Order in the matter of Fin Brains Securities (India) Limited

Order in the Matter of Fin Brains Securities (India) Limited WTM/GM/EFD-1 DRA-2/ 73/2020-21 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA ORDER Under Regulation 27(5) of the SEBI (Intermediaries) Regulations, 2008 in respect of Fin Brains Securities (India) Limited, registered Stock Broker - SEBI Registration Nos. INF/INE/INB 230753439 and INE 260753439 _____________________________________________________________________

1. Background 1.1. The present matter emanates from a letter dated August 28, 2015 from the National Stock Exchange (NSE), informing of the expulsion of Fin Brains Securities (India) Limited (the Noticee/ Fin Brains) from the membership of the NSE and notification dated September 19, 2015 of the Metropolitan Stock Exchange of India Limited (MSEI) conveying the message of expulsion of the Noticee from the membership of the MSEI.

2. Enquiry proceedings against Fin Brains 2.1. Consequent to the receipt of the above-mentioned letter/notification, Enquiry Proceeding was initiated against Fin Brains, a registered intermediary, in terms of Order in the Matter of Fin Brains Securities (India) Limited the Securities and Exchange Board of India (Intermediaries) Regulations, 2008 (the Intermediaries Regulations). 2.2. Pursuant to the said appointment, the DA issued an SCN dated June 13, 2018 bearing number EAD-09/SM/PR/17074/2018. The SCN called upon the Noticee to show cause as to why appropriate action should not be initiated in terms of Section 12 (3) of the SEBI Act read with Regulations 23 and 27 of the Intermediaries Regulations read with Regulation 25 (ii) of the SEBI (Stock Brokers) Regulations, 1992 (the Broker Regulations) for alleged violation of the following provisions of law, viz. Regulation 9 (a) (b), (f) of the Broker Regulations read with Regulation

27 (i), (viii), (xv), (xvii) of the Broker Regulations. 2.3. The SCN dated June 13, 2018 was sent by speed post to the Noticee at the address: 100/28, 1st Floor, Shiva Tower, Rajapur, Sector-9, Rohini, Delhi - 110085. The same was returned undelivered. Consequently, the SCN was affixed at the said address on July 16, 2018. The Noticee did not enter appearance before the DA in response to the SCN dated June 13, 2018 or file any reply. 2.4. The DA proceeded ex-parte and for the violations as stated above, the DA, in his report dated December 31, 2018 came out with the following findings a. The Noticee, by not holding the membership of any Stock Exchange, has failed to comply with the conditions stipulated in Regulations 9 and Regulation

23 (a) of the Intermediaries Regulations, thereby making it liable for action under Regulation 27 of the Intermediaries Regulations. Order in the Matter of Fin Brains Securities (India) Limited b. There was nothing on record to suggest that the Noticee desired to get itself reinstated or it had taken any efforts in this regard. Also, there was no confirmation from NSE or MSEI that the Noticee had approached it for reinstating itself. On the contrary, the Noticee is shown as an expelled member as per the information available on NSE website. 2.5. Based on the above findings, the DA has recommended that in terms of Regulation

27 of the Intermediaries Regulations, the Certificate of Registration of Fin Brains Securities (India) Ltd, as a stock broker of MSEI and NSE (under certificate of Registration numbers INE 260753439 and INB/INF/INE 230753439) respectively be cancelled.

3. Post Enquiry SCN dated March 01, 2019 3.1. After considering the Enquiry Report dated December 31, 2018, post enquiry SCN dated March 01, 2019 under Regulation 28(1) of the Intermediaries Regulations was issued to Fin Brains (enclosing therewith a copy of the Enquiry Report), calling upon it to show cause as to why action as recommended by the DA or any other penalty/direction should not be imposed on it in terms of Regulation 28 (1) and (2) of the Intermediaries Regulations, as deemed fit, by the Designated Member. 3.2. In this regard, opportunities of personal hearing before the Designated Member (hereinafter referred to as the DM) were granted to the Noticee on September 23, 2020 and January 27, 2021. However, no appearance was entered by the Noticee on the above-mentioned dates. Further, no reply/written submission has Order in the Matter of Fin Brains Securities (India) Limited been submitted by the Noticee in response to the post enquiry SCN dated March 01, 2019. 3.3. The details with respect to the service of the SCN and Hearing Notices to the Noticee are provided hereunder: Table-1 Noticee Details

1. Fin Brains Securities (India) Limited The post enquiry SCN dated March 01, 2019 was sent by speed post to the said Noticee at the address: 100/28, 1st Floor, Shiva Tower, Rajapur, Sector-9, Rohini, Delhi - 110085. The same was returned undelivered Newspaper publication was carried out intimating the personal hearing scheduled for September 23, 2020 in the Hindustan Times (English daily) and the Navbahrat Times (Hindi daily) in Mumbai and Delhi regions. Hearing Notice dated January 27, 2021 was emailed to the Noticee at the email address: 'finbrainsindia@hotmail.com'. Consequent to this, a reminder by way of an email dated January 20, 2021 was sent to the Noticee. Furthermore, by way of email dated January 22, 2021, the Noticee was provided the web link to join Order in the Matter of Fin Brains Securities (India) Limited the hearing scheduled for January 27, 2021 through video conferencing.

4. Consideration of issues and findings 4.1. In this regard, the record reveals that NSE expelled the Noticee at the meeting of its Disciplinary Action Committee (DAC) on August 10, 2015 in terms of Rule

1 of Chapter IV of the Rules of the Exchange. The DAC noted the following irregularities for the expulsion of the Noticee: Mis-appropriation of client securities and funds towards own obligations. Non-Settlement of Funds and securities due to clients i.e, non- compliance with SEBI Requirement of running account of clients. Extending loans to certain entities who are not its clients. Failure to extend full co-operation and submit documents to NSE 4.2. It is further seen from the notification of MSEI that pursuant to the expulsion by NSE, MSEI had also expelled the Noticee vide its notification dated September 19, 2015. 4.3. The essential allegation that has emerged against the Noticee from the findings of the DA in his Enquiry Report dated December 31, 2018 is that as per Regulation 9(a) of the Broker Regulations, the registration of a stock broker is subject to the stock broker holding membership of any stock exchange. The Noticee having been expelled from the membership of the NSE and MSEI on August 28, 2015 and September 19, 2015 respectively, had failed to comply with the conditions specified Order in the Matter of Fin Brains Securities (India) Limited in the Broker Regulations for the continuation of the Noticee as a registered stock broker. Accordingly, it has been alleged in the post-enquiry SCN that the Noticee has, as a consequence of being expelled from the NSE and MSEI, has failed to comply with the provisions of Regulation 9(a), (b), (f) and Regulation 23 (a) of the Intermediaries Regulations, and as such, liable for action under Regulation 27 of the Intermediaries Regulations. 4.4. The relevant portions of the said provisions are provided hereunder: BROKER REGULATIONS Condition of Registration. Regulation 9. Any registration granted by the Board under Regulation 6 shall be subject to the following conditions, namely: (a) the stock broker holds the membership of any stock exchange; (b) he shall abide by the rules, regulations and bye-laws of the stock exchange which are applicable to him. (c ) (f) he shall at all times abide by the Code of Conduct as specified in Schedule II; . INTERMEDIARIES REGULATIONS Cancellation or suspension of registration and other actions.

23. Where any person who has been granted a certificate of registration under the Act or regulations made thereunder, (a) fails to comply with any conditions subject to which a certificate of registration has been granted to him; Order in the Matter of Fin Brains Securities (India) Limited the Board may, without prejudice to any action under the securities laws or directions, instructions or circulars issued thereunder, by order take such action in the manner provided under these regulations. 4.5. Thus, from the above it is seen that Regulation 9 requires that any person who has been granted registration as a stock-broker by SEBI is required to conform to the conditions prescribed therein. The said conditions inter alia being that the stock broker should hold the membership of any stock exchange; he shall abide by the rules, regulations and bye-laws of the stock exchange which are applicable to him; and he shall at all times abide by the Code of Conduct as specified in Schedule II. The Code of Conduct requires the stock-broker to maintain high standards of integrity, promptitude and fairness in the conduct of its business and act with due skill, care and diligence. The code also enumerates different kinds of duties that a stock-broker bears with respect to its clients. The DAC of NSE in its decision to expel the Noticee has noted that the expulsion of the Noticee was due to the Noticees mis-appropriation of client securities and funds towards own obligations; non-Settlement of Funds and securities due to clients and extension of loan facilities to certain entities who were not its clients. The instant case is a follow up on the expulsion of the Noticee by the two exchanges where he was authorized to trade. Thus, even though a violation of the provisions of the code of conduct has been alleged, I do not intend to get into those details, for the purpose of this order. The Noticee has neither entered appearance before me nor provided any reply in response to the post-enquiry SCN. So, there is nothing on record to show that there has been any change in the status of the Noticee in so far as the membership Order in the Matter of Fin Brains Securities (India) Limited of the stock exchanges is concerned. The Noticee has, therefore, clearly failed to comply with the conditions of registration as required under Regulation 9 of the Broker Regulations. As a consequence of the above, Regulation 23 of the Intermediaries Regulations is triggered as Regulation 23 provides that in case any person , who has been granted a certificate of registration by SEBI, fails to comply with any conditions subject to which such registration was granted then SEBI may take such action as provided in the Intermediaries Regulations. 4.6. In view of the aforesaid, the Noticee is liable for suitable action under Regulation

27 of the Intermediaries Regulations.

5. Order 5.1. I note that the DA has in the Enquiry Report recommended that the certificate of registration of the Noticee be cancelled. 5.2. I note that Regulation 28 including Regulation 28(2) of the Intermediaries Regulations was omitted by the SEBI (Intermediaries) (Amendment) Regulations, 2021, with effect from January 21, 2021. Accordingly, as per the amended Regulation 27 of the Intermediaries Regulations, an appropriate order after considering the facts and circumstances of the case, may be passed by the DM under Regulation 27(5) of the Intermediaries Regulations. 5.3. Considering the violations brought out in the foregoing paragraphs, I, in exercise of powers conferred upon me in terms of Section 12(3) and Section 19 of the Securities and Exchange Board of India Act, 1992 read with Regulations 23 and Order in the Matter of Fin Brains Securities (India) Limited 27(5) of the SEBI (Intermediaries) Regulations, 2008, hereby direct that the Certificate of Registration of the Noticee i.e. Fin Brains Securities (India) Ltd, as a stock broker registered with SEBI with the registration nos. INF/INE/INB 230753439 and INE 260753439 be cancelled from the date of this order. 5.4. The order shall come into force with immediate effect. 5.5. A copy of this order shall be forwarded to the Noticee immediately. A copy of this Order shall also be forwarded to all the recognized stock exchanges and depositories. Date: February 15, 2021 G. MAHALINGAM Place: Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA