JM Financial SEBI investigation: JM Financial Ltd has committed to full cooperation with the Securities and Exchange Board of India (SEBI) as the regulatory body initiates an investigation into the public issue of debt securities, following allegations of flouting regulatory norms.

SEBI's interim order, issued on Thursday, barred JM Financial from accepting new mandates to act as a lead manager for public debt securities issues. However, the company retains the authority to continue its role as a lead manager for existing mandates for a period of 60 days.

In response to SEBI's directive, JM Financial assured its commitment to collaborating with the investigation, as stated in a filing to the stock exchanges.

The regulatory scrutiny follows recent actions by the Reserve Bank of India (RBI), which prohibited JM Financial Products Ltd from extending any form of financing against shares and debentures, including loans against initial public offerings (IPOs).

SEBI's investigation was prompted by a routine examination of non-convertible debentures (NCD) public issues conducted in 2023. The focus of the inquiry centered on the activities of JM Financial and its affiliated entities in a specific debt issue.

In its interim order, SEBI expressed dismay at how subscriptions were managed during the public debt securities issue, characterising it as "shocking." The regulator highlighted a systematic approach wherein transactions were orchestrated to ensure subscription and success.

SEBI observed that JM Financial and its related entities allegedly facilitated an assured exit for certain investors at a profit, thereby incentivising their participation in contravention of regulatory mandates. This scheme involved enticing individual investors, who may not have otherwise participated, by assuring them of a profit upon listing.

While SEBI scrutinised one instance, examination of investors' bank statements operated through Power of Attorney (PoA) by JM Group entities suggested a widespread practice across various public issues.

The recurring pattern of transactions indicated that such practices were not isolated incidents but rather systemic in nature, SEBI noted.

(With PTI inputs.)