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Move National Securities Clearing Corp for trade annulment: SAT tells IL&FS Securities

Press Trust of India  |  New Delhi 

The Wednesday directed to approach National Securities Corporation regarding its plea for annulment of certain trades that were executed for

IL&FS Securities, a member, had contended that of trades were done on the basis of fraudulently transferred collateral by Allied Financial and sought annulment of certain trades.

In its 16-page order, the tribunal also said that cannot deny IL&FS Securities the opportunity to be heard as it was a party affected by the irregularities committed by Allied Financial.

IL&FS Securities is part of crisis-hit IL&FS group.

In November 2017, both entities entered into a member-trading member agreement, wherein Allied was obligated to place the margin with IL&FS Securities. The latter was clearing the trades of Allies in Futures & Options (F&O) segment of the National Stock Exchange.

The mutual funds provided by Allied were transferred to IL&FS Securities Services' and then to the approved account of NCL.

The issue pertains to Allied selling certain F&O contracts on Nifty in December 2018 and it was alleged that Allied also received an upfront premium of around Rs 380 crore. IL&FS Securities was required to clear the contracts using the mutual funds.

Before the mutual funds could be utilised, passed an order in February 2019 against Allied and other entities for various irregularities.

Mutual funds of Novjoy Emporium Private Ltd, and were alleged to be illegally transferred by Allied to as a collateral for margins of Allied. In this case, the Economic Offence Wing (EOW) directed IL&FS Securities not to deal with the securities till further orders.

The EOW's direction has been challenged by IL&FS Securities before the

IL&FS Securities moved the tribunal after rejected its plea to modify the February order passed against Allied and other entities.

In its appeal, IL&FS Securities also sought annulment of the trade undertaken by Allied in December 2018.

Noting that IL&FS Securities is a clearing member and not a trading member, the tribunal asked the company move an appropriation application to for annulment of the trade.

"If such an application is filed, the said clearing corporation will decide the matter at the earliest after hearing all concerned parties," it noted.

Sebi's ex-parte interim order against Allied Financial and other entities had observed that Allied Financial committed various violations by misappropriating clients securities which need to be returned.

"Such securities were given to the appellant (IL&FS Securities) as collateral to square off the trades of Allied.

"In our view, the appellant is an affected party. We thus, leave it as that and hold that in the event the appellant applies for being heard and for protection of its interests the Whole Time Member of Sebi cannot deny the opportunity of it being heard," the tribunal said.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, May 15 2019. 20:26 IST
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