Prabhudas Lilladher Barred from Taking New Assignments for 7 Days

Effective December 15, 2025, the Securities and Exchange Board of India (SEBI), a market regulator, has prohibited Prabhudas Lilladher Pvt Ltd from accepting any new assignments, contracts, or schemes as a stockbroker registered with SEBI for a period of seven days. The action follows a joint inspection by SEBI, National Stock Exchange (NSE), Bombay Stock Exchange (BSE) and Multi-Commodity Exchange (MCX), which uncovered multiple regulatory violations across client fund management, margin reporting, know-your-customer (KYC) compliance and handling of client securities. One of the most alarming discoveries was the misuse of customer cash, disclosed through negative G-values on three sample dates 12th July, 13th July and 15 July 2021 suggesting a shortfall of ₹2.70 crore. SEBI decided that once the G-value displays a deficit, the burden lies on the broker to justify the gap, which the stockbroker failed to do. The regulator ruled that the firm violated important laws protecting client funds. Additionally, it was discovered that the broker had neglected to promptly settle client accounts. Funds totaling ₹36.09 lakh belonging to 1,283 non-traded clients remained unsettled, along with ₹2.85 crore over 677 monthly cases. Additionally, three quarterly cases involving traded clients' funds totaling ₹39 lakh remained unresolved. SEBI dismissed the company's allegations of technical problems, pointing out that no supporting documentation was submitted and that prompt settlement is necessary to protect client funds. Further, SEBI detected many violations in margin reporting and collection. In four instances, the broker reported End-of-Day margins inaccurately, and in five instances, peak margins. Additionally, it failed to collect a peak margin of ₹55.46 lakh from a single client. Since brokers are required to maintain rigorous accuracy in risk-management submissions, SEBI ruled that erroneous reporting and discrepancies between collected and reported margins amounted to regulatory violations.

Prabhudas Lilladher incorrectly passed on fines for forward margin shortages to clients, totaling ₹15.64 lakh, despite specific exchange regulations banning this, according to a SEBI inspection. SEBI rejected the company's defense in cases involving peak-margin and SPAN, but it accepted its explanation for penalties relating to MTM. The regulator noticed that the broker refunded penalties in only five of the 33 required instances. KYC compliance breaches were also recorded. In fifteen instances, the broker failed to upload KYC paperwork within the allotted ten working days. SEBI determined that the broker's justifications—such as software issues or CKYC-related delays—were unfounded.

The inspection uncovered improper reporting of client funds and collateral on three days, where ₹1.26 crore of base capital was wrongly shown as ‘funded collateral’. SEBI emphasized that such mistakes cannot be justified as simple misreading because they alter client-fund protection systems.

The broker was also held accountable for the inaccurate reporting of clear ledger balances and peak ledger balances. While minor variations were missed, the remaining disparities revealed significant violations of SEBI’s reporting rules as stipulated in the 2016 circular. A substantial infringement emerged from the management of client securities. 91 clients' fully paid securities, valued at about ₹1.30 crore, were improperly retained in their unpaid securities account (CUSA) rather than being sent to their demat accounts. Because regulations require the transfer of fully-paid securities without exception, SEBI ruled that the broker's explanation based on F&O positions and client letters was unlawful.

The broker was also found to have wrongly reported customer exposure on 27 instances by failing to assess appropriate collateral, leading to exaggerated exposure estimates. Exposure reporting is an essential risk-management function, according to SEBI, which rejected the explanation of human errors. SEBI examination further confirmed that the broker collected excess brokerage in ten occasions, breaking the cap stipulated under SEBI regulations. The excuse of clerical error was not accepted, as brokerage caps are absolute and refunds received immediately after examination do not erase the infraction.

Finally, Prabhudas Lilladher failed to liquidate two demat accounts labeled as ‘stock broker–client account’ within the statutory timescale of 30 September 2019. The accounts stayed open until December 2022, long past the extended deadline.

Given the wide variety and intensity of these infractions, SEBI decided to impose a seven-day suspension on the broker from taking on any new assignments.