JM Financials Tanks Over 9% As SEBI Bars Firm From Being Lead Manager For New Debt Issues

Shares of JM Financials dropped over 9 per cent in early trade on Monday after the capital market regulator Securities and Exchange Board of India (Sebi) barred the company from acting as a lead manager for any new public issue of debt securities.

The scrip dropped as much as 9.82 per cent to Rs 79.30 apiece on the BSE. JM Financial shares have fallen more than 17 per cent in the past one week after sanctions from the Reserve Bank of India (RBI) on one of its group entities and now the latest Sebi order.

In an interim order on March 7, SEBI, however, said JM Financial may continue to act as a lead manager for public issue of debt securities for a period of 60 days from the date of the order.

The capital markets regulator said the order was based on the material available on record and that the investigation into this matter would be completed in six months.

The order followed an investigation into the roles of parent company and merchant banker JM Financial’s wholly-owned subsidiary and broker JM Financial Services and subsidiary, and a non-banking financial corporation JM Financial Products in a debt issue.

In the debt issue, every transaction was done in a “pre determined and pre-meditated manner; and executed clinically to ensure subscription and success”. According to the regulator, it resulted in market integrity and fair-price discovery being compromised.

The order comes a few days after the Reserve Bank of India (RBI) stopped JM Financial Products from giving loans against shares and debentures, including sanction and disbursal of loans against initial public offering of shares, with immediate effect.

Announcing the decision on March 5, the RBI said the action was taken after observing certain serious deficiencies in the financial services firm’s loan process. The banking regulator said there were serious concerns on the governance issues in the company apart from violation of regulatory guidelines.