When a trusted name in trading faces regulatory action, investors naturally worry. And they should.
SEBI just penalized Motilal Oswal Financial Services Limited for multiple compliance violations. Here’s what went wrong and what it means for you.
SEBI Action Against Motilal Oswal Financial Services
Motilal Oswal Financial Services Limited is a SEBI-registered stock broker (Registration No. INZ000158836) and a member of both NSE and BSE.
Over the years, it has grown from a brokerage into a large financial services group offering wealth management, investment banking, and asset management.
With thousands of clients across India, most people assume their systems are tightly controlled. But SEBI’s latest inspection showed that things weren’t as clean as they should have been.
SEBI carried out a thematic inspection on March 01 and March 04, 2024.
The focus was on one key area: how well Motilal Oswal controls its Authorized Persons (APs), the intermediaries who deal directly with clients and execute trades.
What SEBI found raised serious concerns.
What they discovered was troubling. Multiple Motilal Oswal Complaints and violations. Unauthorized activities. Poor oversight.
The investigation focused on Motilal Oswal’s control mechanisms over its Authorized Persons (APs). These are intermediaries who facilitate trading for clients.
Violations By Motilal Oswal Financial Services
Multiple non-compliances with SEBI regulations and exchange circulars were identified.
1. Trading Terminals Operating from Ghost Locations
Here’s where it gets serious.
Merit Capital Market Services Pvt Ltd, an authorized person of Motilal Oswal, had terminals registered at one location but operating from another.
According to the SEBI order:
- 13 NSE terminals were not found at the reported location (65, Old Rajinder Nagar Market, Delhi)
- 5 of these terminals had executed trades on March 04, 2024
- 9 BSE terminals were also missing from the registered address
- 1 terminal actively traded on inspection day
The terminals were actually operating from 211, DLF Towers, Moti Nagar, New Delhi. An unauthorized location.
Motilal Oswal only informed NSE and BSE about this new branch on March 12, 2024, eight days after the inspection. Approval came on March 14, 2024 for NSE and March 21, 2024 for BSE.
But trading had already started from the unauthorized location.
Impact on Investors: When terminals operate from unauthorized locations, regulatory oversight becomes impossible.
Client orders lack proper monitoring. Audit trails get compromised. Investor protection weakens significantly.
2. Unauthorized Users Operating Trading Terminals
Things got worse when SEBI checked who was actually using those terminals.
Four NSE terminals were being operated by people who were not approved users. All four had traded on inspection day.
On the BSE side, terminals registered in the names of Dilmeet Banga and Gagandeep Banga were actually being used by Rajesh Paswan and Varun Kalra — neither of whom was authorized.
On top of that, three people were found to have terminals in their names even though they didn’t have a valid NISM certification.
Motilal Oswal explained that some of these were former employees whose access wasn’t deactivated in time. But the rules are clear — without a valid certification, no one should be operating trading terminals.
Impact on Investors:
When untrained or uncertified people handle client orders, mistakes, misuse, and regulatory breaches become far more likely.
3. Failed Inspections and Missed Red Flags
Motilal Oswal conducted onsite inspections of their Authorized Persons. But they failed to identify critical violations.
- Case of Triventure Services Pvt Ltd
During inspection in November 2023, Triventure didn’t provide their last 6 months’ bank statements.
Motilal Oswal marked this as “non-complied” but closed the inspection anyway.
According to the SEBI order, sample verification of bank statements revealed transactions worth ₹19.56 crores with registered clients.
The transactions included:
- Loans to employees, directors, and relatives
- Commission payments to 61 parties (12 were registered clients)
- Referral fees without proper documentation
- Salary payments through personal arrangements
For 11 parties receiving commissions totaling ₹89,90,980, no proper supporting documents existed.
- Case of Merit Capital Market Services Pvt Ltd
Motilal Oswal inspected Merit Capital on November 17, 2023. They failed to report fund-based activities with clients.
The broker collected loan agreements and documents for unlisted NSE share transactions.
But they didn’t identify that Merit Capital was accepting funds directly into their bank accounts from clients.
This violates Para 32.5.1 of SEBI Master Circular, APs cannot receive or pay money in their own name for securities trading.
Impact on Investors: When brokers fail to inspect properly, unauthorized activities go undetected. Clients remain unaware of risks.
Fund-based arrangements create conflicts of interest. Investor money becomes vulnerable to misuse.
4. Unauthorized Fund-Based Activities by Authorized Persons
The most serious violations involved direct financial transactions between APs and clients.
Triventure Services’ Financial Web
According to SEBI’s findings, Triventure Services had fund-based relationships with 36 registered clients:
Money Received: ₹18.31 crores Money Paid: ₹1.24 crores
Breakdown of transactions:
The problems:
- Loan agreements were on plain paper, neither stamped nor notarized
- Commission payments to 12 clients violated revenue-sharing norms
- No proper documentation for ₹89.90 lakhs in payments
- Interest-free loans with unverifiable terms
NSE Circular NSE/COMP/50030 dated October 21, 2021 clearly states: “APs are not permitted to undertake activities such as providing assured/guaranteed return schemes… as well as directly accepting or paying/delivering any funds and securities from/to the clients/investors.”
Merit Capital’s Complex Transactions
Bank statement verification revealed fund movement with clients across 228 entities.
Key figures:
- 99 client transactions identified
- ₹5.69 crores paid to clients
- ₹5.06 crores received from clients
But SEBI found critical gaps:
- 33 instances lacked any supporting documentation
- 39 instances had incomplete proof (no demat statements for share transactions)
- 7 instances showed revenue-sharing agreements with clients (27% or 27.5% of revenue)
- 4 instances involved non-broking services like office decoration and software consultancy
Only 12 entities out of 228 could be verified as employees through salary slips.
When APs directly handle client money, the entire regulatory framework collapses. Investors believe their funds flow through the regulated broker.
Instead, money sits in AP accounts without proper safeguards.
5. Employees Accessing Client Login Credentials
During onsite verification at Merit Capital’s premises, inspectors observed something alarming.
Mr. Rajesh Paswan, an employee of Merit Capital, had logged into a client’s terminal using the client’s login credentials. The client was Mr. Parminder Singh (UCC: DIVK0097).
Motilal Oswal admitted this but explained Mr. Parminder Singh was the uncle of Mr. Gagandeep Singh (Managing Director of Merit Capital).
They claimed a letter of authorization permitted this.
However:
- No separate authorization letter was provided during inspection
- Using client credentials violates basic security protocols
- NSE Circular NSE/COMP/48536 dated June 09, 2021 states APs can only provide “administrative assistance”, not direct trading access
WhatsApp chat records were examined by SEBI. No evidence of authorization was found in those communications.
Even with family relationships, proper authorization protocols must be followed. Shortcuts create vulnerabilities that affect all clients.
6. Poor Oversight and Systemic Control Failures
The violations weren’t isolated incidents. They revealed systematic control failures.
SEBI found Motilal Oswal:
- Failed to conduct thorough AP inspections
- Closed inspection reports without obtaining critical documents
- Did not identify fund-based activities during audits
- Did not report violations to stock exchanges
- Allowed terminals to operate from unauthorized locations
- Permitted uncertified individuals to access trading systems
- Did not monitor AP bank accounts effectively
According to Para 32.5.1 of SEBI Master Circular: “The stock broker shall be responsible for all acts of omission and commission of the authorized person.”
Despite these inspections, violations continued undetected.
When India’s established brokers fail basic compliance, it affects market trust broadly. Retail investors depend on regulated intermediaries for protection.
SEBI’s Final Order and Penalty
After considering all evidence and submissions, SEBI’s Adjudicating Officer Amit Kapoor issued the final order on June 09, 2025.
Penalty Imposed: ₹3,00,000 (Rupees Three Lakhs only)
However, the order emphasized: “As SEBI SEBI-registered intermediary, Noticee is under a statutory obligation to comply with the applicable circulars, rules and regulations.
The very purpose of the said regulations is to deter wrongdoing and promote ethical conduct in the securities market.”
Motilal Oswal must pay the penalty within 45 days. Failure triggers recovery proceedings under Section 28A of the SEBI Act, including attachment and sale of properties.
How to File Your Complaint Against Motilal Oswal?
Facing issues with Motilal Oswal? Unauthorized terminals? Fund-based activities by Authorized Persons? The complaint process doesn’t have to be complicated.
Register with us. We handle the complexity so you can focus on recovery.
Here’s how we support you at every stage:
Step 1: Evidence Collection and Documentation
We help you gather trading statements, contract notes, communication records with Authorized Persons, bank statements showing fund transfers, screenshots of trading terminal access, KYC documents, and any agreements signed with APs.
We organize these systematically so your complaint has solid backing.
Step 2: Complaint Drafting for Multiple Platforms
We prepare clear, precise complaints customized for SEBI SCORES, NSE, and BSE investor cells, and SMART ODR proceedings.
Our experience with these platforms means your complaint gets accepted quickly without formatting issues or missing information.
Step 3: Filing Process Guidance
We walk you through submitting complaints on SCORES and SMART ODR portals.
You’ll know which category to select, how to upload documents, what reference numbers to note, and how to check status updates. We ensure every field is filled accurately.
Step 4: Response Management and Follow-Up
We help you analyze the broker’s response and draft counter-responses when needed.
When regulators ask for clarifications or additional documents, we ensure you provide exactly what’s needed within deadlines. We track timelines and send reminders.
Step 5: Escalation Strategy
If your complaint doesn’t get resolved at the first level, we advise on escalation routes, whether approaching the exchange’s appellate mechanism, filing with SEBI, or preparing for arbitration. We explain each option clearly.
Step 6: End-to-End Case Management
From registration to resolution, we manage your entire case.
We maintain complete timelines, coordinate before deadlines, prepare you for hearings or counselling sessions, and provide a dedicated point of contact who understands your case.
Step 7: Arbitration and Hearing Support
If your matter proceeds to arbitration in stock market, we help prepare written statements, organize documents, draft submissions responding to the broker’s defense, and prepare you for proceedings so you can present your case confidently.
Don’t let broker violations go unchallenged. Register with us today.
Conclusion
The Motilal Oswal case exposes how even established brokers can fail basic compliance. Unauthorized terminals. Uncertified users. Fund-based activities. Poor oversight.
The ₹3 lakh penalty seems modest given the scale of violations spanning nearly two years. But it sends a clear message, SEBI is watching, and compliance cannot be compromised.
For investors, this case offers crucial lessons. Verify your broker’s authorized persons. Monitor your account activity regularly. Report suspicious transactions immediately. Don’t ignore red flags.
Regulatory frameworks exist to protect you. But your vigilance matters equally. Stay informed. Stay protected.
