BRH Commodities' Registration Cancelled by SEBI
Moneylife Digital Team 11 May 2023
Market regulator Securities and Exchange Board of India (SEBI) has cancelled the registration certificate of BRH Commodities Pvt Ltd (BRHCPL, formerly BMA Commodities Pvt Ltd),  for multiple offences, including misutilisation of client securities and funds. 
In an order, Ananth Narayan G, whole-time member (WTM) of SEBI, says, ""...from 2 July 2021 and 5 July 2021, BRHCPL was declared a defaulter and expelled from the memberships of MCX and NCDEX respectively. Regulation 9 (a) of the SEBI (stock brokers) regulations provide that any registration granted by SEBI is subject to the condition that the stock broker holds the membership of any stock exchange. Further, as per regulation 27(i) of SEBI (stock brokers) regulations, ceasing to be a member of a stock exchange is one of the grounds for suspension or cancellation of registration of a stockbroker. Thus the absence of membership in any exchange is by itself a ground for cancellation of registration as a stockbroker."
Earlier in March, SEBI cancelled the registration certificate of BRH Wealth Kreators Ltd (BRHWKL, formerly BMA Wealth Creators Ltd) for multiple offences, including misusing, diverting client's securities and funds, non–redressal of grievances, wrong submission of data and non-cooperation with the market regulator. 
In the order, Ashwani Bhatia, WTM of SEBI, says, "...BRH had failed to produce to the inspecting authority such books, accounts and other documents in its custody or control and failed to furnish to the auditor appointed on the directions of SEBI, the statements and information sought by them...I am constrained to go by the findings made in the forensic audit report (FAR) and hold that BRH has failed to redress investor complaints within the stipulated time..." 
"I also note that BRH Wealth Kreators has been declared a defaulter and expelled by BSE on 17 February 2020 and National Stock Exchange (NSE) on 13 February 2020. Given the above, I am inclined to accept the recommendation in the designated authority (DA) report that the registration of the broker be cancelled," the WTM says.
In January this year, while imposing a penalty of Rs11.50 crore, SEBI barred BRHWKL, BRH Commodities and others from the markets for five to seven years. 
SEBI had imposed a penalty of Rs5 crore each on BRHWKL and BRHCPL; Anubhav Bhatter is fined Rs1 crore while restraining all three from markets for seven years. Prosperous Vyapaar Pvt Ltd, Polo-Setco Tie Up Pvt Ltd, Parton Commercial Pvt Ltd, AB Investments and Bluesnow Supplier Pvt Ltd are asked to pay a fine of Rs10 lakh each and are barred from the markets for five years. (Read: SEBI Imposes Rs11.5 Crore Penalty; Bars BRH Wealth Kreators, BRH Commodities and Others from Markets for up to 7 Years)
In its ruling, the SEBI WTM mentioned that the designated authority (DA)'s report had recommended cancelling the registration of BRH Wealth Kreators. After the DA report, a post-inquiry show-cause notice (P-SCN) was issued by SEBI to the stockbroker.
In its reply to the P-SCN, BRH Wealth Kreators accepted that it has been pledging securities of its clients. However, it contended that it was done with the knowledge and consent of the clients. Regarding submitting incorrect data, the broker argued that a data mismatch happened because of some issues in the backend software. 
BRH Wealth Kreators argued that they had made seldom delayed in redressing complaints. The broker did not reply to the allegation of misusing the client's money. 
SEBI relying on its rules and regulations, stated that pledging or diverting clients' securities in contravention of the stringent norms cannot be justified. The market regulator dismissed the argument of 'issues in backend software' as BRH Wealth Kreators failed to submit any evidence to substantiate the claim. 
The WTM of SEBI then decided to cancel the registration of BRH Wealth Kreators. However, the order clarifies that BRH Wealth Kreators would continue to be liable for anything done or omitted to be done as a stockbroker and continue to be responsible for payment of outstanding fees and dues, if any, payable to SEBI.
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