sebi:WTM/GM/MIRSD/DOP/13811/2021-22
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Facts / Headnote
Application for registration as commodity derivatives broker rejected; Noticee to cease to act as commodity derivatives broker with directions for client notification and withdrawal/transfer of funds and securities
Provisions invoked
- s. 19
- s. 12
- s. 27
- s. 21
- s. 29A(2)
Regulations
- Reg. 9(f)
- Reg. 27
- Reg. 5
- Reg. 9(b)
- Reg. 28(1)
- Reg. 6
- Reg. 5(e)
Parties
- Investsmart Commodities Limited
Holding
The application of Investsmart Commodities Limited for registration as a commodity derivatives broker is rejected as the Noticee is found not fit and proper in terms of Schedule II of the Intermediaries Regulations for facilitating trading in paired contracts on NSEL.
Full text
Page 1 of 20 Order in the matter of Investsmart Commodities Limited WTM/GM/MIRSD/DOP/13811/2021-22 SECURITIES AND EXCHANGE BOARD OF INDIA
Page 2 of 20 Order in the matter of Investsmart Commodities Limited commodities. It was also stipulated that all information or returns relating to the trade as and when asked for shall be provided to the Central Government or its designated agency. Thereafter, NSEL commenced operations in October 2008.
Page 3 of 20 Order in the matter of Investsmart Commodities Limited 6. Subsequently, FMC vide order No.4/5/2013-MKT-1/B dated December 17, 2013, inter alia, held that the contracts traded on NSEL violated the following conditions stipulated in the aforesaid notification SO906(E) dated June 05, 2007: 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. 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 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 a settlement schedule for a period exceeding 11 days were not allowed under the aforesaid notification.
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Source: SecMarx — sebi:WTM/GM/MIRSD/DOP/13811/2021-22. 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.