Sebi slaps Rs 5 lakh fine on Jainam Share Consultants

NEW DELHI: Capital markets regulator Sebi has imposed a penalty of Rs 5 lakh on Jainam Share Consultants for alleged failure in complying with new regulations related to power of attorney (POA) within the stipulated timeline.

The stock broking firm was required to implement the new format of POA by September 1, 2010, but it only implemented the direction in this regard for the new clients from August 23, 2011 i.e. after a delay of about 15 months.

Besides, the firm "till date has not completely updated the POA for existing clients as per the direction," Securities and Exchange Board of India (Sebi) said in an order.

Thus, Jainam share consultants delayed the implementation of POA for the existing clients by 5 years.

Even after the inspection team pointed out to the firm by communication in April 2014, Jainam failed to update the new POA format for the existing clients, Sebi said.

Accordingly, Sebi has imposed a penalty of Rs 5 lakh on Jainam Share Consultants Pvt Ltd for failure/delayed in complying the regulatory norms.

The firm is directed to pay the penalty within 45 days.

Sebi has come out with norms regarding execution of POA by the client in favour of stock broker and depository participant.

It has come to notice that the clients were compelled to give irrevocable power of attorney to manage their bank and demat accounts so that they can pay funds or deliver shares to their broker on time. In some cases, the POA even allows a broker to open and close accounts on behalf of the client and to trade in his/her account without the consent.

Consequently, Sebi had directed stock brokers to take necessary steps to implement the new POA format by May 31, 2010 for new clients and were also told to take necessary steps by September 1, 2010 to revoke those authorisations given by the existing clients to the stock broker as well as depository participants through POA that are inconsistent with the new guidelines.