Market regulator Securities and Exchange Board of India (SEBI) on Thursday, March 7, prohibited JM Financial from serving as a lead manager for any new public issuance of debt instruments, citing violations of regulatory norms.
The
SEBI order comes after its investigation into a specific public issue of debt, executed in 2023, that had JM Financial as the lead manager and involved two other JM Financial entities—JM Financial Products (the non-banking finance arm) and JM Financial Broker (the broking arm).
According to SEBI, JM Financial Products provided funding support of over ₹121 crore to 1,000-plus retail investors to subscribe to the debt issue.
SEBI observed that these transactions, involving all three JM Financial entities, appear to be pre-determined and done in a synchronised manner, with 'unnaturally high' retail subscription.
On the day of the listing of the debt issue, a large number of these retail investors sold the securities through the JM Financial Broker.
Interestingly, the buyer of these securities was JM Financial Products, which then sold these securities to certain non-retail investors at a loss.
What next?
The SEBI order is an ad interim ex-parte order, which means SEBI is yet to hear JM Financial’s stand on the issue and the investigation will continue.
For now,
JM Financial will be allowed to complete its existing assignments as the lead manager for 60 days, and the market regulator hopes to complete its investigation against the group within the next six months.
SEBI will also investigate other public debt issuances done by JM Financial for regulatory lapses.
The regulator is also likely to examine the incentive structure in such deals.
(Edited by : Shweta M)
First Published: Mar 8, 2024 5:35 PM IST
