Adjudication order in the matter of Composite Investments Pvt. Ltd

This adjudication order concerns Composite Investments Pvt. Ltd., a SEBI-registered stockbroker and depository participant. Following a comprehensive inspection, SEBI issued a Show Cause Notice alleging several violations. These included incorrect nomenclature in client bank accounts, utilisation of credit balance clients' funds for debit balance clients, incorrect reporting of client credit balances, and improper running account authorisation forms.

BEFORE THE ADJUDICATING OFFICER
SECURITIES AND EXCHANGE BOARD OF INDIA

[ADJUDICATION ORDER NO. ORDER/VV/NK/ /2020-21/9246]

ORDER UNDER SECTION 15-I OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992, READ WITH RULE 5 OF THE SEBI (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES) RULES, 1995, UNDER SECTION 23‐I OF SECURITIES CONTRACTS (REGULATION) ACT, 1956, READ WITH RULE 5 OF SECURITIES CONTRACTS (REGULATION) (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES) RULES, 2005 AND UNDER SECTION 19-H OF DEPOSITORIES ACT, 1996, READ WITH DEPOSITORIES (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES) RULES, 2005

In respect of:
Composite Investments Pvt. Ltd.
(PAN no. - AAACC7373B)

In the matter of inspection of Composite Investments Pvt. Ltd. - Stock Broker & Depository Participant

BACKGROUND

1.    Composite Investments Private Limited (hereinafter referred to as “Broker/Noticee/DP”) is SEBI registered Stock Broker and Depository Participant having following registration details:-

2.   The Securities and Exchange Board of India (hereinafter referred to as “SEBI”) carried out Comprehensive Joint Inspection (“Inspection”) with the Exchanges and CDSL of the Noticee for the period from April 2017 to August 31, 2018 (“Inspection Period”).

APPOINTMENT OF ADJUDICATING OFFICER

3.   The undersigned was appointed as the Adjudicating Officer vide Communiqué dated January 31, 2020 to conduct adjudication proceedings in the manner specified under Rule 4 of SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995 (hereinafter referred to as “SEBI AO Rules”), Rule 4 of Securities Contracts (Regulation) (Procedure for Holding Inquiry and Imposing Penalties) Rules, 2005 (hereinafter referred to as “SCRA AO Rules”) and Rule 4 of Depositories (Procedure for Holding Inquiry and Imposing Penalties) Rules, 2005 (hereinafter referred to as “DP AO Rules”) for the alleged violations committed by the Noticee.

SHOW CAUSE NOTICE, REPLY AND PERSONAL HEARING

4.   Show Cause Notice dated July 29, 2020 (hereinafter referred to as “SCN”) was issued to the Noticee through digitally signed E-mail in under Rule 4(1) of the SEBI Adjudication Rules, Rule 4(1) of the SCRA Adjudication Rules and Rule 4(1) of the Depositories Adjudication Rules to show-cause as to why an inquiry should not be initiated against the Noticee and why penalty should not be imposed upon the Noticee under of Section 15HB of the SEBI Act, 1992, section 15A(b) of SEBI Act, 1992, Section 23D of the Securities Contracts (Regulation) Act, 1956 (hereinafter referred to as the “SCRA”) and Section 19G of the Depositories Act, 1996 (hereinafter referred to as ‘DP Act’). The allegations levelled against the Noticee in the SCN are summarized as follows:-

A.  Wrong Nomenclature in client and settlement bank accounts: SEBI Circulars Nos. (i) SMD/SED/CIR/93/23321 dated November 18, 1993 and SEBI/HO/MIRSD/MIRSD2/CIR//P/2016/95 dated September 26, 2016.

B.  Funds of Credit Balance Clients are being utilized for meeting the obligations of debit balance clients: SEBI Circulars Nos. (i) SMD/SED/CIR/93/23321 dated November 18, 1993 and SEBI/HO/MIRSD/MIRSD2/CIR//P/2016/95 dated September 26, 2016.

C.  Incorrect Reporting of credit balance of clients: Clause 3.2 of Annexure of SEBI Circular SEBI/HO/MIRSD/MIRSD2/CIR/P/2016/95 dated September 26, 2016.

D.  Improper running account authorization form: Clause 12(c) of Annexure-A of SEBI Circular SEBI/MIRSD/SE/Cir-19/2009 dated December 03, 2009.

To read more in details, find the enclosed file