In the recent case of Hardik Manharlal Kotecha v. SEBI and Anr., a petition has been filed by a retail investor names Hardik Manharlal Kotecha, where he submitted that in December, 2020, he placed various trades through Motilal Oswal Financial Services but due to the challenged circulars, a huge penalty was imposed on the account of the shortfall of margin on certain occasions.
Prior to issuance of the circulars, the cash margins were not demanded from the incestors/clients and these were being borne by the Trading Members. However, after the issuance of these circulars, the investor/client is required to mandatorily deposit margin being Value at Risk and the Extreme Loss Margin with the Trading Member before placing the trade.
Further, the petitioner also submitted that the circulars impose arbitrary penalties for non-compliance, is impractical and excessive considering its purported motive to bring transparency and prevent misuse of client/investor securities by the Trading Member or broker. Taking all the opinions and contentions into consideration, the Gujarat High Court has issued notice on this plea.
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