SEBI bars JM Financial from managing public debt issues till March 2025

Shares of brokerage JM Financial Ltd (JMFL) dipped 4.31% in the early morning trade today after the capital markets regulator SEBI (Securities and Exchange Board of India) barred it from taking any new mandate for acting as a lead manager for any public issue of debt securities till March 31, 2025. The SEBI's order followed after in March 2024 it found out that JM group entities were incentivising certain investors to apply for securities in issues managed by JMFL.

SEBI says its directions are limited to the functioning of JM Financial as a lead manager to the “public issue of debt securities”, and do not relate to other activities, including acting as a lead manager to the “public issue of equity instruments”.

SEBI in its confirmatory order says JMFL was one of the lead managers in a public issue of NCDs. “A significant portion of the public issue was allotted to retail shareholders. Many retail shareholders, who were allotted securities pursuant to the issue, exited on the listing day itself. When the trading data on the listing day was analysed, it was noted that the counterparty to the trades of these retail investors was JM Financial Products Limited (JMFPL), an NBFC which is part of JM Group.”

The SEBI probe revealed JMFPL on the very same day sold down the securities, purchased from the retail investors, at a loss. “The applications of a significant number of these retail investors were routed through JM Financial Services Ltd., the stock broker which is part of JM Group, and their applications were funded by JMFPL.”

The probe revealed that JMFPL had the power of attorney to operate the accounts of the investors being funded by them. “...It prima facie appeared that JM group entities were incentivising certain investors to apply for securities in issues managed by JMFL.”

In its interim order in March 2024, SEBI barred JM Financials from taking any new mandate for acting as a lead manager for any public issue of debt securities. The regulator had said the company may continue to act as a lead manager for the public issue of debt securities for 60 days from the date of the order.

JM Financial, in its statement issued on Thursday, says the order, in line with the voluntary undertaking of the company, is limited to the company’s role as a lead manager to the public issue of debt securities and does not relate to other activities of the company, including acting as a lead manager to public issue of equity instruments.

“The Company is committed to co-operate with SEBI for an expeditious resolution of the matter.”

Notably, the Reserve Bank of India in its interim order on March 05, 2024, had also directed JMFPL “to cease and desist, with immediate effect, from doing any form of financing against shares and debentures, including sanction and disbursal of loans against Initial Public Offering (IPO) of shares as well as against subscription to debentures”.

Shares opened a gap down today and slipped to an intra-day low of ₹83.30 on the BSE, taking the company's m-cap down to ₹7,979.20 crore. At the current share price, JM Financial's share is trading 3.2% down compared to its 52-week high of ₹114.95 touched on January 29, 2024.