MPID Court declares NSEL brokers as deposit taking institutions

The MPID (Maharashtra Protection of Interest of Depositors) Court has declared stock brokers involved in the NSEL payment crisis as deposit taking financial establishment under MPID Act.

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In its ruling MPID Court has named 16 brokers including Motilal Oswal Commodities Brokers, Philip Commodities India, Nirmal Bang Commodities, Suresh Rathi Commodities, JM Financial Commtrade, Systematix Commodities Services, KR Choksey Commodity Brokers and Roongta Comtrade for accepting money from investors and failed to repay the same.

The money accepted from investors and brokers respectively fall under the definition of Sec 2 (c) and 2(d) for Deposit Taking and Financial Establishment under MPID Act.

The MPID Court’s observation pave the way for State Government to attach properties of brokers having been declared Financial Establishment by designated MPID Court.

Taking cognizance of 11 charge sheets filed by the Economic Offences Wing of Mumbai Police on April 18, the MPID Court had summoned 16 brokers, their 49 directors and entities.

On Monday, the Court ordered these entities to furnish cash bond of ₹50,000 and not to travel out of the country without informing the Court.

The EoW has charge sheeted brokers for misrepresenting their clients with wrongful, misleading statements leading to enticement for investments in NSEL products.

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It also noted that the brokers misled their investors/clients by assuring risk-free returns and through presentation, marketing materials, brochures or word of mouth induced the investors/clients to trade on NSEL by offering risk-free returns.