SEBI Penalises HDFC Bank Rs. 1 Cr in BRH Wealth Kreators Case

Securities & Exchange Board of India (SEBI), the Capital Market Regulator has imposed a fine of Rs.1 crore for invoking securities pledged by BRH Wealth Kreators in violation of the regulator’s interim orders. The intent of the interim order was to protect the interest of the investors or clients of BRH through an immediate freeze of the ‘assets of the noticees”, and also for ensuring that BRH ceases and desists from undertaking any activity in the securities market.

It added that the interim order was not an ultimate determination of the rights of recovery of the noticee but rather intended to ensure a freeze on the assets of BRH until completion of the investigation or forensic audit and that the investors’ interests are not compromised in any manner whatsoever. “The noticee (HDFC Bank) cannot now contend that the directions contained in the interim order, including restraining BRH from disposing of its assets for any purpose other than payment of client funds and securities, were not binding on it,” it said.

Further, the Bank has been directed vide the Order to transfer an amount of Rs. 158.68 crore along with interest from October 14, 2019 till date, calculated at the rate of 7 pc p.a. to an interest bearing Escrow Account in any nationalized bank, by marking a lien in favour of SEBI, until the issue of settlement of clients’ securities (clients of the stockbroker) is reconciled.

BRH, along with the other noticees, were also directed to provide a full inventory of all their assets, whether movable or immovable, or any interest or investment or charge in any of such assets, including details of all their bank accounts, demat accounts and mutual fund investments immediately to NSE and BSE but not later than five working days from the date of receipt of the order.

HDFC Bank had granted credit facilities to BRH (Rs 191.16 crore) and BRH Commodities (Rs 26.61 crore) as loan against securities (LAS) out of which an amount of Rs 87.75 crore was granted as LAS. On October 14, 2019, HDFC Bank allegedly had invoked securities pledged by BRH to the extent of Rs 158.68 crore. The aforementioned invocation of pledge of client securities available in the aforementioned two demat accounts of BRH, by HDFC Bank, was allegedly not in conformity with the directions contained in the interim order.