Fyers Securities Penalised Rs4 Lakh for Non-compliance with Disaster Recovery Mechanism

Moneylife Digital Team 14 February 2025

Investor Interest

Market regulator Securities and Exchange Board of India (SEBI) has imposed a penalty of Rs4 lakh on Fyers Securities Pvt Ltd following multiple violations of a master circular related to business continuity planning (BCP), disaster recovery (DR) and governance mechanisms.

In an order, Asha Shetty, adjudicating officer (AO) of SEBI, says, "I note that Fyers Securities has placed on records, wherein it has showcased the company has conducted the DR drill exercise. Fyers Securities is in violation of the regulatory requirements and standards expected from listed entity, therefore, the actions of Fyers Securities should be dealt appropriately by imposing monetary penalty as effective deterrence".

Fyers Securities failed to conduct systematic quarterly monitoring of peak load during the inspection period, violating Clause 61.4.2 of SEBI's Master Circular dated 17 May 2023. Although the broker claimed to review the monitoring system quarterly, the provided documents showed isolated metrics instead of comprehensive monitoring. There was also no proof that the installed capacity met the required 1.5 times the peak load.

Furthermore, SEBI observed that Fyers Securities' governing board did not review the implementation of the business continuity planning and disaster recovery policies for three consecutive quarters during the inspection period, which violated Clause 61.7.2 of the SEBI master circular.

While the broker submitted meeting minutes from a session held on 15 April 2024, these were outside the inspection period, and no documentary evidence of quarterly reviews between April and December 2023 was provided, SEBI says, adding, "This failure to adhere to the required review schedule indicated significant lapses in ensuring operational resilience."

In addition to the above violations, Fyers Securities did not conduct the mandatory Disaster Recovery (DR) drill for one full trading day, which breached Clause 61.7.4 of SEBI's master circular.

Fyers Securities acknowledged delays due to operational complexities, infrastructure delivery issues, and integration challenges. Although live trading from the DR site was successfully managed for four days between 29th April and 3 May 2024, the failure to conduct the DR drill during the inspection period demonstrated inadequate risk management practices.

Fyers Securities was also found lacking in providing sufficient documentary evidence regarding the formal constitution of the incident and response team (IRT) and crisis management team (CMT), violating Clause 61.7.5 of SEBI's master circular.

Although the broker claimed to have dedicated teams consisting of senior personnel for timely decision-making, the submitted documents, including a Board approval note dated 10 July 2023, did not explicitly confirm the formal approval or constitution of these teams. This lack of clear documentation highlighted weak governance and oversight mechanisms within the brokerage, the market regulator says.

Comments