SEBI bars Prabhudas Lilladher for 7 days from new business; full order details

SEBI on Friday barred Prabhudas Lilladher Private Limited, a SEBI-registered stock broker, from onboarding new clients for seven days starting from December 15, 2025, according to the enquiry order. The restriction follows a joint inspection by SEBI and the exchanges that flagged multiple lapses in client-funds handling, settlement and margin reporting during the inspection period. 

The probe, carried out between November 2 and November 8, 2022, covered operations from April 1, 2021 to October 31, 2022. Inspectors found that on three sample dates the broker’s computed “G-value” (the metric that checks whether client funds plus cash-equivalent collateral cover total client credit balances) was negative — a shortfall totalling Rs 2.70 crore, a shortfall SEBI said is indicative of misuse of client funds. 

The regulator also flagged the stock broker for the non-settlement of client accounts. The order detailed that funds for over 1,200 clients were not settled within the mandatory quarterly or monthly timelines.

SEBI’s order goes beyond the G-value finding. The regulator noted there was a non-settlement of client running accounts: funds of 1,283 non-traded clients (quarterly) totalling Rs 36 lakh were not settled in time; 677 monthly non-traded instances amounted to Rs 2.85 crore and three traded-client quarterly cases involved Rs 39 lakhs. 

Further operational lapses included the incorrect reporting of End of Day (EOD) and Peak margins. The inspection found that the broker had reported margins to the exchange that were not actually collected, and in one instance, there was a short collection of peak margin. 

Additionally, the broker was found to have passed on penalties levied by clearing corporations for short-collection of upfront margins to its clients. SEBI reiterated that members are “not permitted to pass on the penalty levied by clearing corporations on account of ‘short/non-collection of upfront margins’ to clients under any circumstances,” it said

In its submission, Prabhudas Lilladher contended that the alleged lapses were ‘technical and procedural, not intentional,’ and attributed several errors to manual or clerical mistakes. The broker also argued that it had already paid a penalty of Rs 11 lakh in separate adjudication proceedings and that a ban on new business would cause “disproportionate and lasting harm” to its reputation and employee morale.

However, SEBI Chief General Manager N. Murugan noted that while mitigating factors such as the small quantum of excess brokerage and post-inspection corrective steps were considered, they did not absolve the broker of liability.