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19 Nov 2024
The Securities and Exchange Board of India (Sebi) confirmed on Thursday the interim ban on JM Financial Ltd from acting as a lead manager for public debt securities issues until March 31, 2025, due to alleged irregularities in a non-convertible debentures (NCDs) public issue. The confirmatory order emphasized that this restriction is limited to debt securities and does not affect JMFL’s equity operations.
Sebi’s interim order on March 7 had initially barred JMFL from accepting new mandates for public debt securities issues, citing potential irregularities involving retail investors and JM Group-associated companies. Sebi found that JM Group entities seemingly incentivized investors to apply for securities in issues managed by JMFL. Notably, substantial NCD allocations were made to retail investors who then sold these securities on the listing day to JM Financial Products Limited (JMFPL), a JM Group NBFC, which sold them at a loss. Additionally, many retail investor applications were funded by JMFPL via JM Financial Services Ltd, with JMFPL holding power of attorney over these accounts.
In response to Sebi's interim order, JMFL requested that the regulator not confirm the restrictions and proposed voluntary undertakings instead. During hearings on April 24 and June 18, 2024, JMFL reiterated these undertakings without disputing the case's merits. As part of the voluntary undertakings, JMFL committed to not accepting new mandates for public debt securities issues until March 31, 2025, or as further specified by Sebi. JMFL's board also decided to cease IPO financing, enhance its systems and processes to prevent misconduct, ensure staff training, hold regulatory workshops, and submit a compliance certificate by December 31, 2024.
Sebi acknowledged the need to maintain the directions from the interim order, which align with JM Financial's voluntary undertakings, until the investigation is concluded.
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