Description
SEBI imposes penalties on 5Paisa Capital Limited and its officials for multiple violations related to Online Bond Platform Provider (OBPP) operations during inspection period June 2023 to March 2024.
Summary
SEBI issued an adjudication order (Order/JS/YK/2025-26/31717-31723) against 5Paisa Capital Limited and six of its officials following an inspection of its Online Bond Platform Provider (OBPP) operations. The inspection, conducted on May 24, 2024, covered the period from June 14, 2023 to March 31, 2024. Multiple violations were identified related to compliance with SEBI (Stock Brokers) Regulations, 1992 read with regulation 51A of SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021.
Key Points
- 5Paisa Capital Limited (Registration No. INZ000010231) received OBPP approval from BSE on June 14, 2023
- Seven noticees: 5Paisa Capital Limited and six officials (Archana Niranjan Hingorani, Nirali Sanghi Sharad, Ravindra Babu Garikipati, Milin Kaimas Mehta, Gourav Munjal, Narayan Gangadhar)
- Inspection findings communicated on November 07, 2024; company response received November 30, 2024
- Post-inspection analysis report identified multiple regulatory violations
Regulatory Violations Identified
Violation (a): Third Party Agreements
- Failed to enter into agreements with third party sellers of products, services, or securities
- Violated clause 3.2 of Annex-XXI-A of Chapter XXI of SEBI NCS Master Circular No. SEBI/HO/DDHS/PoD1/P/CIR/2023/119 dated August 10, 2021
Violation (b): Order Routing and Settlement
- Orders on online bond platform not routed through Request for Quote (RFQ) platform of recognized stock exchanges
- Trades not settled through respective clearing corporations
- Violated clause 3.4.1 of Annex-XXI-A of Chapter XXI of SEBI NCS Master Circular dated August 10, 2021
Violation (c): Deal Sheet Information
- Deal sheets issued to clients did not include all SEBI-mandated information
- Violated clause 3.6.2 of Annex-XXI-A of Chapter XXI of SEBI NCS Master Circular dated August 10, 2021
Violation (d): Quote Receipt Issuance
- Failed to issue quote receipts to third party sellers post-execution of orders for third party sale of debt securities
- Violated clause 3.6.3 of Annex-XXI-A of Chapter XXI of SEBI NCS Master Circular dated August 10, 2021
Violation (e): Disclosure Requirements
- Failed to meet minimum disclosure requirements (document appears truncated)
Compliance Requirements
- OBPPs must enter into formal agreements with all third party sellers
- All orders must be routed through RFQ platforms of recognized stock exchanges
- Settlement must occur through respective clearing corporations
- Deal sheets must contain complete information as mandated by SEBI regulations
- Quote receipts must be issued to third party sellers after order execution
- All disclosure requirements under SEBI NCS Master Circular must be met
Important Dates
- June 14, 2023: 5Paisa Capital received OBPP approval from BSE
- June 14, 2023 - March 31, 2024: Inspection period
- May 24, 2024: SEBI inspection conducted
- November 07, 2024: Inspection findings communicated to 5Paisa Capital
- November 30, 2024: 5Paisa Capital submitted response to findings
Impact Assessment
Regulatory Impact
- Reinforces strict compliance requirements for Online Bond Platform Providers
- Sets precedent for enforcement of OBPP operational requirements
- Emphasizes importance of proper order routing through exchange mechanisms
Operational Impact
- Affects 5Paisa Capital’s OBPP operations and compliance systems
- May require operational changes to meet regulatory requirements
- Other OBPPs should review their compliance with similar requirements
Market Impact
- Limited direct market impact as violations are entity-specific
- Serves as warning to other stock brokers operating as OBPPs
- Reinforces investor protection framework in debt securities trading through online platforms
Impact Justification
Adjudication order against registered stock broker for OBPP violations affects regulatory compliance standards but has limited broader market impact. Important for broker-dealers operating bond platforms.