NSEL case: SEBI cancels registration of KR Choksi commodity brokers

“By providing such facility to take exposure for ‘paired contracts’, the broker exposed its clients to the risk involved in trading in a product which did not have statutory approval or regulatory approval,” SEBI said in its order.

“Demonstrated conduct by NOTICE as a market intermediary, by indulging in participation/facilitation in trading in ‘Paired Contracts’ on NSEL, blinding to all illegalities and fraudulent manner relating to the contracts in which the business takes place. SEBI said that The ‘Pair Contracts’ that are taking place on NSEL’s Exchange Platform takes the regulator’s confidence in the integrity and intent of NSEL’s Platform seriously.

In the aftermath of such serious malpractice, KR Choksi Commodity Brokers can no longer be termed as a ‘fit and proper person’ to hold a certificate of registration as a Commodity Derivatives Broker in the securities market.

SEBI has asked the broker to allow its existing clients to withdraw or transfer their securities or funds within 60 days.

In case of failure by any client to withdraw or transfer his securities or funds within this period, the broker shall, under advice to the said client, transfer the funds and securities to any other broker within 30 days.

In September 2009, NSEL (now defunct) introduced the concept of ‘paired contracts’ for trading, which allowed buying and selling of the same commodity through two separate contracts at two different prices on the exchange platform , in which investors could buy a short term contract and sell a long term contract and vice versa at the same time and at a pre-determined price.

It was further observed that trading for the buy contract (T2/T3) and the sell contract (T25/T36) took place on the same day on the same day and at different prices, involving the same counterparty. Was. ,

The scheme of ‘paired contracts’ traded on NSEL eventually caused huge losses to investors to such an extent 5,500 crores.

(with inputs from PTI)