defies the transparency that SEBI is trying to achieve through its circular pertaining to handling of client’s securities by the stock broker’s, but also has caused a severe blow to the confidence of the investors in the securities market and at the same time, has also compromised the integrity ofthe market.Such actions of Ficus have to be viewed seriously. As noted above, no explanation has been furnished by the Noticee (Ficus) rebutting or disputing the above findings from the inspection of SEBI and the consequent allegations made in the SCN, thereby leaving no doubt in my mind that the aforesaid acts on the part of the Ficus of using clients’ securities either for its own benefit or for the beneficial interest of other entities who did not own those securities, have violated the provisions of SEBI circular no. SMD/SED/CIR/93/23321 dated November 18, 1993, clause 15 of Rights and Obligations document for Stock Broker, Sub-Brokers and Clients as prescribed in Annexure 4 of the SEBI circular no. CIR/MIRSD/ 16/2011 dated August 22, 2011, clauses A (1), (4) and (5) of the Code of Conduct prescribed for the Stock brokers under regulation 9 of Stock Brokers Regulations and regulations 3(a), (b), (c) and (d) of PFUTP Regulations.

9.4.Non-redressal of investor grievance

Adverting to the above issue, it would be appropriate to reproduce the applicable provisions:

SEBI (Stock Brokers and Sub- Brokers) Regulations, 1992

Conditions of registration.

9. Any registration granted by the Board under regulation 6 shall be subject to the following conditions, namely, -

(e) he shall take adequate steps for redressal of grievances, of the investors within one month of the date of receipt of the complaint and inform the Board as and when required by the Board;

It is noted that as on November 13, 2018, the total number of complaints received against Ficus were 81, out of which 38 are still pending. Further, the updated status (as on November 13, 2018) about the claims received by NSE against Ficus, is as under:

Table No. 13

Exchange	No. of claims	Value of Claim in INR
NSE	327	95,43,61,510

From the above, I note that Ficus has not addressed all of its investors complaints. Mr. Vinod Bansal while not replying specifically on the allegation of pending investors complaints has raised the issue of exaggerated claims by the clients of Ficus in their respective complaints. In this regard, I note that by making the above submission, Mr. Vinod Bansal has admitted that there are investor complaints which are yet to be resolved by Ficus even if he disagrees with the claim amount as mentioned in the said investors’ complaint. It will be appropriate here to note that the issue before me is whether or not all the investor complaints pending against Ficus as per SCORES have been redressed by it in a timely manner or not and the answer to the said question has already been given in the negative as stated above. With respect to the dispute raised by Mr. Vinod Bansal regarding exaggerated claims, the same is a matter of details which can’t be gone into and adjudicated in the instant proceedings. This grievance of him can be raised by him at the appropriate forum, provided and only after he makes genuine efforts to settle the claims client wise with right earnest which as the records indicate has not been attempted by him at all.

In the light of the aforesaid discussions, I note that speedy and effective redressal of grievances is an important hallmark for the healthy and steady development of the securities market. If investors do not get the replies or their dues from the stock broker on time or do not get their shares demated expeditiously, it leads to frustration and they may be discouraged to invest in the securities market so as to avoid falling prey to such unprofessional and illegal practices being adopted by deviant stock brokers like Ficus. This may, therefore, adversely affect the growth of capital market. Hence the importance of complaint redressal, cannot be undermined and its sanctity has to be maintained by all the intermediaries’ / market participants. In the instant matter, as per available records, the default to redress investors’ grievances in question had continued unabated for a considerable period oftime, well beyond the time period of one month prescribed under the applicable regulations and circular. This is a blatant violation of law and I find that Ficus by taking no effective steps towards redressal of grievances of its clients has violated regulation 9 (e) of SEBI (Stock Brokers and Sub- Brokers) Regulations, 1992.

9.5. Failure to furnish information to SEBI inspection team

The applicable regulation on this issue is as follows:

SEBI (Stock Brokers and Sub- Brokers) Regulations

Obligations of stock-broker on inspection by the Board.

21. (1) It shall be the duty of every director, proprietor, partner, officer and employee of the stock-broker, who is being inspected, to produce to the inspecting authority such books, accounts and other documents in his custody or control and furnish him with the statements and information relating to the transactions in securities market within such time as the said officer may require.

(2) The stock-broker shall allow the inspecting authority to have reasonable access to the premises occupied by such stock-broker or by any other person on his behalf and also extend reasonable facility for examining any books, records, documents and computer data in the possession of the stock-broker or any other person and also provide copies of documents or other materials which, in the opinion of the inspecting authority are relevant.

(3) The inspecting authority, in the course of inspection, shall be entitled to examine or record statements of any member, director, partner, proprietor and employee of the stock-broker.

(4) It shall be the duty of every director, proprietor, partner, officer and employee of the stock broker to give to the inspecting authority all assistance in connection with the inspection, which the stock broker may reasonably be expected to give.

It is noted from the materials made available on record that vide a Notice under Section 11(2)(i) of SEBI Act dated August 30, 2017, certain information was sought from Ficus. Ficus vide its letter dated September 15, 2017 replied to the aforesaid Notice and had furnished all the information except for the information related to loans and advances given by Ficus as on August 31, 2017. The same has also been submitted by Mr. Vinod Bansal. There is no material on record to highlight the inadequacy / veracity, if any of the information submitted by Ficus. Subsequently, Ficus was called for a meeting on October 4, 2017 which the representatives of Ficus failed to attend. The material on record don’t show that a follow up questionnaire was sent to Ficus when its representatives failed to attend the meeting. The allegation that has been levelled in the SCN is the failure of Ficus to submit the information sought from it, which however, as the records reflect has been largely complied by Ficus. Thus, in the given facts and circumstances of the matter, I find that the allegation of failure to furnish information to SEBI, does not hold good against Ficus when nothing has got recorded that failure/non furnishing had hampered the enquiry substantially

9.6.Non-disclosure of two DP accounts to the Exchange

On verification of beneficiary accounts of Ficus, it was observed that the stock broker was maintaining two more DP accounts which have not been declared by it to the Exchange. Details of such demat accounts are as under: -

Table No. 14

DP Name	Account No.	Type of Account
IL&FS Securities Services Limited	IN300095-11465666	Client beneficiary
Globe Capital Market Limited	12020600-00448228	Client beneficiary

Mr. Vinod Bansal while not denying the existence ofthe aforesaid two demat accounts has submitted that Ficus had disclosed the said two demat accounts to the Exchange. The said submission of the Mr. Vinod Bansal is not supported by any documentary evidence which would show as to how and when the information pertaining to the said two demat accounts was informed / furnished by Ficus to the Exchange. Therefore, I am not convinced by the above submission of Mr. Vinod Bansal, consequently, it is held that Ficus has violated clause 2 (2.2) of the SEBI circular SEBI/HO /MIRSD/ MIRSD2/CIR /P/2016/95 dated September 26, 2016 which puts an obligation on the stock broker to inform the Stock Exchanges of all existing and new demat account(s) maintained by a stock broker.

9.7. The findings of the inspection as narrated in the SCN with respect to Ficus Commodities Pvt. Ltd. (hereinafter referred to as “Ficus Commodities”) are as follows:

It was observed that Ficus and Ficus Commodities are connected with each other. The basis of their inter-se connection rests on the following acts:

 Upon perusal of website of Ficus i.e. http://ficuswealth.com the name of Ficus Commodities is appearing on the said homepage.

 Mr. Surender Singh is the common Director of both the entities.

 Both Ficus and Ficus Commodities shared the same office (810, Indra Prakash Building, Connaught Place, New Delhi-110001).

 The names of past Directors i.e. Ms. Tripta Kapoor and Ms. Poona Rajbhar of Ficus Commodities were appearing in the client master (extracted from the back office) of Ficus and they were also found to be the employees of Ficus.

 Ms. Neena Bansal who was a Director in Ficus was a subscriber to the Memorandum of Association of Ficus Commodities.

 There were huge fund transfers between Ficus and Ficus Commodities. During the period April 1, 2015 to January 30, 2018, Ficus has transferred INR 87.28 crore to and has received INR 80.23 crore from Ficus Commodities.

On a scrutiny of bank statement of Ficus, it was noted that during the period of April 2015 till December 31, 2016, from its HDFC NSE Client a/c no. 30340030695 Ficus has transferred INR 48.28 crore to Ficus Commodities’s HDFC a/c no. 00030340037043 and has received INR 48.94 crore during the said period from Ficus Commodities. This transaction was done at the same time when Ficus was not in a position to repay / settle funds due to its credit clients. It has already been held in the preceding paragraphs that Ficus has misutilised its clients’ funds for purposes other than what it was meant for. Further, it has also been noted that clients’ securities were not available with Ficus as it had pledged its clients’ securities to avail loan from financial institutions and consequently was not settling the accounts of its clients on a monthly / quarterly basis. Allthe aforesaid factors aptly demonstrate that the financial health of Ficus was unsound. Given the aforesaid circumstances, the transfer of funds regularly, almost every other day for 21 months by Ficus from its account to one of Ficus’s connected entity i.e., to Ficus Commodities, on a preponderance of probability basis, can be said to be nothing but diversion of those funds which were meant to be refunded to its clients to settle their credit balances. The above findings find strength from the fact that Ficus was having a poor financial health because of which it was found to be using securities and funds belonging to its clients, for its own proprietary use. Though, Mr. Vinod Bansal has advanced a submission that Ficus was a client of Ficus Commodities, however, no justification with supportive evidence has been furnished to lay credence to the above claim or to otherwise justify the frequent transfer of funds made by Ficus to its own entities. The above acts of transfer of funds on a frequent basis by a defaulter stock broker who defaulted in settling the accounts of its clients was apparently due to the fact that Ficus was found utilising clients’ money as well as securities to meet its own obligation and for other purposes not permissible under the law. Therefore, given the fact that Ficus and Ficus Commodities have common Promoter, common Director and ex-employees of Ficus were Directors of Ficus Commodities apart from sharing the same office and website, the aforesaid transfer of funds by Ficus to Ficus Commodities at a time when Ficus needed the funds the most to repay to its clients, cannot be said to be a fortuitous act but was deliberately done pursuant to an illicit design, wherein both, Ficus and Ficus Commodities were aware that Ficus was prohibited under the law to transfer funds belonging to its clients to its connected entity, Ficus Commodities. Thus, Ficus has fraudulent used its associate company, Ficus Commodities to divert its clients’ funds for its private gain.

Mr. Vinod Bansal has submitted that Ficus and Ficus Commodities are different companies and for the purpose of cost cutting, both, Ficus and Ficus Commodities were operating from a common office. As already noted in preceding paragraphs, both, Ficus and Ficus Commodities at some point in time or the other had common Promoter and Director too, with ex-employees of Ficus being Directors of Ficus Commodities and both the entities even shared a common website. The record also shows that in the then active bank accounts of Ficus Commodities, Mr. Vinod Bansal, Ms. Neena Bansal and Mr. Mayur Bansal (nephew of Mr. Vinod Bansal) were the authorized signatories. Thus, not only the key personnel of both, Ficus and Ficus Commodities were common but their functioning was also intricately linked with each other (through common website and authorised signatories, fund transfers etc.). Therefore, the submission of Mr. Vinod Bansal that Ficus and Ficus Commodities are different companies cannot brush aside the truth that both the so called different corporate entities were in fact intricately linked to each other and were practically run by same set of common key persons, hence, were in fact acting in concert as far as the aforesaid alleged transactions are concerned.

Mr. Vinod Bansal has further contended that the fund transfers between Ficus and Ficus Commodities were done in the normal course as both were clients of each other. In this regard, I have noted above that Ficus Commodities as a client of Ficus has not done any trading in the period from April 2015 till December 2016. Nevertheless, during this period itself, Ficus had transferred INR 48.28 crore to Ficus Commodities and had received INR 48.94 crore from Ficus Commodities. Thus, in absence of any trading relationship with Ficus Commodities, the contention of fund transfers being routine business transaction holds no ground.

In view of the aforesaid discussion, I am of the view that there are sufficient evident to hold that Ficus has used its connected entity, Ficus Commodities for diverting its clients’ funds which has resulted in violation of clauses A (1) and A (5) of code of conduct of Stock Brokers Regulations read with SEBI circular no. SMD/SED/CIR/93/23321 dated November 18, 1993, by Ficus.

10. To sum it up, I observe that the information and data gathered at the time of inspection unequivocally bring to light, the various flagrant regulatory lapses noticed from the way Ficus was operating, specially the way Ficus was mis-managing its clients’ funds and securities. Further, the violations committed by Ficus are undoubtedly grave in nature which have been carried out for a considerable period of time unabatedly despite the fact that the Noticee very well knew that what it was doing are not at all permissible under the extant SEBI regulations and circulars pertaining to dealing in clients’ funds and securities.

11. In view of the aforesaid discussions, it is held that Ficus has carried out its stock broking activities during the inspection period in contravention of various provisions ofSEBI Act, regulations and circulars. I note that a stock broker being a vital securities market intermediary, is strictly prohibited from indulging in any act detrimental to the investors’ interest or which leads to interference with the fair and smooth functioning of the market. A stock broker is required to maintain high standards of integrity, promptitude and fairness in the conduct of his business dealings, and shall have to ensure that its interests is not in conflict with its clients. In the given facts situation, Ficus has not only failed to fulfil its avowed duty towards its clients, be it redressing their grievances or settling the funds due to its clients, but has gone to the extent of misutilising its clients’ funds and securities. The gravity of lapses and contraventions of the statutory provisions committed by Ficus as alluded at length in preceding paragraphs, can also be gauged from the fact that Ficus has been expelled from the Exchanges (BSE Ltd., NSE and MSEI) since March 2018 by declaring it as a defaulter. As a regulator of the capital markets, SEBI has the duty to safeguard the interest of investors and protect the integrity of the securities market. Since the conduct of Ficus is not in the interest of investors in the securities market, appropriate measure need to be taken against Ficus, else it may lead to loss of investors’ trust in the securities market.

12. I note that the DA has recommended that certificate of registration of Ficus may be cancelled. Having considered the allegations and defense advanced with supporting evidence, I find no reason to disagree with the recommendation given by the DA, rather I am of the firm view that considering the facts and circumstances of the case and justification adduced to counter the serious allegations levelled against Ficus, the ends of justice demands that in the instant matter the Noticee i.e. Ficus does not deserve to continue as a registered intermediary.

Directions

13. In view of the foregoing, I, in exercise ofthe powers conferred upon me underSections 12 (3) and 19 of the Securities and Exchange Board of India Act, 1992 read with regulation 27 (5) of Securities and Exchange Board of India (Intermediaries) Regulations, 2008, hereby cancel the certificate of registration granted to Ficus Securities Pvt. Ltd. (reference can be made to Table No. 1).

14. The Order shall come into force with the immediate effect.

15. A copy of this order shall be forwarded to Ficus Securities Pvt. Ltd. and all recognized Stock Exchanges.