The Securities and Exchange Board of India (Sebi), the market regulator, has found lapses at five broking firms in the National Spot Exchange Ltd (NSEL) scam.
According to an audit finding, the brokers failed to meet the “fit and proper” criteria and also found to be in violation of certain securities regulations. Based on the third-party audit report, the regulator has issued final show-cause notice to five brokerages. These are Anand Rathi Commodities, India Infoline Commodities (IIFL), Geofin Comtrade, Motilal Oswal Commodities, and Phillip Commodities. Sebi has given the brokers 21
days to reply to the notice.
“Prima facie evidence shows that these brokers are guilty and also violate fit and proper criteria,” said a source. Before passing the final order in the case, the whole time member would give them a hearing in the matter, he added. Sources said the regulator had completed its audit and would accordingly take a final call on it. Sebi could impose a penalty or declare them not fit and proper if brokers are found guilty. “Fit and proper”
rules require market intermediaries to have a code of conduct in place, and a sound reputation and financial integrity.
In the NSEL case, brokers are facing allegations of mis-selling NSEL contracts by promising too high returns without ensuring delivery. They are also alleged to have modified client codes for doing multiple deals.
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