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Nearly two years after it issued show-cause notices to certain leading commodity brokerage houses in the NSEL scam, market regulator SEBI has cracked the whip on two of them — Motilal Oswal Commodities and IIFL Commodities, declaring them as not ‘fit and proper’ to be a commodity derivatives broker.
The latest SEBI move — separate orders passed by SEBI Wholetime Member Madhabi Puri Buch — comes on the heels of the Serious Fraud Investigation Office (SFIO) concluding that 148 broker companies including top ones such as IIFL Commodities and Motilal Oswal Commodities made “unlawful gains” in the ₹5,600 crore NSEL scam that came to light in 2013.
In the separate orders uploaded on its website on Friday, SEBI said that the commodity brokers — Motilal Oswal Commodities and IIFL Commodities — had a close association with NSEL and allowed themselves to “become a channel”. “Thus...the noticee is not a fit and proper person to be granted registration to operate as a commodity derivatives broker,” said the SEBI order.
SEBI also said that clients of the commodity broking firms — Motilal Oswal Commodities and IIFL Commodities — must withdraw or transfer their securities held with the brokers within 45 days without any additional cost.
Besides these two commodity arms of Motilal Oswal and IIFL, SEBI is also probing some top commodity houses including Anand Rathi Commodities, Philip Commodities and Geofin Commodities.
‘Unlawful gains’ by brokers
It may be recalled that SFIO, a multi disciplinary organisation involved in detecting white collar crimes, had asked SEBI to put the commodity brokerage houses, including the nine top ones, through the market regulator’s ‘fit and proper’ test.
SEBI must examine if these commodity broker companies or their promoters or directors need to be declared as ‘not fit and proper’, the SFIO report had then said.
The Corporate Affairs Ministry had in November 2016 ordered a SFIO probe into the alleged irregularities in the National Spot Exchange Ltd (NSEL) scam. In its report, which was submitted to Government last year, the SFIO has concluded that all the 148 member-brokers of NSEL had made “unlawful gains” while their clients suffered from “illegal losses”.
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