‘Shall fully cooperate with SEBI’: JM Financial on investigation into public debt issue

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JM Financial on Thursday said that it would fully cooperate with market regulator Securities and Exchange Board of India in its investigation into the public issue of debt securities. Earlier this evening, Sebi imposed curbs on the parent company JM Financial from acting as the lead manager for any new debt public issue.  

It, however, ruled that it can continue as lead manager for existing debt public issue mandates for another 60 days. JM Financial will have 21 days to file its reply or objections, if any, including the option of a personal hearing. Further, SEBI will undertake an investigation into these issues, to be completed within six months.

“SEBI shall undertake an investigation into the issues covered under the said Order and complete the same within a period of six months from the date of the said Order. The company shall fully cooperate with SEBI in this investigation,” the company said in an exchange filing on Thursday. 

“The Noticee (JMFL-MB) is barred from taking any new mandate for acting as a lead manager for any public issue of debt securities,” Ashwani Bhatia, Whole Time Member, Sebi said in an interim ex parte order.

For any existing mandates, JMFL-MB can continue to act as a lead manager for public issue of debt securities for a period of 60 days from the date of order, he said.

The market regulator undertook a routine examination of the public issues of non-convertible debentures (NCD) during the year 2023. The examination considered the role of three different businesses — one of the parent company and merchant banker JM Financial Limited, wholly owned subsidiary and broker JM Financial Services (JMFSL) and subsidiary and a non-banking financial corporation (NBFC) JM Financial Products Limited (JMFPL) — in a debt issue. 

The debunture opened in October 19, 2023, and closed on October 31. As per regulator, the base issue size was Rs 200 Crore with a green shoe option of Rs 800 crore.

“The manner in which subscriptions have been managed in this public issue of debt instrument is shocking. The transactions at every stage of this public issue appear to have been done in a pre-determined and pre-meditated manner; and executed clinically to ensure subscription and success… In the process, market integrity and fair price discovery have been compromised,” stated the Sebi order.

Sebi’s action against JM Financial comes days after RBI banned JM Financial Products from financing against shares and debentures. It also barred it to sanction and disbursal of loans against initial public offering (IPO) of shares as well as against subscription to debentures. JMFPL is a non-banking finance company (NBFC) and a subsidiary of JMFL.

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