ED summons top brokers in NSEL money-laundering case

Asks them to appear before it for questioning on Monday

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The Enforcement Directorate (ED) has summoned nine brokers for questioning in connection with the National Spot Exchange Ltd (NSEL) money-laundering case, said a senior ED official.

The brokers have been asked to appear before the ED on Monday.

This is the first time senior officials from brokerages such as Motilal Oswal Financial Services, India Infoline Commodities, Geofin Comtrade and Phillip Commodities are being called for questioning.

Two year ago, three executives of leading brokerage firms Anand Rathi Financial Services, Geojit Comtrade and India Infoline were arrested by the Economic Offences Wing (EOW) of the Mumbai police, and later released on bail.

When contacted, Motilal Oswal, IIFL and Philip Commodities did not respond. A Geofin Comtrade spokesperson told Business Standard, "We are not aware of such development. Earlier, we had attended, and if in future we are called again, we will have to appear."

An ED official said: "We suspect that brokers were working in close co-ordination with some top officials at NSEL and its group entities, while many of the investors could also have been in the loop about such structured products being in contravention of the extant norms. We are looking at certain clues on unauthorised changes made on NSEL servers. The names of clients on NSEL servers were found to be different from those in brokers' records."

The ED is recording the statements of key officials of NSEL and FTIL management but these have to be cross-verified. "Besides, client code modification for those trading exclusively on NSEL and funding of clients through non-banking finance companies and their unexplained write-offs are also being examined," said official.

Apart from the ED, the Securities and Exchange Board of India and the EOW of the Mumbai Police are also investigating the case, and looking into brokers' roles in the matter. A committee appointed by the Bombay HC also had raised doubts on the role of brokers and recommended audit of books of leading brokers.

According to NSEL disclosures, subsidiary Indian Bullion Markets Association had the highest exposure to NSEL at Rs 1,159 crore, in June 2016. Other brokers with high exposure include Anand Rathi (Rs 629 crore), India Infoline Commodities (Rs 326 crore), Geofin Comtrade (Rs 313.25 crore), Systematix Commodities Services (Rs 277 crore), Motilal Oswal Commodities (Rs 263 crore) and Phillip Commodities (Rs 140 crore). However, some of these dues have been paid to the brokers.

"The ED registered a criminal case under the Prevention of Money Laundering Act in 2013 to probe the case. So far, it has made an attachment of Rs 800 crore in the case. A supplementary charge-sheet could be expected," added the ED official.

The NSEL crisis had led to payment default of Rs 5,600 crore in July 2013, involving 23 borrowers.