Sebi Cancels Registration of LFS Broking, Bans MD for 5 Years

Markets regulator Sebi on Friday canceled the registration of LFS Broking and barred its Managing Director, Saiyad Jiyajur Rahaman, from being employed or associated with any registered intermediary for five years due to violations of market norms. The regulator also canceled the firm’s registrations as a stockbroker, portfolio manager, depository participant, and research analyst.

P24 News Media

June 30, 2024

1 minute

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Business

Sebi’s Decision

The Securities and Exchange Board of India (Sebi) took decisive action against LFS Broking and its Managing Director, Saiyad Jiyajur Rahaman, for failing to comply with market regulations. Sebi’s Whole Time Member, Kamlesh C Varshney, stated in a 56-page order that Rahaman did not act with integrity, honesty, or ethical behavior, deeming him unfit to be associated with any registered intermediary.

Misuse of Registration

Sebi’s investigation revealed that LFS Broking misused its registration certificates in collusion with Rahaman to deceive investors and illegally mobilize funds. The brokerage firm failed to meet the criteria prescribed under the Intermediaries Regulations.

Promoting Unregistered Entities

The probe found that LFS Broking’s registration was exploited to promote LFS-PMS, a portfolio management service, and MOL Commodities, an unregistered entity. These entities collected substantial funds from investors, which were funneled through various bank accounts managed by Rahaman. Specifically, transactions totaling Rs 9.3 crore were noted in Rahaman’s accounts, including transfers to LFS Broking’s proprietary trading account.

Large-Scale Fund Mobilization

Sebi noted that LFS-PMS mobilized Rs 266 crore from 6,219 clients, many of whom did not execute any trades in the securities market. The accounts of LFS-PMS and MOL Commodities showed significant financial activity without proper agreements or regulatory compliance, raising red flags about their operations.

Complaints and Enquiry

The order came after Sebi received complaints that LFS Broking and LFS-PMS, a proprietorship firm of Rahaman, were running an investment scheme assuring returns. The scheme was falsely presented as a legitimate operation under the disguise of registration granted by Sebi to the brokerage house.

Recommendations and Actions

The present proceedings stem from an enquiry report dated September 20, 2023, where the Designated Authority recommended the cancellation of LFS Broking’s registration in various capacities. It was also recommended that Rahaman be debarred from associating with any registered intermediary for five years.

The cancellation of LFS Broking’s registration and the ban on Saiyad Jiyajur Rahaman serve as a stern warning to market participants about the importance of adhering to regulatory norms and maintaining ethical standards in their operations.