Restrictions on JM Financial: SEBI confirms ban on managing public debt issues until 2025

Securities and Exchange Board of India issued a confirmatory order on Thursday barring JM Financial Ltd from acting as a lead manager for public issues of debt securities until March 31, 2025, due to alleged irregularities in a public issue of non-convertible debentures (NCDs). This restriction, however, does not impact JM Financial Ltd’s (JMFL) other activities, including equity issues.

Restriction on JM Financial

In response, JM Financial stated in a filing that the order aligns with the company's voluntary undertaking. The company confirmed that it would not take new mandates as a lead manager for public issues of debt securities until the specified date or as further directed by Sebi.

The confirmatory order follows Sebi's interim directive in March, which initially prohibited JMFL from accepting new mandates as a lead manager for debt securities. Sebi's preliminary findings suggested that JMFL engaged in irregular practices involving retail investors and related companies within the JM Group. It appeared that JM Group entities incentivized investors to apply for securities in issues managed by JMFL. Significant NCD allocations were made to retail investors, who then sold these securities on the listing day, primarily to JM Financial Products Limited (JMFPL), a JM Group NBFC. JMFPL subsequently sold these securities at a loss.

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

Following the interim order, JMFL requested Sebi not to confirm the restrictions and proposed voluntary undertakings instead. In hearings held on April 24 and June 18, 2024, JMFL reiterated these undertakings without contesting the merits of the case. As part of its voluntary commitments, JM Financial pledged to cease taking new mandates as a lead manager for public debt issues until March 31, 2025, or as further directed by Sebi.

Furthermore, JMFL’s board decided to stop IPO financing and enhance its systems and processes to prevent misconduct. This includes staff training, regulatory workshops, and submitting a compliance certificate by December 31, 2024.

Sebi has decided to maintain the interim restrictions, part of JM Financial's voluntary undertaking, until the investigation concludes.

Also watch: JM Financial banned from public debt issue participation by SEBI