The Securities Appellate Tribunal (SAT) has temporarily suspended an order issued by the Securities and Exchange Board of India (SEBI) that prohibited Prabhudas Lilladher from onboarding new business for a period of seven days. In its decision dated December 9, 2025, SAT noted that the penalty could still be imposed later if the brokerage’s appeal is ultimately rejected. Until then, the tribunal has directed that the SEBI order will remain on hold.
As part of the appeal proceedings, SAT has allotted six weeks to SEBI to submit its reply, after which Prabhudas Lilladher will have three weeks to file a rejoinder. The matter is scheduled for its next hearing on March 23, 2026.
Brokerage Disputes SEBI’s Disciplinary Action
Prabhudas Lilladher moved SAT seeking relief from SEBI’s restriction, which had barred the brokerage from taking new business for one week. SEBI had cited lapses in compliance with investor-protection requirements and key market-risk guidelines as the basis for its action.
In its appeal, the brokerage contended that in matters involving procedural or technical violations, SEBI had generally opted for monetary penalties rather than restrictions affecting day-to-day business. It further pointed out that this instance represented the first compliance-related issue in its operational history spanning more than eight decades. The firm also argued that SEBI’s inspection framework is intended to promote corrective measures instead of punitive sanctions.
SEBI’s Enquiry Findings: Eleven Regulatory Breaches
The action followed a SEBI enquiry order issued in November, which highlighted 11 separate instances of non-compliance identified during inspections conducted from April 2021 to October 2022.
One of the major findings related to shortfalls in client funds and collateral. SEBI recorded that the brokerage’s G-value—a parameter used to evaluate whether a broker maintains adequate client funds—was negative on three occasions in 2021, indicating a deficiency of ₹2.7 crore.
Another concern involved misreporting of client exposures. According to SEBI, the firm inaccurately reported exposure data 27 times, resulting in inflated figures submitted to the exchanges. These numbers play a crucial role in assessing leverage and margin sufficiency. SEBI dismissed the company’s claim that these discrepancies stemmed from clerical mistakes, noting that such misreporting, whether intentional or accidental, bears similar operational risks and lacked corroborating records.
The enquiry also outlined 10 instances where clients were overcharged brokerage fees, amounting to a total of ₹4,322.75. While the broker stated that incorrect system configurations led to the overcharges and that refunds had been issued, SEBI clarified that issuing refunds after detection does not remove the violation.
Additional lapses detailed in the inspection included failure to close broker–client demat accounts as per a 2019 circular, transferring margin-shortfall penalties to clients, delays in uploading KYC documentation, and erroneously moving securities worth ₹1.3 crore belonging to 91 clients into unpaid securities accounts.
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