JM Financial share plunges 8% after SEBI bars firm from managing new debt issues

SEBI on March 7 barred JM Financial from acting as a lead manager for any new public issue of debt securities.

JM Financial shares fell 8 percent in the early trade on March 11 after the Securities and Exchange Board (SEBI) barred  it from taking any new mandate for acting as a lead manager for any public issue of debt securities.

At 9.20 am, the stock were quoting at Rs 81.35 on the NSE, lower by 7.5 percent from the previous close.

In an interim order on March 7, SEBI, however, said JM Financial may continue to act as a lead manager for public issue of debt securities for a period of 60 days from the date of the order.

The capital markets regulator said the order was based on the material available on record and that the investigation into this matter would be completed in six months.

The order followed an investigation into the roles of parent company and merchant banker JM Financial's wholly-owned subsidiary and broker JM Financial Services and subsidiary, and a non-banking financial corporation JM Financial Products in a debt issue.

In the debt issue, every transaction was done in a "pre determined and pre-meditated manner; and executed clinically to ensure subscription and success". According to the regulator, it resulted in market integrity and fair-price discovery being compromised.

The order comes a few days after the Reserve Bank of India (RBI) stopped JM Financial Products from giving loans against shares and debentures, including sanction and disbursal of loans against initial public offering of shares, with immediate effect.

Announcing the decision on March 5, the RBI said the action was taken after observing certain serious deficiencies in the financial services firm's loan process. The banking regulator said there were serious concerns on the governance issues in the company apart from violation of regulatory guidelines.

Since March 5, shares of JM Financial have dived more than 8 percent to Rs 87.7 apiece on the NSE.

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