Sebi suspects money laundering by brokers in NSEL scam

Sebi had on April 4 given brokerages 60 days' time to have their books vetted

The Securities and Exchange Board of India (Sebi) has come across fresh evidence indicating that as many as five brokers might have used the 'exchange mechanism' to launder money in the Rs 5,574-crore National Spot Exchange (NSEL) scam, according to the audit report submitted to it.

The third-party auditor appointed by Sebi has submitted its audit finding to the regulator, said a person with direct know of the matter.

The market regulator had on April 4 given brokerages 60 days' time to have their books vetted by them.

"We are examining the audit report we received in the matter. Accordingly, we would issue showcause notice to the respective entities," said a Sebi official.

According to the audit findings, these five brokers have allegedly sold the products of NSEL with the promise of assured returns of 16 per cent. The report contains the fund flow analysis, which apparently shows a clear nexus between brokers, NSEL and defaulting clients, said the person cited above.

Some of the brokers had facilitated loans to investors through their non-banking financial companies despite being aware that there were no such goods with the borrowers/defaulters.

The transactions that happened were very complex in nature, and all the entities involved were used to trading on the NSEL platform with the intent to legitimise the funds, the person added.

The report also cites instances of misuse or unauthorised modification of unique client code. Instances of discrepancies and manipulation of books of accounts need to be verified further, it said.

Apart from Sebi, the Enforcement Directorate (ED) and the Economic Offences Wing of the Mumbai Police are investigating the case, and looking into brokers' roles in the matter. A committee appointed by the Bombay High Court had also raised doubts on the role of brokers and recommended audit of books of leading brokers. The ED had summoned nine brokers for questioning in the case.