SEBI has prohibited JM Financial from serving as a lead manager for any public offering of debt securities, following recent actions by the Reserve Bank of India (RBI) restricting JM Financial Products from IPO financing and financing against shares. The capital markets regulator cited alleged practices by JM Financial that undermine market orderliness and harm the interests of regular investors.
SEBI’s order, issued by whole-time member Ashwani Bhatia, outlined that JM Financial, along with related entities, provided guaranteed profits to certain investors, encouraging their participation in public issues in violation of regulations. The order criticized the orchestrated manner in which subscriptions were managed, compromising market integrity and fair price discovery.
An investigation disclosed that in a specific debt offering, numerous individual investors sold their allotted securities on the listing day itself. Further scrutiny revealed that JM Financial Products, a non-banking finance company and subsidiary of JM Financial, acted as a counterparty to these investors’ trades and financed their subscriptions.
Additionally, the probe uncovered instances where loans extended to applicants were disproportionate to declared income, along with discrepancies in dates and failure to receive upfront margin from certain applicants. Sebi’s order suggests that such practices may not be isolated incidents, indicating a broader pattern across public offerings.
