Sebi initiated proceedings under Intermediaries norms and appointed a designated authority (DA) to look into the matter.
Markets regulator Sebi on Friday disposed of proceedings against IL&FS Financial Services Ltd without issuing any direction against it in a matter pertaining to alleged violation of underwriter norms. The firm is a Sebi registered underwriter. The order came after Ministry of Corporate Affairs (MCA) forwarded a report to Sebi to ascertain if the underwriter, which is a 100 per cent subsidiary of Infrastructure Leasing & Financial Services Ltd (IL&FS), was qualified to be a “fit and proper person” to continue as a Sebi registered intermediary.
Serious Fraud Investigation Office (SFIO) had conducted an investigation into the affairs of Infrastructure Leasing & Financial Services Ltd (IL&FS) and its subsidiary companies responsible for the credit crisis.
It had submitted its report to the MCA which was subsequently forwarded to Sebi. The report has pointed out various irregularities, showing apparent violation of various provisions of the Indian Penal Code, Companies Act, 1956, the Companies Act, 2013 and the RBI Act, 1934, leading to raising of integrity issues in respect of IL&FS Financial Services.
Sebi initiated proceedings under Intermediaries norms and appointed a designated authority (DA) to look into the matter. The DA submitted report in May 2020 and concluded that IL&FS Financial Services was no longer a fit and proper person as required under market norms.
Further, the DA in his report recommended that the certificate of registration of the firm be cancelled. The fit and proper person requirements have to be met on a continuous basis, since compliance with the same is mentioned as one of the conditions for grant of registration under Underwriters Regulations, Sebi noted.
However, after taking into consideration the submissions of IL&FS Financial Services, Sebi concluded that it has never undertaken activities as an underwriter from the date of grant of certificate of registration since January 2009 and had submitted a request to Sebi for surrender of certificate of registration prior to initiation of the proceedings.
“No meaningful purpose would be served by continuing with the instant proceedings against the Noticee,” Sebi said. Noticee refers to IL&FS Financial Services Ltd.
Hence, without going into the merit of the issue at hand, Sebi has dispose of the proceedings without issuing any direction against.