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After the arrests of some officials of the beleaguered National Spot Exchange Ltd (NSEL) and its leading borrowers, the economic offences wing (EOW) of the city police here has initiated investigations against the 150-odd brokers through which investors had dealt with NSEL contracts.
The EOW has told NSEL to give it, by Tuesday, details of the past five years, of investors through the exchange-appointed broking firms, along with facts on the margin money taken by them from clients.
It has also sought details of financing/funding made by the brokers to the NSEL investors, either directly or through non-banking finance companies (NBFC) arranged by them, along with the position on dues of investors as on March 31 and August 31 this year.
The idea is to check if the brokerages had used ‘margin funding’ for trading on NSEL. Brokers are key for putting through orders on the exchange platform.
This action follows a complaint by Pankaj Ramnaresh Saraf against NSEL, its directors, the Financial Technologies (FTIL) parent group, its directors, borrowers, brokers and others for allegedly committing several acts of forgery and criminal breach of trust, pursuant to a criminal conspiracy.
The EOW had earlier arrested key officials of NSEL including its ex-managing director, Anjani Sinha, and officials Amit Mukharjee and Jai Bahukhandi. It also arrested the heads of its large borrowers, N K Proteins and Lotus Refineries. EOW also probed the books of accounts of leading brokers linked with the NSEL case. The EOW letter also seeks details regarding the total amount of brokerage received from the investors who traded in NSEL, including clearing and forwarding charges, warehousing charges, advisory charges and others. Also, details of any amount parted with and received by NSEL from these receipts are to be provided.
Brokers who’d done business exceeding Rs 1 crore a year on NSEL will also have to file a copy of their ledger accounts. NSEL has already written to the 150-odd brokers, seeking these details. Of the Rs 5,600 crore of dues on NSEL, the top 10 brokers account for 80 per cent.
Brokers sold the commodities’ forward contracts on NSEL to their investors as lucrative investment products.
“The brokers charged Rs 100 per lakh as brokerage and huge commissions from investors, apart from brokerage fees, warehouse receipts fees, rollover charges etc. They charged Rs 25 per lakh of transaction to their clients. Margin charges of the brokers were much higher at 10% as compared to 3% charged by the exchanges,” trade sources said.
Sources believe brokers may have earned around Rs 1200 crore in interest from dealing in NSEL products.
Some of the commodity brokers with an outstanding on NSEL who were also the Clearing & Forwarding (C&F) agents in various states are Anand Rathi Commodities, Motila Oswal Commodities Brokers, Arihant Futures & Commodities, Purvag Commodities, Pace Commodities, Airan Commodities, Chinmay Financial, Jhaveri Credits and Capital, Time leverage Instruments and Sincere Commodities.
Brokers sold the commodities forward contracts on NSEL to their investors as lucrative investment products / structured financial products, garnering fully secure and fixed 12-18% annualised returns under portfolio management services (PMS).
· EOW writes to NSEL seeking account details of top 30 brokers
· Seeks sources of investment – own or NBFC
· Details of charges received by brokers
· NSEL to furnish details by Tuesday
· Top 10 brokers owes 80pc of Rs 5600 crore outstanding dues
