SEBI to send supplementary notice to 300 brokers in NSEL case

By Tarun Sharma

Tarun Sharma Moneycontrol News

The Securities and Exchange Board of India (SEBI) has started sending supplementary notices to 300 NSEL brokers, who are either registered with SEBI or have made a registration application with SEBI.

A supplementary notice is issued by SEBI if any investigation suggests wrongdoing – as pointed in this case by the Serious Fraud Investigation Office (SFIO), that is investigating the Rs 5,600-crore NSEL scam. Failure on the part of brokers to provide a satisfactory explanation could result in cancellation of their licences.

According to the SFIO probe report, the NSEL brokers lured their clients into trading products offered by NSEL, which offered guaranteed inflated returns on their investment. The report said the brokers had failed to inform their clients on the risk involved in trading for NSEL. They also failed to verify if the traded commodities were available at the warehouses of NSEL.

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Earlier, SEBI had issued enquiry notices to five NSEL brokers, namely Anand Rathi Commodities, India Infoline Commodities, Geofin Comtrade, Motilal Oswal Commodities and Philip Commodities, that had allegedly traded in large volumes in a ‘fraudulent manner’ on NSEL.

Later, in 2017, show cause notices were issued to these five brokers by a whole time member of SEBI. After that, enquiry notices were issued to nearly 300 NSEL brokers by SEBI.

Meanwhile, several brokers who got a notice in the matter have filed Consent Applications with SEBI under the Settlement Regulations. SEBI is in the process of getting these Consent Applications legally examined.

Through the consent route, a party accused of wrongdoing can settle a legal matter without accepting or denying guilt, typically against a fee.

SEBI has also filed a first information report with the Economic Offences Wing (EOW) of the Mumbai Police against these brokers.