Capital and commodity market regulator SEBI has declared Geofin Comtrade (formerly Geojit Comtrade) and Anand Rathi Commodities (ARCL) as not ‘fit and proper’ to neither trade nor facilitate trade in commodity derivatives for their suspected involvement in the ₹5,600-crore National Spot Exchange scam.
Last Saturday, the regulator had taken similar action against Motilal Oswal Commodities Broker and India Infoline Commodities. Earlier, SEBI had listed out 300 broking firms for their role in settlement scam on the spot exchange in 2013.
According to a report, Anand Rathi Commodities has an exposure of ₹591 crore, India Infoline Commodities ₹282 crore, Geofin Comtrade ₹290 crore and Motilal Oswal ₹243 crore to the NSEL scam.
On Tuesday, Madhabi Puri Buch, whole-time director, SEBI, said the close association of Geofin Contrade and Anand Rathi Commodities with NSEL and the paired contracts… and the serious adverse observations of the various courts and authorities have seriously eroded the reputation, fairness, honesty, integrity and character of the broking firms.
“They had facilitated transactions in the said paired contracts for their clients on the NSEL platform. This in itself establishes a close association between the broking firms on the one hand and the paired contracts and NSEL on the other. Moreover, the broking firms, by their own admission, allowed themselves to become a channel and instrument for NSEL to promote paired contracts among its clients,” said the order.
Anand Rathi to appeal
Anand Rathi Commodities, in a statement, said it will take necessary legal steps to file an appeal against the order. SEBI’s order rejecting the application of registration of ARCL has no impact on other businesses of the group, it added.
In its scathing order, SEBI said even though the observations (against the broking firms) are yet to be established in court, it is justified in keeping a person with doubtful reputation out from the market rather than running the risk of allowing the market to be affected.
Though the SEBI order has come as relief for worried investors, they wonder how a not ‘fit and proper’ broking firm in commodity can facilitate trade in equity and other markets through its group companies registered with the same regulator.