The Securities and Exchange Board of India (Sebi) has ruled that Motilal Oswal Commodities Broker Pvt Ltd (MOCB) and India Infoline Commodities Ltd (IICL) are not “fit and proper” to be commodity derivative brokers in connection with the Rs 5,600-crore scam at National Spot Exchange Ltd (NSEL).

In two separate orders passed on Friday, the commodities and stock market regulator said both the entities shall “cease to act directly or indirectly’’ as commodity derivatives brokers.

Sebi pointed out that while reputation is an important factor for the consideration of the “fit and proper” criteria, the reputation of the two entities have been seriously eroded.

After the payment scam at NSEL came to light in 2013, many entities, including brokers, have come under the scanner of Sebi and other probe agencies.

Both the entities have been found to facilitate transactions in “paired contracts” for their clients on the NSEL platform. According to Sebi, such transactions are in violation of the Forward Contracts (Regulation) Act and the Maharashtra Protection of Interests of Depositors Act.

Paired contracts is the buying and selling of the same commodity through two different contracts at two different prices on the exchange platform.

Sebi has rejected the applications dated December 11 and December 16, 2015, filed by Motilal Oswal for registration as commodity derivatives broker. IICL’s application dated December 23, 2015, has also been rejected.

Existing clients of the two entities should be allowed to withdraw or transfer their securities within 45 days from the date of the orders at no additional cost.

Both the entities said they were exploring legal options.

“MOCB itself is the victim of the scam like thousands of investors. MOCB is aggrieved by this order and it is in consultation with its lawyers to explore legal options before it,” a statement from the Motilal Oswal group said.

“The order mentions that Sebi has initiated similar enquiry proceedings against 300 brokers and there will be no discrimination. However, IICL is seeking legal advice as regards to going for an appeal in this matter,” a statement from the IIFL group said.