SEBI disposes showcause notices against Sharekhan Commodities
Market regulator Securities Exchange Board of India (SEBI) decided to dispose of the show-cause notices issued to Sharekhan Commodities Private Limited after an investigation of whether the company was a “fit and proper person” (FPP) to continue working as a broker. The probe was ordered as Sharekhan Commodities was involved in trading of now banned “paired contracts,” news platform Moneycontrol reported on Friday.
Sharekhan Commodities was a member of a trading platform called National Spot Exchange Limited (NSEL) where these contracts were traded.
NSEL operations were stopped on August 6, 2013, as the regulator revealed certain issues with its functioning. The investigations into NSEL revealed that there was trading of certain goods, but those goods were not actually present or available for delivery, the exchange was permitting short-selling and paired contracts were offered as an alternative to fixed deposits.
The order said that the Sharekhan Commodities surrendered its certificate of registration so “the present proceedings for determination of whether the Noticee is a FPP are rendered infructuous.”
“Hence, I am not inclined to pass any directions against the Noticee,” added Sebi’s Chief General Manager (CGM), in the order.
Invoked estoppel
Sharekhan Commodities also used the legal principle called “estoppel” to argue their case. Estoppel is a rule that prevents someone from making a statement or claim that contradicts what they had previously said.
The brokerage claimed that SEBI cannot change its mind or re-evaluate its fitness as a broker because the brokerage had already been granted registration based on its previous assessment. The principle of estoppel is used to prevent Sebi from going back on their earlier decision.
“In my opinion, the statutory mandate of FPP contained in the Intermediaries Regulations will override the administrative act of registration,” noted the CGM in the order.
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Updated: 17 Jun 2023, 12:55 AM IST
