However, JM Financial can continue to act as a lead manager for the public issue of debt securities for a period of 60 days in case of existing mandates, Sebi said in its interim order on Thursday.
Further, the regulator will undertake an investigation into these issues, to be completed within six months. Following the order, JM Financial in a filing to the stock exchanges said, "The company shall fully cooperate with Sebi in this investigation".
The Sebi's directive came days after the
The regulator's order followed after it undertook a routine examination of the public issues of Non-Convertible Debentures (NCD) during the year 2023.
The investigation focused on the activities of JM Financial and its related entities in a particular debt issue. In its interim order, Sebi said the manner in which subscriptions have been managed in this public issue of debt instruments is "shocking".
The transactions at every stage of this public issue appear to have been done in a pre-determined and pre-meditated manner; and executed clinically to ensure subscription and success.
"The regulator noted that notice (JM Financial) along with its connected group entities were prima facie noted to have given an assured exit to certain investors at a profit, thereby incentivising them to apply in the public issue in contravention of the regulatory mandates," it stated.
The scheme, it is prima facie noted, involved getting individual investors, who would otherwise not have participated in the issue, to make applications not just by providing funds to them but also by assuring them an exit at a profit on the listing day.
While the regulator has examined modus-operandi in one case, the bank statements of the investors, operated through Power of Attorney (PoA) by the
The pattern of transactions seen in the bank statements suggests that this is not an isolated incident, Sebi noted.