IL&FS Securities Services pays Rs 7.8 lakh to settle case with Sebi

IL&FS Securities Services Ltd has settled with markets regulator Sebi a case of alleged violation of market norms in respect of its risk participation arrangement with IL&FS Financial Services Ltd. The firm paid Rs 7.8 lakh towards settlement charges, as per a settlement order issued on Wednesday. IL&FS Securities Services is a clearing member of the National Stock Exchange and is also registered with Sebi, while IL&FS Financial Services is registered with the Reserve Bank of India as a non-banking financial company (NBFC).

IL&FS Securities Services Ltd has settled with markets regulator Sebi a case of alleged violation of market norms in respect of its risk participation arrangement with IL&FS Financial Services Ltd. The firm paid Rs 7.8 lakh towards settlement charges, as per a settlement order issued on Wednesday.

IL&FS Securities Services is a clearing member of the National Stock Exchange and is also registered with Sebi, while IL&FS Financial Services is registered with the Reserve Bank of India as a non-banking financial company (NBFC). IL&FS Securities Services had provided certain support services to IL&FS Financial Services other than its primary business activities, the order noted.

The firms entered into a risk participation arrangement wherein IL&FS Securities Services agreed to proportionately provision for any loan account sourced by it, if such account became a special mention account or a non-performing account or was categorised as an account for which IL&FS Financial Services was subjected to provisioning. As per the arrangement, the proportionate provision amount could be deducted from the service fees due to IL&FS Securities Services. If the provisioning amount was greater than the service fees, the provisioning amount could be deducted from any subsequent service fees due to IL&FS Securities Services or be required to be paid out by the firm pursuant to a notice by IL&FS Financial Services.

The arrangement was allegedly in violation of the Securities Contracts (Regulation) Rules. However, IL&FS Securities Services filed a settlement application to proposing to settle the enforcement proceedings that could be initiated for the alleged violation.

The high-powered advisory committee of Sebi considered the proposed settlement terms and recommended the case for settlement upon a payment of Rs 7.8 lakh towards settlement charges. The amount was remitted by the firm in October, the order noted.

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