After RBI, the stock market regulator SEBI took major action against JM Financial. SEBI has decided to ban JM Financial from acting as lead manager of any IPO. This is currently an interim order of SEBI. Two days ago, on Tuesday, March 5, RBI banned giving loans against shares and debentures of JM Financial Products Limited, after which SEBI took this action.
In providing information about this action, SEBI said it has decided to conduct a routine investigation of the public issue of non-convertible debentures in 2023. During this investigation, SEBI found that in the case of an NCD issue, investors who were allotted securities sold them on the day of listing. The holding pattern of securities revealed that many securities were sold, following which there was a huge decline in retail holdings, which was surprising.
According to SEBI, AK Capital Services, JM Financial Limited, Nuvama Wealth Management, and Trust Investment Advisors were the lead managers on this issue. Scrutiny of the transactions on the day of listing revealed that the subsidiary of JM Financial Products Limited, to whom the notice was issued, had acted as the counterparty to the trades of these investors and provided funds to these investors for investment in NCDs.
In any issue where JM Financial acts as the lead manager, he will be allowed to act as the lead manager for 60 days after this SEBI order.
RBI also found in the investigation against JM Financial Products that the company provides funding to a specific group of customers by giving loans to apply for IPO and NCD offerings. And this loan was being given on a low margin. By taking power of attorney from these customers, the company operated subscription applications, demat accounts and bank accounts.
RBI has also decided to ban JM Financial Products Limited from giving loans against shares and debentures and stopped providing loans for subscription shares or debentures in IPO. RBI said many flaws have been found in the loan granting process of JM Financial Products. Along with violating regulatory rules, there is also a severe governance issue. After RBI’s decision, there was a big fall in JM Financial’s shares.
