SEBI finds ₹125.92 crore shortfall in Modex International Securities Ltd

Who it concerns: Modex International Securities Ltd (SEBI Registration No. INZ000211434); Mr. Pawan Kumar Sachdeva (Director/Authorized Representative); Mr. Dharmendra Kumar Arora (former key decision-maker, deceased).

What SEBI found or ordered

• SEBI found that the company misappropriated client funds and securities, resulting in a shortfall of Rs. 125.92 Crore.
• SEBI found that the company falsified the Register of Securities of clients and misrepresented its books and accounts.
• SEBI found that the company made improper periodic payments to clients and engaged in business activities other than stock broking.
• The Designated Authority recommended cancelling the company's registration as a Stock Broker.
• A forensic audit conducted by KPMG (appointed by NSE) revealed the misappropriation and shortfalls.
• The company did not reply to the initial pre-enquiry show cause notice, leading to ex-parte proceedings at that stage.
• The company was represented in later hearings by Mr. Pawan Kumar Sachdeva, who stated the company is not in operation.

Also in the document

• The total shortfall identified by the forensic audit was Rs. 125.92 Crore.
• The company claimed a 'system error' caused the mixing of client ledger balances and unauthorized sales, but SEBI's findings indicate falsification and misappropriation.
• The company is currently under Corporate Insolvency Resolution Process (CIRP) proceedings, though NCLT set aside an earlier admission order due to lack of jurisdiction over financial service providers.
• The company claimed to have approximately 13,000 clients in the capital markets segment and 9,720 in the F&O segment.