FTIL Case: Mis-selling of products by NSEL brokers to be probed

As market regulator SEBI continues its extensive probe against NSEL brokers, the focus on mis-selling of products is gaining credence. Five to six leading brokers who traded on NSEL are under the scanner, but more brokers could be identified as offenders.

SEBI recently amped up its radar along with the Bombay HC to get to examine the case at its roots.  The intervention was overdue because the Forward Markets Commission had failed to bring broker offences to light.

There has been some strange decision making in the case, such as the proposal to merge NSEL with its parent company FTIL. It invoked criticism from all corners of the corporate world and even FTIL promoter Jignesh Shah said that the move would put undue burden of 64k shareholders.

SEBI, which is probing the account of brokers that sold NSEL schemes on false and exaggerated promises of returns, has also picked on black money routing by sister concerns and associates of brokers that traded on the platform. The SEBI committee has also issued an interim order for further investigation into source of funds of brokers and other traders who involved sister concerns and associates during trading.

This explains the glaring discrepancies in the data and details submitted by investors to make their claim against the data which was submitted by NSEL.

Submission of wrong PANs (Permanent Account Numbers), suspicious source of funds are some of the discrepancies and authorisation letters and trade execution documents submitted by brokers have also been rendered questionable.

In a one-of-its-kind case, it has been observed that the brokers themselves were the real traders. To add to the long list of criminal activities, the brokers also allegedly created fake ledger accounts in the name of their clients without consent.

"It has also been alleged that funds of sister concerns of brokers, which could have been derived from illegal sources, were used to trade on the NSEL platform with an intent to legitimise the said funds, which amounts to money laundering," a senior official had said.

Multiple agencies are now dedicated to uncover the entire truth about the case and the affected parties can hang on to that as a silver lining in a case mired with traces of executive overreach and policy infringement.