Forensic auditor appointed for SEBI's Allied Financial Services & 7 entities case

Regulator Sebi Friday refused to lift the market ban imposed on Allied Financial Services and seven entities in a case of alleged misappropriation of clients' securities. However, the watchdog revoked the directions against three former directors -- Rajeev Kumar Asopa, Lalit Agarwal and Rajendra Prasad Basia -- of the company in the same case.

In an interim order in February, Sebi barred Allied Financial and ten others from securities market till furthers directions besides imposing various other restrictions. The ruling had come after Sebi found that mutual funds of Novjoy Emporium Pvt Ltd, OCL India Ltd and Dalmia Cement East Ltd were allegedly transferred illegally by Allied to IL&FS Securities Services as collateral for margins of Allied.

Further, various other violations were found to have been committed by the Allied. In its confirmatory order on Friday, the regulator said there is no case for revocation of the directions passed against Allied and seven entities, including two directors Awanish Kumar Mishra and Jitendra Kumar Tiwari.

Others are Money Mishra Financial Services, Money Mishra Overseas and two partners at Digi locker -- Pankaj Garg and Jitender Malhotra. "Further proceedings, if any, initiated based on findings of a forensic audit by NSE/ Sebi investigation shall take place before the competent Whole Time Member," the regulator said in the order.

The NSE has appointed a forensic auditor to look into the matter and Sebi probe is also underway. In addition, Sebi said rejected a request of Allied regarding the annulment of a particular trade.

In April, Allied requested Sebi to annul certain contract expiring in June citing that those cannot be hedged due to the regulator's interim order. The request cannot be entertained in the present proceedings, Sebi said on Friday, adding that such requests for annulment of trades are dealt by stock exchanges or clearing corporations in accordance with their bye-laws.

Sebi also cited the latest ruling by the Securities Appellate Tribunal regarding the annulment of trade. In an order on Wednesday, the tribunal directed IL&FS Securities Services to approach National Securities Clearing Corporation regarding its plea for annulment of certain trades that were executed for stockbroker Allied Financial Services.

Noting that IL&FS Securities is a clearing member and not a trading member, the tribunal had asked the company to move an appropriation application to National Securities Clearing Corporation 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," the tribunal had said.

(With inputs from agencies.)