Motilal Oswal, IIFL Holdings tank 5-9% after SEBI declares commodity arms as 'not fit and proper'

Motilal Oswal Financial Services shares fell 5 percent and IIFL Holdings plunged 9 percent in morning on Monday after market regulator SEBI declared their commodity broking subsidiaries as 'not fit and proper'. It is a part of action by the regulator in the NSEL case.

IIFL Holdings was quoting at Rs 354, down 3.11 percent and Motilal Oswal Financial Services was down 3.9 percent at Rs 588.45 on the BSE, at 09:49 hours IST.

SEBI is investigating as many as 300 brokers on charges of colluding with NSEL to defraud investors. In the NSEL case, the exchange was found to have not maintained sufficient underlying stock on trades it allowed, even as brokers sold lucrative contracts to investors. In 2013, the exchange defaulted on payments worth Rs 5,600 crore.

SEBI asked clients of the commodity broking firms to withdraw or transfer their securities held with the brokers within 45 days without any additional cost.

Over the past few years, however, several brokers, including Motilal Oswal and IIFL have moved their commodity broking arm under the same unit that operates stock broking under SEBI’s unified licence regime.

While SEBI’s 'not fit and proper' status applies to the commodity arms, it is unclear in terms of what it would mean for the unified broking business of the firms.

IIFL has clarified that its commodity broking firm, India Infoline Commodities (IICL), does not have any outstanding dues to any clients, nor does not it have any proprietary position.

"However, IICL is seeking legal advice as regards to going for an appeal, in this matter," the company said in a release, adding the has no impact on businesses of other companies of IIFL Group.

The Motilal Oswal Commodities Broker Private Limited also said it is in consultation with its lawyers to explore legal options before it.