The action follows a joint inspection conducted by SEBI and BSE (Bombay Stock Exchange) covering the period from 1 April 2024 to 30 April 2025, during which the regulator identified several deficiencies in the broker's compliance framework and in the supervision of its authorised persons.
SEBI found that three APs failed to maintain verifiable evidence of client orders. Although the broker claimed that orders were placed by telephone, over the internet, or in person, it could not produce call recordings, visitor register entries, CCTV footage, or other documentary evidence to support the trades, thereby violating regulatory requirements for pre-order trade confirmations.
The inspection also revealed that two APs did not possess the mandatory NISM Series VII certification. Further, trading terminals at two AP locations were operated by individuals who were not approved by the stock exchange, in violation of SEBI regulations governing terminal operations.
Another violation related to the operation of two brokers' terminals from the same premises without proper physical and operational segregation. SEBI observed that the entities shared infrastructure and personnel, increasing the risk of operational lapses and weakening internal controls.
The regulator also found that one authorised person had shifted operations to an unregistered location. Eastern Financiers informed BSE and the National Stock Exchange (NSE) of the address change only after considerable delay and failed to notify clients at least 30 days before the relocation, as required under SEBI rules.
SEBI further noted shortcomings in the broker's internal inspection process. Despite carrying out periodic inspections, Eastern Financiers failed to detect the deficiencies identified during the joint inspection by SEBI and BSE. In one instance, an authorised person had not been inspected since registration in July 2023.
During the proceedings, Eastern Financiers submitted that the lapses were procedural in nature, that there were no investor complaints or financial losses, and that it had implemented corrective measures, including strengthening record-keeping, enhancing supervision, installing voice recording systems, and improving compliance monitoring.
However, SEBI held that subsequent corrective measures do not absolve a stockbroker of responsibility for earlier violations. Emphasising that brokers are responsible for the acts and omissions of their authorised persons, the regulator imposed a penalty of ₹4 lakh on Eastern Financiers under Section 15HB of the SEBI Act.
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