New Delhi: On Friday, February 22, in a major turn of events around the National Spot Exchange Limited (NSEL) scam, the SEBI has declared commodity brokers Motilal Oswal and India Infoline (IIFL) as improper, unfit and inappropriate for carrying out commodity derivative trades.
The declaration was made pursuant to SEBI’s probe into the alleged collusion of over 300 brokers with NSEL, facilitating an illegal trading channel and defrauding investors. Some of the others accused of being involved in the scam include Anand Rathi Commodities, Philip Commodities, Geofin Commodities and numerous others.
Making use of the NSEL platform, brokers provided for a channel to enter into contracts that are in contravention of the Forward Contract Regulations Act 1952 (FCRA). However, since the spot exchange was permitted to undertake trading only in spot contracts, any other kind of trading method followed by the brokers is deemed to be considered illegal, stated SEBI.
The goodwill in any industry plays an integral part in determining “Fit & Proper Criterion”, which in the present case of the brokers has gravely been affected, said Madhabi Puri Buch, Whole Time Director at SEBI.
Additionally, SEBI had instructed all investors of the commodity broking firms to withdraw or transfer their respective securities with the brokers within 45 days without any additional costs.