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JM Group entities, including JM Financial, JM Financial Services, and JM Financial Products, have settled with SEBI over irregularities in the 2023 public issue of Piramal Enterprises NCDs. The group paid INR 3.92 crore and disgorged additional gains of over INR 2.5 crore. SEBI found that loans and coordinated trades were used to provide guaranteed profits to 1,008 applicants on the listing day, reducing retail ownership sharply. JMFL, JMFSL, and JM Financial Products have also agreed to temporary bans on managing or distributing debt securities and IPO financing activities.
JM Group entities JM Financial, JM Financial Services, and JM Financial Products - have reached a settlement with markets regulator SEBI in a case involving alleged irregularities in managing the public issue of non-convertible debentures (NCDs) of Piramal Enterprises. The entities paid a total of INR 3.92 crore as part of the settlement. Advertisement
Additionally, JM Financial Ltd (JMFL) and JM Financial Services Ltd (JMFSL) disgorged illegal gains of INR 1.22 crore and INR 1.33 crore, respectively, as per the SEBI settlement order issued earlier this week.
As part of the settlement, JM Financial agreed to a voluntary three-month debarment from acting as a manager in any public issue of debt securities, effective from the date of the order. JMFSL will refrain from acting as a distributor in such issues for the same period, while JM Financial Products accepted a three-month ban on undertaking IPO financing activities.
The case pertains to public issues of NCDs during 2023. SEBI's examination revealed that a large number of individual investors sold their allotted debt securities on the listing day, sharply reducing retail ownership. Following this, SEBI issued an interim order in March 2024 barring JMFL from taking new mandates as a lead manager in NCD issues. A confirmatory order in June 2024 extended this restriction until March 2025.
An investigation showed that 1,008 applicants, who were clients of JMFSL, were involved in a scheme where JM Financial's NBFC arm, JMFPL, used a Power of Attorney to submit bids for 11.34 lakh NCDs on their behalf. JMFPL provided loans at 10% interest to the applicants, while the NCDs carried coupon rates between 9% and 9.35%. On the listing day in November 2023, JMFPL bought the allotted NCDs from the applicants at a predetermined price, providing them a guaranteed exit with profits, even though JMFPL incurred a loss on the transaction.
SEBI alleged that the three JM Group entities acted together to ensure profits for the applicants by sharing part of the commission, brokerage, or incentives received from the issuer. Collectively, the group made a net gain of INR 1.99 crore through dealings in the 11.34 lakh NCDs. Following the settlement payments, SEBI ordered that any proceedings related to the violations be considered settled for the JM Group entities. The settlement was reached under rules allowing parties to neither admit nor deny the findings of fact and conclusions of law.
Source PTI
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