Moneycontrol
Last Updated : May 15, 2017 10:13 AM IST | Source: Moneycontrol.com

SFIO sends 6-page questionnaire to NSEL investors, intensifies probe against brokers

Stepping up its investigations into the ongoing National Spot Exchange (NSEL) scam, the Serious Fraud Investigation Office (SFIO) has sought detailed answers from investors in the bourse regarding a number of irregularities.

Stepping up its investigations into the ongoing National Spot Exchange (NSEL) scam, the Serious Fraud Investigation Office (SFIO) has sought detailed answers from investors in the bourse regarding a number of irregularities. SFIO has sent a 6-page questionnaire to all the 1,300 investors in NSEL demanding to know whether brokers played a role in ‘inducing’ them to trade in the commodities. The SFIO has also queried investors on alleged non-payment of value-added tax at the time of trading.

NSEL stopped all trading activity on its platform in July 2013 soon after a payment settlement crisis at the electronic commodities bourse blew into a national fraud involving Rs 5,600 crore.

SFIO will be submitting a report based on the questionnaire results to market regulator SEBI and the Mumbai Police Offence Wing.

Source close to development told Moneycontrol that SFIO will collate the answers, file them into an excel sheet and forward them to SEBI which will take a final call on fixing responsibility of brokers in the NSEL case.

However, some brokers claim that SFIO’s clampdown on them isn’t fair. “There are very few financial products in the country that are sold without a broker. Second, some MCX traders also migrated to NSEL without being advised by brokers. So, what is the case of inducing investors in this case?” a broker told Moneycontrol on condition of anonymity.

In April this year, SEBI had served show-cause notices to five broking houses, questioning their application for a commodity trading licence given they had ‘mis-sold’ NSEL products.

Another source privy to developments told Moneycontrol that soon a recommendation will be made to SEBI to take action on all the 234 brokers. “These 5 brokers [who were served notices] accounted for more than 50 percent in volumes.”

SFIO may not spare even NSEL’s investors. SFIO alleges that investors hadn’t paid VAT at the time of trading in NSEL products. SFIO’s view is that since these trades were undertaken by unregistered investors, there was no way they could have paid the tax. The government is said to have lost hundreds of crores over non-payment of VAT, claims a source.

However, investors cry foul. They claim they had paid the tax to IBMA, an entity set up by NSEL to collect and pay VAT on behalf of unregistered investors. “Since NSEL told us that IBMA had a VAT licence in 24 states, we paid through IBMA. SFIO can easily find out if they inspect any investor’s books of accounts. So, there is no point of evasion of VAT in this case. An unregistered dealer can’t be licenced to pay VAT in every state. They have to go through a licensed VAT agent. Traders use VAT agent for clearing VAT in trades”.
First Published on May 15, 2017 10:13 am
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