FTIL Merger with NSEL Overrides Fiscal, Legislative Prudence

In a case that has evoked much public interest, authorities have finally decided to venture into areas that should have been investigated long back. This relates to the NSEL case wherein Bombay High Court Panel has ordered audits into investor claims following discrepancies in figures submitted by various stakeholders.

Quite in line with Jignesh Shah’s position on the issues, investigators have found fresh evidence suggesting black money being laundered by companies considered sister concerns of brokers who traded on the platform.

"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 legitimize the said funds, which amounts to money laundering," a senior investigating official said.

Noteworthy in the case is an interim order of the HC panel which states, “The committee while processing the claims received from various investors noticed large scale discrepancies between the claims set up by investors vis-à-vis the data submitted by NSEL. Even the discrepancies in Permanent Account Number were noticed.” The order further stated that no reservations be made regarding sharing of information for verification of claims.

Complaints against brokers have also been made in the past relating to false assurances, misrepresentation, trading without client’s authority, modification of client code and selling contracts as investment vehicles. There is also a case against NSEL brokers and traders alleging creation of fake ledger accounts in the name of the clients without obtaining their consent.

A senior regulatory official commented on the case calling it unique as brokers themselves appear to be investors. This again is in line with Jignesh Shah’s stand on the issue and something FTIL has been vocal all along.

Taking into account the role played by brokers, the investigation seems to be shaping up as a bottom-up enquiry. Though a bit late in the day, it could spell be the difference between 63k shareholders of FTIL victimized by executive overreach or upholding of fiscal, legislative and judicial prudence.

NSEL Traders suspected of routing black money

A classic plot-twist has unfolded as agencies probing the NSEL case have tightened the grip around defaulters. Investigators have realised that NSEL brokers indulged in routing of black money by their sister concerns as well as associates. 

The case which came to light in 2013 is being seen as an example of multiple agencies uniting to provide justice – SEBI (Securities and Exchange Board of India) and a high-level committee set up by the Bombay High Court are investigating from their respective fronts.

The committee has summoned a new investigation direction to track the source of funds of the brokers and traders; and suspicions are strong that they were sister concerns or associates of the very same brokers.

It was already revealed that glaring discrepancies have been found in the data and details submitted by the traders. Submission of wrong PANs (Permanent Account Number) has raised suspicions about the source of funds. Besides, authorisation letters and trade execution documents submitted by brokers are also questionable.

A senior regulatory official has aptly described the case as very unique because here – brokers themselves appear to be the real investors. Brokers nearly committed every fiscal crime in the rulebook when they created fake ledger accounts in the name of their clients, that too without client knowledge or permission.

At least eight brokers and their trading clients are under the scanner of regulators, probe agencies and the High Court Committee, who will extensively audit the account books, bank accounts and income tax returns of traders. Account books of the brokers and those of NSEL will also be audited.

That’s not all; complaints against the brokers extend as far as giving false assurances, trading without permission from clients, misuse of client code and non-receipt of payouts by clients.

"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 said.

More than two years have passed without proper action against the perpetrators and instead inferior alternatives have been suggested like – merging of NSEL with its parent company FTIL founded byJignesh Shah, a suggestion that goes entirely against the concept of limited liability.

But now with SEBI and the High Court committee fully dedicated to dig out the truth, there’s finally hope for the 63k FTIL shareholders who are being made to pay for someone else’s sins.