SEC charges four Indian brokerages with violating rules

Ambit, Edelweiss, JM, Motilal to pay $1.8-billion disgorgement

US financial market regulator the Securities & Exchange Commission (SEC) on Tuesday charged four Indian financial services firms with providing brokerage services to US-based institutional investors without getting registered with it. The four firms — Ambit Capital, Edelweiss Financial Services, JM Financial Institutional Securities and Motilal Oswal Securities — will pay a total of $1.8 million as disgorgement — or, repayment of profits to regulators earned through questionable means — to SEC, a release said.

SEC said Ambit agreed to pay disgorgement and prejudgment interest totalling $30,910. Edelweiss agreed to pay $568,347, JM Financial agreed to pay $443,545 and Motilal agreed to pay $821,594.

“ In their respective settlements, the firms agreed to be censured while neither admitting nor denying the SEC’s charges,” said the release, which was uploaded on the SEC website late on Tuesday.

The US securities markets regulator said these unregistered firms conducted sponsored conferences in that country, had employees travel regularly to the US to meet with investors, traded securities of India-based issuers on behalf of US investors and participated in securities offerings from India-based issuers to US investors.

SEC took a stance that these brokers did not meet the requirements for an exemption as a “foreign broker-dealer” and they should have been registered with it as one.

“The broker-dealer registration provisions are critical safeguards for the integrity of our securities markets,” said Scott W Friestad, Associate Director of the SEC’s Division of Enforcement, in the release. “These four firms and all other foreign broker-dealers must educate themselves on the US laws and regulations when they provide services to US investors.”

The SEC’s investigation will continue to look for potential violations at other firms, the release said.