SEBI Slaps ₹3 Lakh Fine on Motilal Oswal
• Motilal Oswal Caught in SEBI Net Again
• Compliance Lapses Cost Motilal Oswal Dear
Unmesh Gujarathi
Sprouts News Exclusive
Contact: +91 9322755098
Sprouts News Exclusive
Contact: +91 9322755098
SEBI has fined Motilal Oswal Financial Services ₹3 lakh for violating stock broker regulations, including unauthorized terminal operations and fund-based dealings by Authorized Persons. The Sprouts News Special Investigation Team has previously exposed Motilal Oswal’s recurring compliance failures, highlighting systemic governance lapses that continue to endanger investor interests and market stability.
In yet another blow to Motilal Oswal Financial Services, the Securities and Exchange Board of India (SEBI) has imposed a monetary penalty of ₹3 lakh on the firm for serious violations of stock brokers’ regulations. The violations, which involve misuse of trading terminals and unauthorized fund-based transactions, underscore persistent compliance failures that the Sprouts News Special Investigation Team has exposed multiple times in the past.
SEBI’s Targeted Inspection Uncovers Widespread Irregularities
SEBI had conducted a theme-based inspection in March 2024, focusing on “Control over Authorized Persons.” This inspection reviewed activities from April 2022 to January 2024. According to SEBI’s investigation report, Motilal Oswal Financial Services exhibited significant procedural lapses across multiple trading platforms, namely the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).
During the inspection, SEBI found that 13 NSE trading terminals reported by Motilal Oswal were not present at their declared physical locations. Moreover, as of March 4, 2024, trades were executed from 5 of these 13 terminals, indicating possible unauthorized usage. A similar pattern was observed on BSE, where 9 reported terminals were missing, yet trades were still being executed from at least one terminal.
Contents
SEBI Slaps ₹3 Lakh Fine on Motilal Oswal• Motilal Oswal Caught in SEBI Net Again• Compliance Lapses Cost Motilal Oswal DearSEBI’s Targeted Inspection Uncovers Widespread IrregularitiesUnauthorized Users Operated Trading TerminalsGrave Violations by Authorized Persons (APs): Fund-Based Activities ExposedDirect Violation of SEBI RegulationsSEBI’s Enforcement Action: ₹3 Lakh Penalty ImposedA Pattern of Recurring Violations: Sprouts News Special Investigation Team’s Previous ExposésMotilal Oswal Under Scanner, Investors AlertedAlso Read: Shagun Realty Exposed in ₹1,500 Cr Scam Defies HC Order.Related Article: Motilal Oswal Under Fire.Related Article: Why Motilal Oswal Spending Crores on Media Advertisements?Related Article: Motilal Oswal: Navigating a Path Through Controversy.Previous Controversies: Long History of Compliance Failures at Motilal Oswal1. Unauthorized Trading and Client Complaints2. Mis-selling of Financial Products3. PMS Irregularities & Conflict of Interest4. Unauthorised Fund Transfers Between Client Accounts5. Breaches of KYC and Client Confidentiality6. Penalties and Regulatory Actions• Sprouts News SIT Note:
Unauthorized Users Operated Trading Terminals
Further violations came to light when SEBI verified the users operating these terminals. On NSE, four trading terminals were being used by individuals who were not authorized or approved users. A similar breach occurred on BSE, where four more terminals were operated by unauthorized personnel. These activities represent a direct violation of stock broking norms, which mandate strict control and monitoring of trading access to prevent market manipulation and unauthorized trading.
The Sprouts News Special Investigation Team has consistently highlighted how lax internal controls at Motilal Oswal have allowed unauthorized individuals to bypass regulatory frameworks, posing systemic risks to market integrity.
Grave Violations by Authorized Persons (APs): Fund-Based Activities Exposed
In addition to the terminal irregularities, SEBI also uncovered non-compliance regarding activities of Authorized Persons (APs) associated with Motilal Oswal Financial Services. The company had conducted onsite inspections of only two APs and submitted reports to BSE and NSE. However, during these inspections, the firm failed to detect or report fund-based transactions that contravene SEBI’s rules.
One of the APs, Triventure Services, maintained fund-based relationships with 36 registered clients. SEBI’s findings show that this AP received ₹18.31 crore from clients and disbursed ₹1.24 crore in payments. Another AP, Merit Capital Market Services, was involved in 99 client transactions out of a total 228, handling payments of ₹5.69 crore to clients while receiving ₹5.06 crore from them.
Direct Violation of SEBI Regulations
According to SEBI’s order, both these Authorized Persons engaged in fund-based relationships that are strictly prohibited under SEBI’s Byelaws, Rules & Regulations, and circulars. As a stockbroker, Motilal Oswal Financial Services is obligated to ensure its APs restrict their activities to brokerage functions and avoid any form of lending or fund mobilization from clients.
By failing to detect, prevent, or report these activities, Motilal Oswal Financial Services demonstrated gross negligence in governance and supervision. SEBI has categorically stated that the firm did not ensure that its Authorized Persons operated strictly within the permitted regulatory framework.
The Sprouts News Special Investigation Team has earlier exposed multiple such fund-based lending practices by several broking entities, with Motilal Oswal featuring prominently in many such dubious practices.
SEBI’s Enforcement Action: ₹3 Lakh Penalty Imposed
Considering the gravity of the violations, SEBI proceeded to impose a financial penalty of ₹3 lakh on Motilal Oswal Financial Services. While the monetary fine may appear modest relative to the volumes involved, regulatory experts believe the penalty reflects SEBI’s continued focus on tightening operational compliance within the broking industry.
It is worth noting that this action adds to a growing list of regulatory setbacks for Motilal Oswal. The Sprouts News Special Investigation Team has repeatedly highlighted the firm’s systemic control failures, unethical practices, and weak internal compliance protocols that expose investors to significant risks.
• Regulatory Crackdown Raises Industry Concerns
The recurring nature of violations at Motilal Oswal Financial Services has reignited debate within industry circles about the adequacy of current compliance frameworks among India’s leading brokerage houses. Despite repeated warnings and inspections, several top-tier brokers continue to operate through grey areas, using authorized persons as proxies for high-risk fund-based activities that are outside the regulatory perimeter.
Regulatory watchers caution that unless stricter penalties, suspensions, or license revocations are enforced, such practices may continue to endanger market stability. The role of authorized persons — often functioning as quasi-sub-brokers — remains a particularly sensitive compliance loophole, as repeatedly documented by the Sprouts News Special Investigation Team.
A Pattern of Recurring Violations: Sprouts News Special Investigation Team’s Previous Exposés
This is not the first time Motilal Oswal has come under regulatory scrutiny. The Sprouts News Special Investigation Team has, over the years, uncovered multiple instances where the firm allegedly engaged in:
•Mis-selling of financial products.
•Conflict of interest in portfolio management schemes.
•Unauthorized fund transfers between client accounts.
•Breaches in KYC norms and client confidentiality.
Despite SEBI’s repeated interventions, these structural lapses suggest deeper governance issues within Motilal Oswal’s risk management systems.
Motilal Oswal Under Scanner, Investors Alerted
SEBI’s latest enforcement action against Motilal Oswal Financial Services serves as another wake-up call for India’s broking ecosystem. The pattern of violations reflects a serious need for broking firms to overhaul their compliance culture, enforce stricter monitoring of Authorized Persons, and align fully with regulatory expectations.
The Sprouts News Special Investigation Team will continue its vigilant coverage and deep-dive investigations into financial sector malpractices, ensuring that policymakers, investors, and regulators remain informed and alert.
Also Read: Shagun Realty Exposed in ₹1,500 Cr Scam Defies HC Order.
Related Article: Motilal Oswal Under Fire.
Related Article: Why Motilal Oswal Spending Crores on Media Advertisements?
Related Article: Motilal Oswal: Navigating a Path Through Controversy.
Previous Controversies: Long History of Compliance Failures at Motilal Oswal
The Sprouts News Special Investigation Team has, over the years, systematically uncovered multiple instances of regulatory breaches, unethical conduct, and governance lapses involving Motilal Oswal Financial Services. Some of the major controversies that have plagued the brokerage firm include:
1. Unauthorized Trading and Client Complaints
Multiple clients have previously alleged that Motilal Oswal executed trades without their consent, leading to financial losses. SEBI had intervened in several such complaints, imposing penalties and directing the firm to strengthen its internal control mechanisms.
2. Mis-selling of Financial Products
Sprouts SIT investigations earlier exposed how Motilal Oswal’s sales teams aggressively sold high-risk derivatives, portfolio management schemes (PMS), and insurance-cum-investment products to retail investors, often without full disclosure of the risks involved. SEBI has reprimanded the firm for inadequate due diligence and failure to adhere to suitability norms while recommending products.
3. PMS Irregularities & Conflict of Interest
SEBI initiated inquiries into conflict of interest allegations in Motilal Oswal’s portfolio management schemes. The firm was accused of recommending and investing in in-house funds and group companies, thus compromising client interests. The Sprouts SIT also exposed how PMS managers allegedly manipulated disclosures to inflate performance reports.
4. Unauthorised Fund Transfers Between Client Accounts
In previous inspections, SEBI found that Motilal Oswal’s back-office operations facilitated inter-client fund transfers without proper authorization or documentation, violating client fund segregation norms. Such transfers expose clients to counterparty risks and undermine trust in regulated financial intermediaries.
5. Breaches of KYC and Client Confidentiality
Sprouts SIT reported how KYC norms were often violated, with instances of lax identity verification, improper documentation, and even account openings based on incomplete data. In several cases, client data was allegedly shared or misused by relationship managers for cross-selling purposes, triggering privacy and security concerns.
6. Penalties and Regulatory Actions
Between 2015 and 2023, Motilal Oswal faced multiple regulatory actions from SEBI, NSE, BSE, and even the National Financial Reporting Authority (NFRA), which questioned the firm’s audit practices and internal controls. These actions cumulatively paint a concerning picture of a brokerage house struggling with compliance culture.
• Sprouts News SIT Note:
The recurring violations and regulatory rebukes highlight systemic weaknesses in Motilal Oswal’s risk management and corporate governance framework. The firm’s heavy reliance on Authorized Persons (APs) and third-party entities has repeatedly led to breaches that endanger both investor funds and market integrity.
