SEBI finds Modex misappropriated client funds and falsified records

Who it concerns: Modex International Securities Ltd., Mr. Dharmendra Kumar Arora, Mr. Pavan Kumar Sachdeva

What SEBI found or ordered

• SEBI found violations including diversion/misappropriation of client securities and funds, shortfall of client funds, and misrepresentation of books and accounts.
• SEBI confirmed interim directions restraining the Noticees from accessing the securities market and dealing in securities.
• SEBI directed that assets of the Noticees be utilized for the payment of money or delivery of securities to clients/investors.
• SEBI directed stock exchanges and clearing corporations to ensure shortfalls of client funds are made good through the realization of funds from the assets of the Noticees.
• A forensic audit conducted by NSE for the period April 1, 2017, to January 24, 2020, was relied upon for these findings.

Also in the document

• The order notes that Noticee No. 2 (Mr. Dharmendra Kumar Arora) passed away on April 17, 2021.
• The proceedings were temporarily kept in abeyance due to insolvency proceedings (CIRP) against Modex, which were later set aside by the NCLT because Modex is a Financial Service Provider excluded from the Insolvency and Bankruptcy Code.
• Interim directions against other individuals (Noticees 4-10) were revoked in a prior order, but SEBI clarified that action may still follow if further examination shows their involvement.