Exchange-broker-client nexus under scanner
28 Sep 2013 11:38 PM GMT
A possible collusion between the exchange officials, brokers and clients, including HNIs and politically connected entities, has come to the fore in the NSEL matter being probed by multiple agencies and regulators.
Preliminary investigations conducted by capital markets regulator Sebi and inputs from other regulators and government departments suggest that some brokers were offering structured financial products to their HNI clients under some portfolio investments schemes for high returns of 10-20 per cent.
The brokers are believed to have been working in close coordination with some top officials at National Spot Exchange Limited (NSEL), as also certain other group entities, while many of the clients could also have been in the loop about such structured products being in contravention of the extant norms, a senior official said.
While investigations are as yet in initial stages, further evidence in these directions could lead to formal proceedings against the suspected entities under regulations governing fraudulent and unfair trade practices, portfolio management schemes and rules governing code of conduct of market intermediaries, he added.
Sources said that the NSEL fiasco is turning out to be a unique case where even the investors could be among the main culprits, as they were not the common people who usually get conned in ponzi schemes and other investment frauds.
In contrast, most of these so-called victims are rather well-heeled brokers or high networth individuals (HNIs) and some of them have been found to have close connections with certain politically active persons in Mumbai, he added.
Sebi is also ascertaining facts from Financial Technologies on withdrawal of report by its auditor.
Preliminary investigations conducted by capital markets regulator Sebi and inputs from other regulators and government departments suggest that some brokers were offering structured financial products to their HNI clients under some portfolio investments schemes for high returns of 10-20 per cent.
The brokers are believed to have been working in close coordination with some top officials at National Spot Exchange Limited (NSEL), as also certain other group entities, while many of the clients could also have been in the loop about such structured products being in contravention of the extant norms, a senior official said.
While investigations are as yet in initial stages, further evidence in these directions could lead to formal proceedings against the suspected entities under regulations governing fraudulent and unfair trade practices, portfolio management schemes and rules governing code of conduct of market intermediaries, he added.
Sources said that the NSEL fiasco is turning out to be a unique case where even the investors could be among the main culprits, as they were not the common people who usually get conned in ponzi schemes and other investment frauds.
In contrast, most of these so-called victims are rather well-heeled brokers or high networth individuals (HNIs) and some of them have been found to have close connections with certain politically active persons in Mumbai, he added.
Sebi is also ascertaining facts from Financial Technologies on withdrawal of report by its auditor.
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