SEBI Censures NNM Securities for Misuse of Client Funds and False Reporting

Moneylife Digital Team 12 September 2025

Investor Interest

Market regulator Securities and Exchange Board of India (SEBI) has issued a regulatory censure to NNM Securities Pvt Ltd, a registered stockbroker and depository participant, after inspections revealed misuse of client funds and lapses in regulatory reporting.

The inspection, conducted jointly by SEBI, BSE, National Stock Exchange (NSE), and Central Depository Services (India) Ltd (CDSL), covered the period between 1 April 2021 and 30 June 2022. It found violations of the Securities Contracts (Regulation) Act (SCRA), SEBI Stock Broker Regulations, and the Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations.

According to SEBI, the broker recorded negative balances referred to as ‘G’ values on 17 sample dates, with shortfalls ranging from Rs38.53 lakh to Rs5.39 crore. These indicated that funds belonging to credit balance clients were diverted to cover the obligations of debit balance clients or used for the broker’s own purposes.

SEBI inspection also flagged positive ‘I’ values on two occasions, suggesting that client assets may have been used to meet the broker’s proprietary margin requirements. NNM Securities argued that balances of promoters, directors, and related parties should be excluded, citing an NSE order. SEBI, however, rejected this claim, clarifying that its 2016 circular does not allow such an exemption.

Another point of contention involved fixed deposits (FDRs). NNM Securities contended that client funds invested in FDRs should be considered in the balance. SEBI found that the broker failed to provide sufficient proof of unencumbered, client-funded FDRs. Even after adjustments, the shortfall in ‘G’ persisted on 15 dates, while positive ‘I’ values remained on two dates.

The inspection further revealed that the broker misreported data under SEBI’s enhanced supervision framework. On 42 occasions, NNM Securities wrongly reported ‘collateral deposited with clearing corporation (CC) or clearing member (CM)’ by including FDRs not placed with clearing corporations. It also misreported ‘unutilised collateral’ on 37 dates.

Even after factoring in client-funded FDRs, SEBI found that the reported figures did not tally with inspection findings. This confirmed that NNM Securities had submitted inaccurate data, violating SEBI’s 1993 and 2016 circulars.

After considering the broker’s submissions, SEBI concluded that NNM Securities had misused client funds and provided false reports under enhanced supervision. As a result, the regulator has issued a regulatory censure against the firm.

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