The IIFL (India Infoline Ltd) Holdings stock has seen a sharp correction in price following the news of three brokers including, Chintan Modi, Director at India Infoline Commodities, being arrested by the Economic Offences Wing of Mumbai police for interrogation related to NSEL scam.

IIFL commodities contributed to about 7-8 per cent of the over ₹1 lakh crore turnover in NSEL when it was in operation.

Two reasons are being cited for the arrest. One, the brokers have engaged in mis-selling by assuring returns to investors.

Other, they have also been found to have manipulated client codes changing transactions after the trade had been carried out without the consent of the clients.

Client code changes are normally allowed only in cases of erroneous punching of orders. But here, it is said to have been done intentionally to launder money.

While the sentiments on the stock of IIFL are negative now, it is not known how much of impact this will have on the broker’s business.

India Infoline Commodities is a 100 per cent subsidiary of IIFL. Apart from the commodity broking business, the company is also engaged in equity broking, wealth management, insurance distribution and financing against gold and property through its NBFC - India Infoline Finance.

In 2013-15, the company’s commodity business represented by India Infoline Commodities reported a revenue of ₹47.8 crore (overall revenue was ₹2837 crore) and profit after tax of ₹23.7 crore.

IIFL will feel the heat only when SEBI pulls up the brokers named in NSEL crisis for interrogation on compliance related matters.

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