sebi:WTM/AN/MIRSD/DOP/29741/2023-24
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Facts / Headnote
Certificate of Registration (INZ000058234) of Rainbow Commodity and Derivatives Pvt. Ltd. suspended for three months from the date of the order or till a Court of competent jurisdiction discharges or acquits the Noticee, whichever is later.
Provisions invoked
- s. 19
- s. 11(4)
- s. 11B
- s. 27
- s. 12(3)
- s. 154
- s. 3(2)
- s. 29A(2)
- s. 209A
Regulations
- Reg. 27
- Reg. 6
- Reg. 5(e)
- Reg. 9(b)
Parties
- Rainbow Commodity and Derivatives Pvt. Ltd.
Holding
The Noticee, Rainbow Commodity and Derivatives Pvt. Ltd., is not a 'fit and proper person' under Schedule II of the Intermediaries Regulations due to its involvement in trading 'paired contracts' on NSEL and the pendency of a criminal complaint/FIR against it, warranting suspension of its Certificate of Registration for three months or until discharge/acquittal by a Court, whichever is later.
Full text
Order in respect Rainbow Commodity and Derivatives Pvt. Ltd. in the matter of NSEL Page 2 of 30 to Forwards Market Commission (hereinafter referred to as “FMC”); (iii) Hon’ble Bombay High Court’s order in criminal bail application no. 1263 of 2014 in Jignesh Prakash Shah vs. State of Maharashtra dated August 22, 2014. In response to the SCN, the Noticee filed a reply dated May 8, 2020.
Order in respect Rainbow Commodity and Derivatives Pvt. Ltd. in the matter of NSEL Page 3 of 30 (ii) Copy of FIR dated September 28, 2018 filed by SEBI under Section 154 of Criminal Procedure Code, 1973 (hereinafter referred to as “CrPC”); and (iii) Amended Schedule II of Intermediaries Regulations;
Order in respect Rainbow Commodity and Derivatives Pvt. Ltd. in the matter of NSEL Page 4 of 30 (ii) In October 2008, NSEL commenced operations providing an electronic trading platform to its participants for spot trading of commodities, such as bullion, agricultural produce, metals, etc. It is observed that NSEL had introduced the concept of ‘paired contracts’ in September 2009 which allowed buying and selling in same commodity through two different contracts at two different prices on the exchange platform wherein the investors could buy a short duration contract and sell a long duration contract and vice versa at the same time and at a pre-determined price. The trades for the buy contract (T+2 /T+3) and the sell contract (T+25/T+36) used to happen on NSEL on the same day at same time and at different prices, involving the same counterparties. The transactions were structured in a manner that buyer of the short duration contract always ended up making profits.
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Source: SecMarx — sebi:WTM/AN/MIRSD/DOP/29741/2023-24. 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.