IIFL Barred From Adding New Clients For Two Years For Misusing Funds

Stock markets can be a tricky terrain to navigate with fluctuations, the everchanging economic climate and other headwinds, which is why investors trust brokerages. But over the past few years, firms tasked with delivering optimum returns on investment for their clients, have been caught misusing their funds.

Now reputed stock market investment platform India Infoline (IIFL) has been barred from taking new clients for two years, for violating norms laid down by the Securities and Exchange Board of India.

Misuse of funds

After a thematic inspection of IIFL's books, SEBI found that it had been fudging clients' funds with proprietary funds.

The firm did this to use funds from credit balance client accounts to settle dues of debit balance accounts, as well as proprietary trade obligations.

Lack of appropriate labelling

What this means is that IIFL mixed its own money with the funds belonging to clients, and didn't label accounts clearly enough to show whose funds were deposited in them.

The money from clients was diverted towards IIFL's traders and those of its debit balance clients.

The inspection which covered processes and records of IIFL from 2011 to 2013, showed that 26 out of 45 client accounts hadn't been labelled correctly.

The firm had failed to comply with the norms despite warnings from BSE.