JM Financial Ltd has said it would fully cooperate with the Securities and Exchange Board of India (Sebi) in its investigation into the public issue of debt securities.
On Thursday, the market regulator had barred the firm from accepting new mandates to act as a lead manager for the public issue of debt securities.
Sebi had, however, said in its interim ex-parte order that JM Financial could continue to act as a lead manager for the public issue of debt securities for 60 days in case of existing mandates.
According to the order, it will investigate these issues, which will be completed within six months.
``The company shall fully cooperate with Sebi in this investigation,’’ JM Financial said in a communication to the stock exchanges.
It added that the quantifiable financial impact of the Sebi action cannot be ascertained at this point.
Earlier, the Reserve Bank of India (RBI) had restrained JM Financial Products Ltd from providing any form of financing against shares and debentures, including sanction and disbursal of loans against initial public offering (IPO).
Sebi observed that in a particular issue, a significant number of individual investors sold the securities allotted to them on the day of listing itself.
Further, the holding pattern of the securities showed that a very large percentage of securities issued changed hands on the day of listing. As a result of such sales, the retail ownership came down sharply which was unusual.
The scheme, Sebi, noted, involved getting individual investors, who would otherwise not have participated in the issue, to make applications not just by providing funds to them but also by assuring them an exit at a profit on the listing day.
It added that JM Financial Products which is an arm of JM Financial acted as counterparty to the trades of these individual investors and had also provided funds to them for subscribing to the issue.
Its examination also revealed that these investors had submitted their applications in the public issue through the stock broker JM Financial Services Ltd.
According to Sebi, JM Financial along with its connected group entities were prima facie noted to have given an assured exit to certain investors.
