Brokers under the scanner in NSEL Scam

Probe into irregularities worth Rs 5,600 crore in the NSEL case is finally penetrating untouched territories. Recently, the Bombay High Court panel ordered audits into investor claims observing discrepancies in the figures submitted by NSEL traders and brokers; a move that widely vindicates Jignesh Shah’s position on the case.

Furthermore, fresh evidence around black money being routed by sister concerns and associates of various NSEL brokers has caught investigators’ attention.  

"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 investigating official said.

The interim order of the HC panel already states, “The committee while processing the claims received from various investors noticed large scale discrepancies between the claim set up by the investors vis-à-vis the data submitted by NSEL. Even the discrepancies in Permanent Account Number were noticed.” It observed 15 instances of such discrepancies with respect to 8 brokers. The order also stated that no reservations would be made I submitting data and information for verification of investor claims.

It should be noted here that there have been complaints against brokers, in the past, related to false assurances, misrepresentation, trading without client’s authority, modification of client code and selling contracts as investment vehicles. There have also been allegations against NSEL brokers and traders for having created fake ledger accounts in the name of their clients without their consent.

While commenting on the case, a senior regulatory official stated that the case seems to be unique as brokers themselves appear to be investors. This is quite in sync with Jignesh Shah’s stand on the issue and the line FTIL has towed since the beginning.

The investigation holds special significance in respect to the facts of the case. Considering the role brokers play on any exchange, the investigation could lead to a landmark step but the questions is—couldn’t it have come earlier especially with FTIL investors, who stand to be crippled pending the forced merger, vehemently trying to get heard ever since the scam broke out. 

Read more

Bombay HC tightens up on brokers in the NSEL case