INSUBCONTINENT EXCLUSIVE:
MUMBAI: The Indian capital markets regulator has issued supplementary show cause notices to five brokers on now defunct National Spot
Commodities.
ET confirmed that at least one of five entities had received supplementary notice, while another brokerage official said that
establishment was yet to receive notice
Three other firms were not immediately available for their comments.
A Sebi official also could not be reached for his comments.
Sources
said Sebi has given brokers three weeks to respond
It will conduct personal hearings by end of month.
In April last year, Sebi had issued notices to five brokers on their alleged role in scam
and its bearing on their status to function as market intermediaries
After final hearings around October, Sebi was expected to pass a final order on five brokers.
However, since SFIO forwarded its report after
final hearings, supplementary notices have been issued to five again
Apart from these five brokers, Sebi has already issued notices to 295 other brokers on NSEL.
The SFIO has suggested government initiate
winding up proceedings against 148 brokers for allegedly mis-selling paired contracts on NSEL to their clients, rampantly modifying client
codes and laundering black money through their NBFC arms.
Sebi noted in its supplementary notices to one of brokers that after its reading
of report, certain observations and recommendations made by SFIO were considered relevant to current proceedings against brokers
It added that transactions facilitated through paired contracts were in nature of borrowing and lending, rather than trading in
commodities.
Clients of about 300 brokers lost Rs 5,600 crore after NSEL scam surfaced in July 2013
Two dozen counterparties raised money from 13,000 investors through paired contracts that are at heart of scam.
In first leg, client,
through his broker, purchased a contract ostensibly backed by a commodity on a trade plus two basis, and sold it back to one of two dozen
counterparties at a higher amount on a T+25 or T+35 basis.
The scam broke as commodities backing these contracts were non-existent.
The
NSEL, its parent 63 moons, Anand Rathi Commodities, IIFL Commodities, Geofin Comtrade and 22 defaulters, among others, have been
chargesheeted by Economic Offences Wing of Mumbai police, which is probing scam along with other agencies.
