Sebi confirms bans JM Financial from managing debt public issues till March

Markets regulator Sebi on Thursday confirmed the interim directions to bar JM Financial Ltd from acting as a lead manager for public issues of debt securities until March 31, 2025, in a case of alleged irregularities in a public issue of non-convertible debentures (NCDs).

The regulator, in a confirmatory order, clarified that the restriction only applies to public issues of debt securities and does not affect JM Financial Ltd (JMFL) other activities, including equity issues.

In its interim order issued on March 7, Sebi barred JMFL from taking new mandates as a lead manager for public issues of debt securities due to potential irregularities in a public issue of non-convertible debentures (NCDs).

JMFL, as a lead manager, had allegedly irregular practices involving retail investors and associated companies within the JM Group.

Sebi, prima facie, found that JM Group entities appeared to incentivise investors to apply for securities in issues managed by JMFL.

It noted that significant NCD allocations were made to retail investors, who sold these securities on the listing day. The primary buyer was JM Financial Products Limited (JMFPL), a JM Group NBFC. JMFPL then sold these securities at a loss.

Further, many retail investor applications were funded by JMFPL through JM Financial Services Ltd with JMFPL holding power of attorney over these accounts.

Following Sebi's interim order, JMFL requested the regulator not to confirm the restrictions and offered voluntary undertakings instead. JMFL in hearings on April 24 and June 18, 2024, reiterated these voluntary undertakings but did not argue the merits of the case.

As a part of voluntary undertakings, JM Financial stated that it will not take any new mandates as a lead manager for public issues of debt securities until March 31, 2025, or a later date specified by Sebi.

JMFL's board voluntarily decided to stop IPO financing completely and decided to improve its systems and processes to prevent any wrongdoing, ensure staff training, conduct workshops on regulatory requirements, and submit a compliance certificate by December 31, 2024.

Given the same, Sebi said there is a need to continue the directions issued through the interim order, which is also part of the voluntary undertaking submitted by JM Financial, till the completion of the investigation into the matter.

"JM Financial shall not act as a lead manager in any public issue of debt securities till March 31, 2025, or such other date as may be specified by Sebi vide by an order," it added.