SEBI cracks the whip on Brokers – more to follow?
It took a long time coming. I had written last month on how the Securities and Exchange Board of India (SEBI) was between a rock and a hard place. After much goading, SEBI has finally declared brokers Motilal Oswal and IIFL as not fit and proper. This is just a start, as there are many more that need to be declared unfit for being a brokerage.
In both cases (Motilal Oswal – MOCBPL and India Infoline – IICL), SEBI has the following to say:
- SEBI vide order dated October 06, 2016 had appointed a Bench of Designated Authorities (hereinafter referred to as “DAs”) to enquire into the alleged violations of various provisions of the SEBI (Stock Brokers & Sub Brokers) Regulations, 1992, (hereinafter referred to as the “Brokers Regulations”), SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (hereinafter referred to as “PFUTP Regulations”), Forward Contracts (Regulation) Act, 1952, (hereinafter referred to as “FCRA”), Prevention of Money Laundering Act, 2002 (hereinafter referred to as “PMLA”), Central Government Notifications and various Circulars / Code of Conduct, Guidelines, Bye Laws, Business Rules etc. of FMC / SEBI / NSEL / NCDEX / MCX.
- In terms of Regulation 27 of the Intermediaries Regulations, the DAs have submitted the Enquiry Report dated April 11, 2017 in respect of MOCBPL(IICL). Vide the said Enquiry Report, the DAs have stated that “…in view of the seriousness of the matter, facts and circumstances of the case, the conduct of the Noticee in its functioning as a commodity broker is questionable and has certainly eroded its general reputation, record of fairness, honesty and integrity and has therefore affected its status as a ‘fit and proper person’ to be an intermediary in the securities market…” and gave the following recommendations:
(a) The application of MOCBPL (IICL) submitted for registration as a commodity broker may not be considered in the interest of securities market and the application of MOCBPL (IICL) may be rejected.
(b) SEBI may also consider initiating prosecution proceedings under the relevant provisions of Chapter V of FCRA for the irregularities committed by MOCBPL (IICL) including the violation of the Government of India Notification issued under Section 27 of FCRA.
What about the Babus?
I have written extensively in my C-Company series on the role of bureaucrats such as K P Krishnan and Ramesh Abhishek, who had displayed amazing alacrity at declaring the entities of Financial Technology India Limited (FTIL) as not fit and proper at the goading of the then Finance Minister, P Chidambaram (PC). The systematic witch-hunt subsequently resulted in Jignesh Shah ending up selling all his companies at fire-sale prices. How will SEBI now make him whole? And what about his loss of reputation? Now that Shah as filed a criminal defamation suit against Chidambaram, Krishnan and Abhishek in the Bombay High Court for a sum of Rs.10,000 crores, the others, such as Ajay Shah and his minions will be shaking in their boots.
Send PC and Ajay Shah to jail
It is high time, the government acted against P Chidambaram for his nefarious moves to kill the FTIL group in order for its rival, the National Stock Exchange (NSE) to succeed. The role of Ajay Shah, his wife and her sister along with several key employees in NSE helped a few garner gargantuan profits. Much of this money never stayed in India as it came via P-Notes and left as hot money.
Laud SEBI but there is much more to be done
That SEBI acted is laudable but there is much muck in the system that needs to be cleaned up. Thus far no action has been taken against the gang of 14 in the NSE scam nor have Ajay Shah and his minions been touched, except for Show Cause notices. It is hoped that quick action will follow and these crooks are sent to the gaol, which is where they belong.
 Order in respect of Motilal Oswal Commodities Broker Private Limited – Feb 22, 2019, SEBI.gov.in
 Order in respect of India Infoline Commodities Limited – Feb 22, 2019, SEBI.gov.in
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