Commodity trading brokerages found to be unfit by Sebi plan to continue with business courtesy a 'unified broking license' given to them and the markets regulator will be a key monitorable going ahead.
In a report Wednesday, domestic ratings agency Icra said it will "monitor" the Sebi orders of last month on the five brokerages.
The agency said it rates only three -- Motilal Oswal Commodities Broker (MOCBL), India Infoline Commodities (IIFLCL) and Phillip Commodities India (PCIPL).
"They intend to continue the commodity trading business through their equity broking companies, which now are armed with a unified broking licence since September 2015," the agency said, basing it on its discussions with the companies.
The unified license allows a company to conduct trades in equities, currency as well as commodities, as opposed to the earlier regime, whereby the commodities broking business had to necessarily be conducted through a separate entity, it explained.
However, the SEBI order clearly states that these entities cannot conduct the commodities broking and commodity derivatives trading businesses, either directly or indirectly.
"The regulators view on conducting the same business in a separate legal group entity needs to be further examined," it said.
The other critical aspect to monitor will be if the scope of investigation is expanded to include any of the other group entities as an extension of the fit and proper person ruling, as the other group entities have similar promoters and can have common directors and management, it said.
Any potential negative impact on other core businesses of these groups including broking, lending, wealth management and distribution businesses because of the reputational and franchisee risks emerging from this event will also be a key monitorable, it said.
In two orders dated February 22 and 28, Sebi found five entities "not fit and proper" to conduct commodities broking on account of their role in the National Spot Exchange Limited (NSEL) settlement crisis in 2013, which brought nearly 300 brokers under the SEBI scanner.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)
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