Shares of IIFL Securities tumbled over 19 per cent in Tuesday morning trade after Sebi barred the brokerage firm, earlier known as India Infoline Ltd, from onboarding new clients for two years for misutilisation of clients' funds.

The stock tanked 18.48 per cent to Rs 58 on the BSE after a weak beginning.

At the NSE, it plummeted 19.24 per cent to Rs 57.50.

The order came after the Securities and Exchange Board of India (Sebi) conducted multiple inspections of the books of account of IIFL for the period from April 2011 to January 2017.

In its probe, Sebi found that IIFL has misused the funds of its credit balance clients for settlement of its proprietary trades as well as the trades of its debit balance clients from April 2011 to June 2014, and the said violations were again noticed during March 2017 inspection for the period of FY16 and FY17.

The funding of debit balance clients' trades using funds of credit balance clients has been done by IIFL on a total of 795 trading days out of 809 trading days covered for examination during the inspection period from April 1, 2011 to June 30, 2014, and on 30 trading days during April 1, 2015 to January 31, 2017, Sebi noted.

At the same time, the brokerage company had also used the funds of clients having credit balances to fund its own proprietary transactions on 42 trading days during the inspection period from April 2011 to June 2014.

"Taking into account the aforementioned data, I do not find any difficulty in holding that the noticee (IIFL) by misusing the monies of credit clients to fund the trades of clients having debit balance in its records as well as for its own proprietary trades, has violated the provisions of ... Sebi 1993 circular," Sebi whole-time member S K Mohanty said in his 64-page final order.

Accordingly, Sebi has prohibited "IIFL Securities Limited from taking up/ onboarding any new client for a period of two years in respect of its business as a stockbroker".

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