Mumbai : In a significant development, the Securities and Exchange Board of India (Sebi) has prohibited JM Financial from acting as a lead manager for any new public issue of debt securities. This action comes in the wake of serious lapses observed during JM Financial’s role as a lead manager in a particular public issue, raising concerns about market integrity and investor interests.
Sebi’s interim order, delivered by whole-time member Ashwani Bhatia, states that JM Financial can continue as a lead manager for the existing mandates related to the public issue of debt securities for a limited period of two months. The merchant banker has been granted the opportunity to present its reply or objections within 21 days.
The regulatory intervention stems from a routine examination conducted by Sebi in 2023 on Non-Convertible Debentures (NCD) public issues. During the examination, Sebi identified a substantial proportion of individual investors involved in a specific issue who sold their securities on the listing day, resulting in an unusual decline in retail ownership. The investigation revealed that JM Financial Products Ltd, a non-banking finance company and subsidiary of JM Financial Ltd Merchant Banker, played a role in financing these investors and acted as a counterparty to their trades.
Notably, the lead managers involved in the issue included A.K. Capital Services Ltd., JM Financial Limited, JMFL-MB (Noticee), Nuvama Wealth Management Limited, and Trust Investment Advisors Private Limited.
Sebi’s order emphasized the need for regulatory intervention to prevent further erosion in market integrity, citing the detrimental effects of such practices on the market’s orderly functioning and the interests of ordinary investors. The regulator’s investigation into the matter is expected to be completed within six months.
This regulatory action follows closely on the heels of the Reserve Bank of India’s directive, which barred another group entity, JM Financial Products, from providing loans against shares and debentures due to serious deficiencies in its loan process and governance issues.
As JM Financial faces scrutiny from both Sebi and RBI, the financial services firm’s shares closed at ₹87.94 apiece, marking a 3.12% increase after the Sebi order was issued.
