Traders work on the trading floor of the Multi Commodity Exchange of India in Mumbai, India (Photographer: Amit Bhargava/Bloomberg News)

NSEL Scam: SEBI Declares Commodity Arms Of Motilal Oswal, IIFL ‘Not Fit And Proper’

The Securities and Exchange Board of India has declared the commodity broking arms of Motilal Oswal and India Infoline (IIFL) as not ‘fit and proper’, as part of the action in the National Spot Exchange Ltd. case.

SEBI is investigating as many as 300 brokers on charges of colluding with NSEL to defraud investors.

“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,” the SEBI-appointed panel said in the submitted the inquiry reports for both the companies.

SEBI had appointed a Bench of Designated Authorities on October 2016, to request information into the alleged violations of various provisions under the regulations, 1992.

“The application of both the companies that were submitted for registration as commodity brokers may not be considered in the interest of the securities market and may be rejected,” the market regulator said, adding that they may also consider initiating prosecution proceedings under the relevant provisions for the irregularities committed by IIFL Commodities and Motilal Oswal Commodities Broker.

IIFL clarified in a statement, saying IICL does not have outstanding dues to any clients or proprietary position.

“IICL is seeking legal advice as regards to going for an appeal in this matter. We would like to clarify to all our stakeholders and clients that this order has no impact on businesses of other companies of IIFL Group,” the statement said.

SEBI ordered both Motilal Oswal Commodities Broker and IIFL Commodities to allow clients to withdraw or transfer their securities or funds held in its custody or withdraw any assignment given to it, without any additional cost to such clients within 45 days from the date of the order.

SEBI in its order also said since the firms were found to be not fit and proper, they shall cease to act, directly or indirectly, as a commodity derivatives broker.

Motilal Oswal Commodities Broker Private Ltd. said it is in consultation with its lawyers to explore legal options. The brokerage said the order will have no impact on overall business activities of companies of Motilal Oswal group in any segment.

“We would like to clarify that MOCB and the group has its own group investment of Rs 58.7 crore which is due from NSEL on the date of default. MOCB itself is the victim of scam like thousands of investors.”