Sebi slaps over Rs 32 cr penalties on IISL, AFSL, three individuals

New Delhi: Sebi has imposed penalties totalling more than Rs 32 crore on IL&FS Securities Services Ltd (ISSL), Allied Financial Services Pvt Ltd (AFSPL) and three individuals for lapses in connection with alleged fraudulent transfer of mutual fund units of three companies.

Besides, the watchdog has passed various directions against them.

The regulator has passed two separate orders, dated July 2, against ISSL, and AFSPL and its three directors after it carried

out a detailed investigation into the matter for the period from February 20, 2017 till February 8, 2019.

ISSL is a clearing member while AFSPL is a depository participant.

While imposing a fine of Rs 26 crore on ISSL, a clearing member, and also passing certain directions, Sebi noted that its order would be subject to any order passed by the Supreme Court.

Also, enforcement of the liability and the order would be subject to the orders of the National Company Law Tribunal and the National Company Law Appellate Tribunal (NCLAT).

These directions come against the backdrop of the entire IL&FS Group, including ISSL, undergoing a resolution process. In January 2021, Sebi held that it has the jurisdiction to determine

the monetary and non-monetary liabilities of ISSL in case there are violations and the order was also upheld by the Securities Appellate Tribunal (SAT) while ISSL's appeal is pending before the Supreme Court.

In the 68-page order, Sebi noted that ISSL being a clearing member has admitted to committing serious lapses in risk management by submitting that it followed a practice under which collateral can be

returned to all its empanelled trading members, upon receipt of a request from

the client.