Brokerage Firms Charged For Alleged False Declarations

The Securities and Exchange Board of India (Sebi) has recommended a forensic audit of brokerage houses whose clients lost significant amounts of money in the Rs 5,574-crore National Spot Exchange Ltd (NSEL) scam.




The regulator has indicated this to third-party auditors looking at the books of these brokers. Sebi had on April 4 given the brokerages 60 days' time to have their books vetted by third-party auditors. The brokerages include Anand Rathi Commodities, India Infoline Commodities, Geofin Comtrade, Phillip Commodities and Motilal Oswal Commodities.

"There were several irregularities found, which included instances of contract notes issued by brokers not matching trade records of the exchange. Instances of discrepancies and manipulation of books of accounts need to be verified further. This can be done by a forensic audit of banking transactions made between brokers and clients.

The NSEL crisis came to light in July 2013, when the National Spot Exchange(NSEL) was unable to repay so called 13,000 trading clients, who were trading on the platform. The National Spot Exchange (NSEL) did not have adequate goods in its warehouses as promised by brokerage firms to their clients. Nor did the settlement guarantee fund have enough money for repayment.

When contacted, Phillip Commodities and Anand Rathi did not respond and IIFL refused to comment. Ajay Menon, director, Motilal Oswal Commodities, said, "Sebi has initiated inspection of books of accounts vide its letter dated April 4 and we are submitting the information sought. As of now, we are not aware of initiation of a forensic audit."