A petition filed in Gujarat HC contesting SEBI circulars requiring buying and selling members to gather margins from buyers prematurely.

In the latest case of Hardik Manharlal Kotecha against SEBI and Anr. A petition was filed by a private investor named Hardik Manharlal Kotecha claiming that he had done various deals through Motilal Oswal Financial Services in December 2020, however, due to in the contested circulars, a large penalty was imposed because on certain occasions the Margin was tight.

Prior to the issuance of the circulars, the incestors / customers were not charged any cash margins carried by the trading members. However, according to the publication of these circulars, the investor / customer must deposit a mandatory margin equal to the Value at Risk and the Extreme Loss Margin with the trading member before placing the trade.

The petitioner also argued that the circulars provide arbitrary penalties for violations, are impractical and excessive given the alleged motive of creating transparency and preventing the trading member or broker from misusing client / investor papers. After considering all opinions and objections, the Gujarat Supreme Court has issued a position on this plea.

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