Shares of IIFL Securities were edging up on Friday after the stock trading platform received a favourable decision from a court that quashed a ban on the firm from taking new clients.

What Happened: The Securities Appellate Tribunal (SAT) has overturned the ruling of the market regulator, Securities and Exchange Board of India (SEBI) with regard to IIFL Securities. The tribunal has lifted a two-year restriction imposed by SEBI that would prevent IIFL Securities from accepting new clients. Additionally, SAT has reduced the financial penalty on the brokerage from ₹1 crore to ₹20 lakh.

In its order dated December 7, SAT said there was no evidence of the misuse of client funds. It criticised the incorrect interpretation of the 2016 circular, stating that an attempt had been made to portray the misuse of client funds, which the tribunal deemed as “patently erroneous.”

Why It Matters: The SAT order argued that IIFL could not be barred from taking new clients for two years. It also clarified that since there was no misuse of client funds and no failure to segregate client monies, the penalty of ₹1 crore could not be justified.

However, SAT acknowledged that IIFL Securities had not followed the proper procedure outlined in SEBI’s 1993 circular regarding the nomenclature of client bank accounts. Despite characterising this as a technical breach with no misuse of client funds, SAT deemed it a violation of the circular. As a result, SAT imposed a total penalty of ₹20 lakh for the two showcause notices, considering it sufficient given the technical nature of the breach.

This decision by SAT follows SEBI’s June 19 order that had restrained IIFL Securities from onboarding new clients for two years, citing the misuse of client funds.

Price Action: IIFL Securities’ share price was up 0.7% at ₹636.80 near the start of trade on Friday.

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