sebi:QJA/AA/MIRSD/DOP/26039/2023-24
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Facts / Headnote
Noticee held not a 'fit and proper person'; certificate of registration cancelled (directions at paragraphs 54-57, including client notification, withdrawal/transfer of client securities and funds within 15 days, and squaring off open positions within 30 days)
Provisions invoked
- s. 19
- s. 11(4)
- s. 11B
- s. 28A
- s. 27
- s. 12(3)
- s. 154
- s. 29A
Regulations
- Reg. 6
- Reg. 27
- Reg. 9
- Reg. 7
- Reg. 9(b)
- Reg. 28
- Reg. 28(1)
- Reg. 25(1)
- Reg. 5(e)
Parties
- CNB Commodities Pvt. Ltd
Holding
The Noticee, CNB Commodities Pvt. Ltd, does not satisfy the 'fit and proper person' criteria under Schedule II of the Intermediaries Regulations, and consequently its certificate of registration as a broker is cancelled under Regulation 27 of the Intermediaries Regulations read with Regulation 5(e) of the Brokers Regulations.
Full text
Page 2 of 34 Order in respect of CNB Commodities P. Ltd In the matter of National Spot Exchange Limited 3. In September 2009, NSEL allegedly introduced the concept of 'paired contracts', i.e. buying and selling the same commodity through two different contracts at two different prices on its platform wherein investors could buy a short duration settlement contract and sell a long duration settlement contract and vice versa at the same time. It entailed occurrence of Buy Trades (T+2 / T+3) and Sell Trades (T+25 / T+36) on the same day at different prices on the platform of NSEL.
Page 3 of 34 Order in respect of CNB Commodities P. Ltd In the matter of National Spot Exchange Limited a. Short Sale NSEL had not made it mandatory for the seller to deposit goods in its warehouse before taking a sell position. Hence, the condition of “no short sale by members of the NSEL shall be allowed” was not being met by the NSEL and its trading/clearing members who traded in the paired contracts during the relevant period. b. Contracts with Settlement Period going beyond 11 days Some of the contracts offered for trade on NSEL had settlement periods exceeding 11 days and therefore, such contracts were “non-transferable specific delivery” contracts under the FCRA. As per the FCRA, the “ready delivery contracts” were required to be settled within 11 days of the trade and hence, the contracts traded on the NSEL which provided settlement schedule for a period exceeding 11 days were not allowed under the aforesaid Notification.
Page 4 of 34 Order in respect of CNB Commodities P. Ltd In the matter of National Spot Exchange Limited ENQUIRY BY DESIGNATED AUTHORITY
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Source: SecMarx — sebi:QJA/AA/MIRSD/DOP/26039/2023-24. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.