The order comes two days after the Reserve Bank of India (RBI) halted JM Financial Products, a subsidiary of JM Financial, from extending loans against shares and debentures, including sanction and disbursal of loans against initial public offering (IPO) and non-convertible debentures (NCDs).
In its interim order, the markets regulator said that JM Financial as lead manager had violated key code of conduct' guidelines, including creation of a false market and price rigging or manipulation of an issue.
"Such practices have detrimental effect on the orderly functioning of the market and harm the interest of the ordinary investors. They also distort the functioning of price discovery mechanism in the securities market. Given the same, there is an urgent need for the regulator to step in and ass interim directions, pending investigation, to prevent any further erosion in market integrity by virtue of such practices," said the Sebi's order.
Sebi said that the observations made in the order are based on the material available on record and that the investigation into this matter will be completed in six months.
However, JM Financial may continue to act as a lead manager for public issue of debt securities for a period of 60 days.
In an exchange filing, JM Financial said, "The quantifiable financial impact on the company cannot be ascertained at this point in time. The company shall fully cooperate with Sebi in this investigation." Modus operandi
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