The Noticee (Joindre Commodities) provided a platform to its clients to access a product which raised serious questions on the ability of the noticee to conduct proper and effective due and diligence regarding the product itself
Capital markets regulator SEBI on Monday cancelled the registration of Joindre Commodities for facilitating its clients to trade on the National Spot Exchange Ltd (NSEL) in illegal "paired contracts".By providing such a facility of taking exposure to 'paired contracts', the broker exposed its clients to the risk involved in trading in a product that did not have regulatory approval, SEBI said in the order.
"The Noticee (Joindre Commodities) provided a platform to its clients to access a product which raised serious questions on the ability of the noticee to conduct proper and effective due and diligence regarding the product itself. "I hold that the Noticee does not satisfy the 'fit and proper person' criteria for holding the certificate of registration as a broker in the securities market and hence, the continuance of the Noticee as a broker will be detrimental to the interest of the securities market," Sebi's Executive Director Pramod Rao said in the order.
SEBI has asked the broker to allow its existing clients to withdraw or transfer their securities or funds held in its custody, within 15 days. In case of failure of any clients to withdraw or transfer their securities or funds within this period, the broker will transfer the funds and securities of such clients to another broker within a period of next 15 days thereon, under advise to the said clients.
In September 2009, NSEL (now defunct) introduced the concept of 'paired contracts' for trading, which allowed buying and selling in the same commodity through two different contracts at two different prices on the exchange platform. Under this arrangement, investors could buy a short-duration contract and sell a long-duration contract and vice versa at the same time and at a pre-determined price.
Further, it was noticed that trades for the buy contract and the sell contract used to happen on the NSEL on the same day at the same time and at different prices, involving the same counterparties. The scheme of 'paired contracts' traded on the NSEL ultimately caused a huge loss to investors to the extent of Rs 5,500 crore, the order noted.
Meanwhile, in three separate orders, the regulator slapped a fine of Rs 5 lakh each on SVPL Developers, Salasar Infraproperties Merchants and Raghav Suppliers for indulging in non-genuine trades in illiquid stock options on BSE. The order came after SEBI observed large-scale reversal of trades in stock options segment of BSE, leading to creation of artificial volume in the segment. Consequently, the Securities and Exchange Board of India (SEBI) conducted an investigation into the trading activities from April 2014 to September 2015.