Sebi Bars JM Financial from New Debt Issues
The Securities and Exchange Board of India (Sebi) has taken action against JM Financial Ltd, barring the company from taking on new mandates as a lead manager for any public issue of debt securities. This decision follows the discovery of unfair trade practices by JM Financial.
According to Sebi’s interim order, JM Financial will be allowed to continue its role as a lead manager for public issues of debt securities for existing mandates, but only for a period of 60 days. The action comes after a routine examination by Sebi into public issues of Non-Convertible Debentures (NCD) during 2023.
The regulator found that JM Financial, along with its connected group entities, had engaged in practices that assured certain investors an exit at a profit, thereby incentivizing their participation in public issues. Sebi has deemed this behavior as an unfair trade practice.
RBI Imposes Restrictions on JM Financial Products
Just days before Sebi’s action, the Reserve Bank of India (RBI) had imposed restrictions on JM Financial Products Ltd. The RBI’s restrictions prevent the company from providing any form of financing against shares and debentures.
This move by the RBI comes after it found JM Financial Products engaged in various manipulations, including assisting a group of customers in bidding for IPOs using loaned funds. The restrictions were implemented immediately and apply to financing against shares, debentures, and IPO subscriptions.
In addition to the immediate restrictions, the RBI has directed JM Financial Products to cease and desist from its financing activities. The RBI is also conducting a separate examination into possible regulatory violations and deficiencies.
Conclusion
The actions taken by Sebi and the RBI against JM Financial and its subsidiaries underscore the importance of fair practices in the financial markets. Both regulators are committed to maintaining the integrity of public offerings and preventing unfair advantages for certain investors.
| Regulator | Action | Implication |
|---|---|---|
| Sebi | Barring JM Financial from new debt mandates | Preventing unfair trade practices |
| RBI | Restricting financing activities of JM Financial Products | Addressing manipulative behaviors |
Investors and market participants should take note of these actions and ensure compliance with regulatory requirements to maintain the integrity and stability of the financial system.