Markets regulator Securities and Exchange Board of India (SEBI) has barred five brokerage houses for up to six months from making fresh applications seeking registration as commodity brokers as they have failed to meet the “fit and proper” criteria in the NSEL (National Spot Exchange Ltd) case.

India Infoline Commodities, Anand Rathi Commodities and Geofin Comtrade have been banned for six months each, while Phillip Commodities and Motilal Oswal Commodities Broker have been barred for three months each.

In five separate orders, SEBI said there were enough red flags to conclude that what was being offered as paired contracts on NSEL were not spot contract in commodities.

These entities, presumably driven by their desire to earn brokerages, provided a platform for their clients to access a product, which raised serious concerns in their ability to conduct proper and effective due diligence regarding the product itself, it said.

Accordingly, the five brokerage houses do not satisfy the fit and proper criteria under the Intermediaries’ regulations, SEBI said.

Motilal Oswal Commodities Brokers and India Infoline Commodities have said the ban in the NSEL case will not have any impact on their commodity broking business.

Motilal Oswal Commodities Brokers said it has no intention to file a fresh application for registration as a commodity broker as it has no intention of doing that business, it said. In fact, the company in June 2018 moved SEBI to withdraw its application to register as a commodity broker. It is in discussion with Legal Counsels to explore the options of challenging the new Sebi order before the SAT, it said in a statement on Wednesday.

The business of commodity broking is being done by Motilal Oswal Financial Services, it said.

Similarly, India Infoline Commodities said it is seeking legal advice in respect of the SEBI order and clarified that the fresh order will have no impact on businesses of other companies of IIFL Group.

Accordingly, the five brokerage houses do not satisfy the fit and proper criteria under the Intermediaries regulations, SEBI said.

In July 2013, NSEL was barred from launching any fresh contracts after it was found that it allowed paired contracts on its platform, which were violating Forward Contracts Regulation Act and the terms on which NSEL was granted registration as a spot exchange.