SEBI Suspends Registration Of Two Brokerage Firms In NSEL Paired Contracts Case
Securities and Exchange Board of India suspended the registration of two brokerage houses—Nortel Vincom and Northeast Commodities—for their involvement in illegal paired contracts on the now defunct National Spot Exchange Ltd.
Capital markets regulator Securities and Exchange Board of India on Monday suspended the registration of two brokerage houses—Nortel Vincom and Northeast Commodities—for their involvement in illegal paired contracts on the now defunct National Spot Exchange Ltd.
By providing access for taking exposure to paired contracts, the broking firms exposed their clients to the risk involved in trading in a product that did not have regulatory approval, Sebi said in two separate orders.
Further, the regulator said that trading activities of the brokers in paired contracts for their clients on the NSEL platform have "serious ingredients jeopardising the reputation, belief in competence, fairness, honesty, integrity and character of the notices in the securities market".
Accordingly, SEBI has suspended registration of the brokerage houses for a period of three months from the date of the orders or till the FIR filed against the broking firms by Economic Offences Wing ceases to be pending or till the two entities are acquitted by a court in relation to the FIR, whichever is later.
Also, the SEBI said the orders will come into force with immediate effect.
In September 2009, NSEL introduced the concept of paired contracts for trading, which allowed buying and selling of the same commodity through two different contracts at two different prices on the exchange platform.
The scheme of paired contracts traded on NSEL had caused a huge loss to investors to the extent of Rs 5,500 crore, as per the orders.