However, JM Financial is permitted to continue serving as a lead manager for public debt issues for an additional 60 days, the market regulator said.

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Why SEBI bar JM Financial?

SEBI has barred JM Financial after a routine examination revealed irregularities in the public issues of Non-Convertible Debentures in 2023.

Specifically, in a particular case, a considerable number of individual investors sold their allotted securities on the day of listing, leading to an unusual decrease in retail ownership, the interim order said.

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Further investigation found that JM Financial Products Limited (JMFPL) acted as a counterparty to these trades, providing funds for subscription. On the same day, JMFPL-NBFC offloaded a significant portion of the acquired securities to corporate investors at a loss. Additionally, these investors applied for the public issue through the stockbroker JM Financial Services Ltd.

SEBI in its order said that JM Financial, together with connected entities “were found to have given an assured exit to certain investors at a profit thereby incentivising them to apply in the public issue in contravention of regulatory mandates.”

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RBI has banned JM Financial from lending against shares, debentures

This comes after the Reserve Bank on Tuesday barred JM Financial Products Ltd from providing any form of financing against shares and debentures, including sanction and disbursal of loans against initial public offering, with immediate effect.

The company can, however, continue to service its existing loan accounts through the usual collection and recovery process, the Reserve Bank said in a statement.