The Securities and Exchange Board of India (SEBI) has let Edelweiss Broking off with a rap on the knuckles for not reporting suspicious transactions. In an order dated June 16, 2023, SEBI found that Edelweiss Broking had failed to report two suspicious transactions to the Financial Intelligence Unit (FIU) of India.
The two transactions involved a total of Rs 10.4 crore and were carried out by a client of Edelweiss Broking. The client had opened a trading account with the broker in 2017 and had deposited Rs 5 crore in the account. In 2018, the client started making large-value transactions, with the average value of each transaction being Rs 1 crore.
SEBI found that the client’s trading pattern was suspicious, as he was not investing in any underlying securities. Instead, he was simply buying and selling the same securities, making a profit on the spread. SEBI also found that the client had provided false information to Edelweiss Broking about his source of funds.
Despite the suspicious nature of the transactions, Edelweiss Broking did not report them to the FIU. SEBI found that the broker had not exercised due diligence in ascertaining the identity of the client.
As a result of its findings, SEBI imposed a penalty of Rs 2 lakh on Edelweiss Broking. The broker was also directed to take steps to ensure that it complies with the Prevention of Money-Laundering (PML) Act in the future.
The order by SEBI is a reminder to all brokers that they have a duty to report suspicious transactions to the FIU. Failure to do so can result in penalties and other sanctions.
