Authority: Securities and Exchange Board of India (Quasi Judicial Authority)

Order Date: September 11, 2026

Case Overview

This matter involves Modex International Securities Ltd (MISL), a SEBI-registered stock broker (Registration No. INZ000211434), against whom proceedings were initiated for multiple violations of securities laws. The case originated from an NSE inspection that found MISL falsifying the Register of Securities by making false entries of security transfers. SEBI directed NSE to conduct a forensic audit by KPMG for the period April 1, 2017 to January 24, 2020, which revealed misappropriation of client funds/securities with a total shortfall of ₹125.92 crore.

SEBI passed an ex-parte ad-interim order on April 30, 2020, which was confirmed on September 11, 2020. The Designated Authority conducted enquiry proceedings and submitted a report on March 28, 2023, recommending cancellation of MISL's registration. The Noticee was under Corporate Insolvency Resolution Process (CIRP) from March 4, 2022 to June 12, 2025, when NCLT set aside the admission order due to lack of jurisdiction as MISL is a Financial Service Provider.

The principal allegations included: non-availability of client securities (₹95.29 crore shortfall in 288 scrips), shortfall in client funds (₹79.61 crore), improper use of clients' funds, misrepresentation of books and accounts, and making periodic payments to certain clients which were in the nature of returns on investments. The forensic audit found that MISL collected investments from clients with assurance of periodic returns, incurred substantial F&O losses, and attempted to recoup losses by unauthorized selling of other clients' securities.

Key Violations Established:

  • Non-availability of client securities - Violation of SEBI Circulars dated November 18, 1993, April 21, 2004, April 17, 2008 and September 26, 2016
  • Shortfall in client funds - Violation of SEBI Circulars dated November 18, 1993 and September 26, 2016
  • Improper use of clients' funds - Violation of SEBI Circulars dated November 18, 1993 and September 26, 2016
  • Misrepresentation of books and accounts - Violation of Rule 15 of SC(R)R read with Regulation 17 of SEBI (Stock Broker) Regulations 1992
  • Periodic payments to clients as returns on investments - Violation of Section 12(1) of SEBI Act read with Rule 8(1)(f) and 8(3)(f) of SC(R)R and Regulation 3 & 14(1)(a) of SEBI (Portfolio Managers) Regulations, 1993
  • Failure to comply with Code of Conduct - Violation of Clauses A(1), A(2), A(3), and A(4) of Schedule II read with Regulation 9 of SEBI (Stock Brokers) Regulations, 1992

Financial Details:

  • Securities shortfall: ₹95.29 crore across 288 scrips
  • Funds shortfall: ₹79.61 crore
  • Potential fund misappropriation: ₹136.29 crore
  • Negative/recoverable securities: ₹113.03 crore from 118 clients
  • Periodic payments to VD group clients: ₹16.87 crore to 50 clients despite F&O losses of ₹98.60 crore

Final Outcome

SEBI cancelled the certificate of registration of Modex International Securities Ltd with immediate effect. The broker had already been expelled from NSE (w.e.f. September 15, 2020) and BSE (w.e.f. September 18, 2020) and was non-operational. Despite cancellation, MISL remains liable for anything done or omitted as a stock broker and responsible for payment of outstanding fees and dues to investors/clients.

Topics: Client Fund Misappropriation, Regulatory Action, Broker Registration Cancellation