SEBI’s Order Unlikey To Affect Motiwal Oswal, IIFL’s Parent Firms

The Securities and Exchange Board of India (SEBI) order that declared Motilal Oswal Commodities and India Infoline Commodities as ‘not fit and proper’ may not impact the running operations at their parent companies specifically to the commodities entities that have been barred, said sources.

The February 23 order by the Securities and Exchange Board of India led to some uncertainty over its impact for  the rest of the group companies but a source suggests, “Sebi may not declare ‘not fit and proper’ the other segments. SEBI order against the two does not extend to the equity arms and other group entities since the SEBI order categorically states that the “noticee” cannot hold registration as commodity derivatives broker.”

Another source close to the development told Moneycontrol, ” The difference between FMC order against FTIL and SEBI order against the two commodity broking entities is that FTIL not being ‘fit & proper’ meant it could not have been a shareholder of any regulated entity and that’s why they had to pare their shareholding in MCX, MSE or IEX. However, in the case of these two entities, they have been told that directly or indirectly they cannot hold a SEBI registration as a commodity derivatives broker.”

“So, the two entities cannot be a commodity derivatives broker themselves and they cannot hold a stake in any entity that has commodity broking licence,” he added.

However, the order clearly stated there would be no discrimination with other brokers.

When the NSEL scam broke out in 2013, around 600 brokers traded on the NSEL platform.  After Sebi and FMC merger, out of these 600, only 300 brokers applied for commodity derivatives registration with the regulator.

In 2016, Sebi first initiated an investigation against only five brokers including Motilal Oswal Commodities, Philip Commodities, Anand Rathi Commodities,  India Infoline Commodities and Geofin Commodities.

Thereafter, in September 2018, Sebi initiated an investigation against 295 brokers in the NSEL case.

After the investigations commenced, Sebi allowed all except these five entities to register for commodities broking business. However, later when the unified license regime kicked in, these five entities shifted their commodities business under the equity business arm.