Castor seeds case: Sebi provides leeway for a trading member
Sebi today allowed a commodities trading member, which was barred in the castor seed contracts matter, to sell securities from its demat account towards repaying a loan.
The relaxation has been extended to Neer Ocean Multitrade Pvt Ltd (NOMPL) to utilise sale proceeds of securities lying in its demat account "only to clear the outstanding loan (along with accrued interest) from KMIL", Sebi said in an order.
The ruling follows NOMPL's request seeking permission to liquidate the stocks lying in its demat account to the extent of outstanding loan of Kotak Mahindra Investment Ltd (KMIL).
As on September 22 this year, the amount was little over Rs 25.45 lakh.
NOMPL was among the entities against whom action was initiated for alleged irregularities in the trading of castor seed contracts on the NCDEX during January 2016.
Citing its order issued in December 2016, Sebi said it had already permitted NOMPL to sell remaining securities lying in its demat accounts under the supervision of stock exchanges and deposit the proceeds in an interest bearing escrow account with a nationalised bank.
This was subject to the condition that securities of the companies that are suspended from trading by the concerned stock exchange would not be sold.
In its eight-page order today, Sebi also expressed its views on another aspect regarding the NOMPL's demat account.
The trading member had submitted that all the securities lying in the particular demat account that was opened specifically for keeping the securities bought out of the loan raised from KMIL and are encumbered since they are kept as security by the latter against the outstanding loan.
According to Sebi, NOMPL had also executed a Power of Attorney in favour of KMIL for operating the demat account.
"In this regard, I find that the said arrangement between NOMPL and KMIL... cannot be recognised as creation of a valid pledge on the shares lying in the demat account since the same is not in accordance with the provisions of Sebi (Depositories and Participants) Regulations, 1996," Sebi Whole Time Member Madhabi Puri Buch said in today's order.
The agreement was for opening of a specific demat account for keeping the securities bought out of the loan amount and execution of a Power of Attorney in favour of KMIL for operating the said account.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)
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