NEW DELHI: Market regulator Sebi has found severe irregularities in the way JM Financial was conducting its business in the IPO as well as debt market and has barred the non-banking financial company (NBFC) JM Financial from taking any new mandate for acting as a lead manager for any public issue of debt securities.
It has given 60 days to JM Financial to continue as lead manager for existing debt public issue mandates. It is given 21 days to file reply or objections. Sebi will undertake a probe on the issues it has covered. This will be completed in six months.
Sebi’s order came after the regulator undertook a routine examination of the public issues of Non-Convertible Debentures (NCD) during the year 2023. This examination led Sebi to unearthen discrepancies and inter-Group transactions in an issue where JM Financial (JMFL-MB) was a lead banker, wholly-owned subsidiary JM Financial Services, was the broker, and another subsidiary JM Financial Products (JMFPL-NBFC) was the funding arm which accounted for over half the transaction volume on listing day.
Sebi noted noticee (JM Financial) along with its connected group entities were prima facie noted to have given an assured exit to certain investors at a profit, incentivising them to apply in IPO against regulatory mandates. It said the a tion of JM Financial appears to be an unfair trade practice.
Sebi’s order stated given JMFPL-NBFC had provided an ‘exit’ to all the applicants who had availed funding from it, the loan applications of some of these investors were called for and examined wherein loans extended were disproportionate to declared income.
“It was noted 47 applicants who had declared an annual income less than Rs 5 lakh were sanctioned loans of Rs 9,80,000 and another 10 investors falling in the same category (less than Rs 5 lakh) were granted loans of Rs 98,00,000,” Sebi’s order noted. It said the series of transactions appear to have been planned and executed meticulously.
The Sebi action comes days after the RBI barred JM Financial Products from providing any financing against shares and debentures, including sanction and disbursal of loans against initial public offering.