SEBI bars JM Financial from accepting new public debt issues as lead manager

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MUMBAI: The Securities and Exchange Board of India (SEBI) has banned JM Financial from accepting new mandates as a lead manager for public issues of debt securities.

This comes days after the Reserve Bank of India (RBI) directed JM Financial to stop from any form of financing against shares and debentures, including sanction and disbursal of loans against Initial Public Offering (IPO) of shares as well as against subscription to debentures.

According to an interim ex-parte order from SEBI dated March 7, JM Financial may continue to act as a lead manager for public issue of debt securities for a period of 60 days from the date of the order in respect of any existing mandates. SEBI emphasised that the order’s observations are grounded in available records, and a thorough investigation into the matter will be concluded within six months.

The market regulator said it shall undertake an investigation into the issues covered under the order. “The investigation so undertaken shall be completed within a period of six months from the date of this order”, it said.

SEBI said that prima facie observations have been made on the basis of the material available on record. “The Noticee may, within 21 days from the date of receipt of this Order, file its reply/objections, if any, to this Order and may also indicate whether it desires to avail an opportunity of personal hearing on a date and time to be fixed in that regard”.

Giving reasons for its directions, SEBI said it is noted from the reply furnished by JMFL-MB that the actions detailed in this order were considered by it to be part of its ordinary course of business.

“It was also stated that a similar approach has been adopted in many of the other issues where it was the lead manager. Such practices as explained earlier have detrimental effect on the orderly functioning of the market and harm the interest of the ordinary investors. They also distort the functioning of price discovery mechanism in the securities market. Given the same, there is an urgent need for the regulator to step in and pass interim directions, pending investigation, to prevent any further erosion in market integrity by virtue of such practices.”

The Securities and Exchange Board of India (SEBI) undertook a routine examination of the public issues of Non-Convertible Debentures (NCD) during the year 2023.

The order said that it was observed during the examination that in a particular issue, a significant number of individual investors sold the securities allotted to them on the day of listing itself.

“The holding pattern of the securities showed that a very large percentage of securities issued changed hands on the day of listing as result of which retail ownership came down sharply. This was unusual.”

AK Captial Services Ltd., JM Financial Limited (JMFL-MB/Noticee), Nuvama Wealth Management Limited and Trust Investment Advisors Private Limited were the Lead Managers to the issue, the order said. (ANI)

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