30th Broker Default as NSE Expels CM Goenka Stock Brokers for Misusing Client Funds

CM Goenka Stock Brokers Pvt Ltd has become the 30th broker since May 2019, expelled by the National Stock Exchange (NSE) for default. According to NSE, the Jaipur, Rajasthan based broker has been declared as a defaulter and expelled for misusing client funds. It is the second broker default declared by NSE in 2022.

There have been a series of 30 broker defaults (including Modex International Securities, Anugrah Stock and Broking Pvt Ltd, Karvy Stock Broking, BMA Wealth Creators, Fairwealth Securities) on NSE since May 2019 till date. 

Since January 2020, the beginning of the COVID pandemic, the number of broker defaults, most of which are found to be misusing client funds or securities, has reached 26. NSE expelled four brokers in 2019, 14 in 2020, 10 in 2021 and two in the first two months of 2022, taking the total number of brokers defaulted and expelled by NSE to 30.

The NSE notification says, “All members are hereby informed that the following trading member has been expelled from the membership of the Exchange under Rules 1 and 2 of Chapter IV of the NSEIL Rules and has been declared as a defaulter under provision 1 (a) of Chapter XII of Exchange Bye-laws with immediate effect.”

In the same release, the bourse says, “Members’ attention is also drawn to the sub-rule 4(A) & 5 under Rule 8 of Securities Contract (Regulations) Rule, 1957 (SCRR) which provides for disqualification on persons from holding the office of a Director/Partner in a company/firm if such persons had previously held the office of the Directors/partners in any company/firm which had been a Member of the Exchange and has been declared defaulter or expelled by the stock exchange.” Om Prakash Goenka and Kapil Goenka are the directors of CM Goenka Stock Brokers.

Sr No Date of Declaration Expelled Members Reasons for declaring the member as expelled Directors/partners
1 15-Feb-2022 C. M. Goenka Stock Brokers Pvt Ltd Misuse of client funds Om Prakash Goenka
Kapil Goenka
2 15-Feb-2022 Omkam Capital Markets Pvt Ltd Failure to recoup shortfall of client securities and settle the same Peeyush Aggarwal
Sachin Garg
3 18-Oct-2021 First Futures And Stocks Pvt Ltd 1) Shortfall of client funds
2) Non-resolution of investor complaints
D. Gunasekar
G. Shri Shivam
4 12-Oct-2021 Indovision Securities Ltd 1) Misuse of client securities
2) Non-settlement of client accounts
Subodh Kumar Dhanuka
Sanjay Kumar Dhanuka
Rekha Devi Dhanuka
5 06-Sep-2021 Yuvraj Securities
(Proprietor: – Mr. Vijay Kumar Goel)
1) Failure to recoup client funds & securities
2) Failure to resolve investor complaints
6 13-Jul-2021 Star Share & Stock Brokers Ltd 1) Failure to honour arbitral award.
2) Failure to fulfill obligations and to abide by the arbitration proceedings
Manoj Kumar
Harleen Kaur Bindra
Vinod Kumar Garg
7 13-Jul-2021 Destiny Securities Ltd 1) Failure to honour IGRP orders and
2) Failure to resolve investor complaints
Anil Kumar Bajoria
Manoj Kumar Agrawal
Babita Agrawal
Pranay Agrawal
8 02-Jul-2021 Arcadia Share & Stock Brokers Pvt Ltd 1) Member engaged in borrowing securities from their clients outside the framework of lending and borrowing securities (SLB Platform) established by SEBI and the Exchanges
2) Shortfall of clients’ funds and securities, indicating misutilization of clients’ assets.
3) Failure to resolve investor complaints
Nitin Brahmbhatt
Antony Sequeira
9 26-Mar-2021 Conard Securities Private Limited 1) Failure to resolve the investor complaints
2) Member not contactable or responded to any of the Exchange communication
3) Being incommunicado, member failed to cooperate with the Exchange in the conduct of the inspection and furnish information for the same
Rajdeep Manoj Javeri
Shikha Hemang Shah
10 24-Mar-2021 Bezel Stock Brokers Pvt Ltd 1) Misuse of clients’ funds and securities
2) Non-settlement of client accounts
3) Shortfall in the net worth
4) Failure to resolve investor complaints
Angad Singh Bhatia
Gurbachan Singh Bhatia
11 12-Mar-2021 Reflection Investments 1) Shortfall in client funds
2) Shortfall in net worth
3) Falsification of lnformation and misrepresentation of data submitted to the Exchange
4) Failure to resolve investor complaints and non-fufillment of Grievance Redressal Committee (GRC) order
5) Failure to comply with the directions of the Member & Core Settlement Guarantee Fund Committee (MCSGFC)
Vijay Sambrani
Chandrika Sambrani
12 22-Jan-2021 Action Financial Services (India) Ltd 1) Misuse of client securities
2) Shortage of client Funds
3) Non-settlement of client accounts
4) Shortfall in Net worth
5) Mis-statement and incorrect reporting of data submission to the Exchange
6) Failure to resolve investor complaints
Bakul R Parekh
Parul Doshi
Harbhajan Singh J Dhillon
Milan R Parekh
Raja Gupta
13 14-Dec-2020 Sumpoorna Portfolio Ltd Sumpoorna Portfolio Ltd Nitesh Aggarwala
Rahul Yadav
Manoj Kumar
14 26-Nov-2020 Anugrah Stock & Broking Pvt Ltd 1) Shortfall and misuse of client funds and securities
2) Inter Client Adjustments in Client Ledgers
4) Monthly pay-outs made to clients
5) Derivatives Advisory Services provided by the member to its clients offered through its own Company as well as through its client and Associated entity
6) Falsification of records
7) Failure to resolve investor complaints
Paresh Kariya
Sadhana Kariya
15 23-Nov-2020 Karvy Stock Broking Ltd 1) Misuse of client funds and securities
2) Non-settlement of client accounts
3) Unsatisfactory financial conditions
4) Non-submission of data to Exchange
5) Non-resolution of investor complaints
M Yugandhar
Bhagwandas Narang
Jyothi Prasad
C Parathasarathy
16 15-Sep-2020 Anee Securities Pvt Ltd 1) Member not contactable or responded to any of the Exchange communication
2) Being incommunicado, member failed to cooperate with the Exchange in the conduct of the inspection and furnish information for the same
Anjanee Kumar
Ajit Kumar Gupta
17 15-Sep-2020 Modex International Securities Ltd 1) Non-availability and Misuse of client funds
2) Shortfall in net worth
3) Non-settlement of client accounts
4) Non-availability and misuse of client securities
5) Falsification of books
6) Non-resolution of investor complaints
Ajay Jain
Sarika Chawla
Pavan Kumar Sachdeva
Parminder Singh Kindra
Dharmendra Kumar Arora
18 30-Apr-2020 Vineet Securities (P) Ltd 1) Non-availability of Client funds and securities
2) Misuse of client securities
3) Falsification of accounts
4) Non-settlement of client accounts
5) Failure to resolve investor complaints
Vineet Jindal
Sushil Kumar Jindal
Vibhor Jindal
19 30-Apr-2020 Grovalue Securities Pvt Ltd 1) Failure to co-operate with the Exchange in the conduct of the inspection
2) Unavailablity of funds to meet the client payables and non- availability of client securities
3) Non-settlement of client accounts
4) Shortfall in net worth
5) Failure to resolve investor complaints
Vineet Chopda
Amit Gala
20 29-Apr-2020 Quantum Global Securities Ltd 1) Misuse and Non-availability of client funds and securities
2) Non-settlement of client accounts
3) Shortfall in net worth
4) Falsification of books of accounts and Register of Securities of Clients
5) Failure to resolve investor complaints
Atul Narendra Malik
Pankaj Kumar Singh
Bhavesh Kumar Singh
Shipra Kasana
Nitesh Pratap Malik
21 29-Apr-2020 Wellindia Securities Ltd 1) Misuse of client’s funds and securities
2) Non-Settlement of client accounts
3) Failure to resolve investor complaints
Alok Gupta
Ashok Gupta
Rajiv Agrawal
22 28-Feb-2020 Ksbl Securities Ltd 1) Misuse of Client Funds and Securities
2) Falsification of books
3) Shortfall in net worth
4) Failure to resolve investor complaints
Suman Arora
Ramesh Chand Arora
Tika Ram Khare
23 13-Feb-2020 Vrise Securities Pvt Ltd 1) Non-availability of funds to meet client payables
2) Misuse of client funds and securities
3) Failure to co-operate with the Exchange in the conduct of the inspection
4) Failure to resolve investor complaints
Rakesh Kirit Kadakia
Sonal Rakesh Kadakia
Ankit Hasmukh Chheda
24 13-Feb-2020 Bma Wealth Creators Ltd 1) Non-availability and misuse of client securities
2) Non-availability of sufficient funds to pay-off creditors
3) Mis-representation of data submitted to the Exchange
4) Failure to resolve investor complaints
Murgesh Devashrayi
Anubhav Bhatter
Shiv Kumar Damani
25 13-Feb-2020 Kaynet Finance Ltd 1) Failure to honour arbitral award.
2) Failure to fulfill obligations and to abide by the arbitration proceedings
3) Failure to resolve investor complaints
Rajendra S Daga
Sanjay A Shah
Paresh Arvind Shah
Mukesh Vasantlal Shah
26 14-Jan-2020 Fairwealth Securities Ltd 1) Non-availability and misappropriation of client securities
2) Non-availability of client funds
3) Shortfall in networth
4) Non-settlement of client accounts
5) Failure to resolve investor complaints
Sandeep Jindal
Naveen Gaba
Dhirender Gaba
27 04-Nov-2019 Allied Financial Services Pvt Ltd 1) Dealing with unregistered entities
2) Misuse of client funds
3) Shortfall in net worth
4) Non-availabilty of securities
5) Non-settlement of client accounts
6) Non-resolution of investor complaints
R P Basia
Awanish Kumar Mishra
Lalit Agarwal
Rajiv Asopa
28 04-Nov-2019 Credential Stock Brokers Ltd 1) Misuse of client funds for meeting proprietary obligations
2) Non-availability of client funds and securities
3) Failure to co-operate with the Exchange in the conduct of the inspection
4) Non-resolution of investor complaints
D K Agrawal
Karuna Agrawal
Nikita Agrawal
29 04-Nov-2019 Raghukul Shares India Pvt Ltd 1) Non-availability of client funds and securities
2) Non-settlement of client accounts
3) Mis-representation of data submifted to Exchange
4) Shortfall in net worth
5) Failure to co-operate with the Exchange in the conduct of the inspection
6) Failure to resolve investor complaints
Dhruvesh Patel
Gangaram Khandelwal
Seema Khandelwal
Amit Sharma
Siya Ram Khandelwal
Sandesh Khandelwal
30 06-May-2019 Guiness Securities Ltd 1) Misuse of client funds and securities
2) Non-settlement of client accounts
3) Non-resolution of investor complaints
Soumen Chatterjee
Tarun Kanti Sengupta
Kamal Kumar Kothari
Dharmendra Kothari

Most broker defaults have inflicted crippling losses on investors, although the settlement guarantee ensures no impact on the market itself. In many cases, brokers used investors’ shares to obtain leverage and take speculative positions on the derivatives market leading to losses. 

Sometimes, they passed back a little interest for the pledged shares, but, in many cases, investors were unaware of their shares being pledged.

For instance, in 2019, Karvy Stock Broking was banned by the Securities and Exchange Board of India (SEBI) for defaulting clients for around Rs2,000 crore, making it one of the biggest such cases in India.

This list does not include the two firms, which abruptly closed their capital market business of their own accord (voluntarily). One is IndiaNivesh, whose voluntary closure has led to litigation between HDFC Bank and Edelweiss Custodial Services and exposed the shady practice of ‘funded fixed deposits’ being accepted by the clearing corporation as collateral. In this case, the dispute is over a Rs100 crore funded FD, which HDFC Bank refused to honour.  The other was Action Financial, which initially claimed to have done a voluntary closure but was later expelled by the exchange since it had failed to refund investors money. (Read: IndiaNivesh, Edelweiss & HDFC Bank: The Curious Case of Rs100 Crore Fixed Deposit Receipts)
In June last year, SEBI issued a framework to minimise the risk of misuse of investor funds by stock brokers. The new measures are part of the market regulator’s effort to prevent misappropriation and misuse of client funds by brokers and also to protect the clients in the event of a default by the brokers. (Read: SEBI Develops System to Detect Misuse of Client Securities by Brokers)

This follows several instances of brokers misusing clients’ securities for trades that were not authorised by them and submitting false information to stock exchanges

Unfortunately, nothing seems to stem the spate of broker defaults and voluntary closures of business by brokerage firms—especially among commodity brokers.

Dolores W. Simon