Capital markets regulator Sebi on Friday canceled Alpha Commodity’s registration for facilitating its clients to trade illegal contracts on National Spot Exchange Ltd (NSEL) and for failing to meet suitability and of good repute.
By offering such a facility to expose itself to “twin contracts”, the broker engaged in transactions capable of exposing its clients to the risk of trading a product that did not have regulatory approval. , Sebi said in his order.
The law has raised “doubts about the competence of the advisor (Alpha Commodity) to act as an honest and diligent intermediary in the securities market”, he added.
”By engaging in/facilitating in the trading of ‘paired contracts’ on NSEL, with the aim of making illegal profit by turning a blind eye to all illegalities taking place on the NSEL trading platform , has seriously undermined the regulator’s confidence in the integrity of Avise,” Sebi said.
The broker was a member of NSEL and had facilitated the trading of matched contracts on the NSEL platform.
After committing such gross misconduct, Alpha Commodity can no longer be called a “fit and proper person” for holding the certificate of registration as a commodity derivatives dealer in the securities market, it said. he adds.
Sebi has instructed the broker to allow its existing clients to withdraw or transfer their securities or funds held in its custody within 60 days.
In the event of a client’s failure to withdraw or transfer his securities or funds within such time, the broker will transfer the funds and securities to another broker within 30 days, upon notice from such client.
In September 2009, NSEL (now defunct) introduced the concept of “twin contracts” for trading which allowed buying and selling the same product through two different contracts at two different prices on the platform exchange, in which investors could buy a short-term contract. and sell a long term contract and vice versa at the same time and at a predetermined price.
It was further noticed that the transactions for the buy contract (T+2/T+3) and the sell contract (T+25/T+36) took place on the NSEL on the same day at the same time. and at different prices. , involving the same counterparties.
The system of “twin contracts” traded on the NSEL ultimately caused a huge loss to investors to the extent of Rs 5,500 crore.
In a separate case, the regulator barred 13 capital markets entities for five years for misusing IPO proceeds for purposes other than those set out in the prospectus in the Aster Silicates Ltd case.
Sebi found that substantial portions of the IPO proceeds were transferred/diverted for purposes other than those disclosed in the prospectus and instead were diverted for other indirect reasons and the same was ostensibly perpetrated by the directors of the company in collusion with other entities.
The order came after Sebi investigated the initial public offering (IPO) of shares in Aster Silicates Ltd. (now known as Shri Aster Silicates Ltd).
The company launched an IPO to raise Rs 53.10 crore through the issuance of 45 lakh shares in July 2010.
(This story has not been edited by the Devdiscourse team and is auto-generated from a syndicated feed.)