Mumbai-based Action Financial Services (India) Ltd (AFSL), a listed company, which in October last year closed its business, has been declared as defaulter member and expelled by the National Stock Exchange (NSE).
Similarly, NSE Clearing Ltd has also declared AFSL as defaulter. The exchange has also advised investors to file their claims within three months.
In a public notice, NSE says, "...Action Financial Services has been declared defaulter under Byelaws 1(a) of Chapter XII of the Byelaws of the Exchange and expelled under Rules 1 and 2 of Chapter IV of the Rules of the Exchange."
In a statement, NSE Clearing says, following AFSL being declared by other exchange and clearing corporations, it has declared AFSL as defaulter in accordance with SEBI circular issued on 17 March 2010.
NSE has also asked investors of Action Financial Services to submit their claims within three months online on its website
(hhttps://investorhelpline.nseindia.com/NICEPLUS/welcomeuser) and upload relevant documents. Investors can file their claims offline as well after downloading forms and submitting it physically at NSE offices from across the country.
"All claims submitted by investors will be considered for processing if found due and payable in accordance with Rules, Byelaws, Regulations and Guidelines of the Exchange, SEBI circulars and Regulations and the maximum compensation limit per investor is Rs25 lakh out of the Investor Protection Fund (IPF)," the Exchange says in a public notice.
In a regulatory filing in September last year, Action Financial Services says, "...we are a trading member registered in capital market, equity derivatives, currency derivatives segment of the NSE and capital market segment of the BSE. We have voluntarily requested the membership departments of the BSE and NSE on 18 September 2020 to disable our trading terminals in all segments from closing of trading hours on Friday, 18 September 2020."
A few days later, the company decided to dispose of its depository business. A resolution passed in its board meeting says, "...having received the approval of the audit committee, the consent of the board be and is hereby accorded to sell or dispose of the depository business of the company, taking into consideration the estimated investment being less than 20% of net-worth as per the audited balance sheet as on 31 March 2019, and estimated income being less than 20% of total income during the previous financial year, as continuing with the said business may be detrimental/ disadvantageous to the interest of the company and its stakeholders."
Several investors are finding it difficult to access their account details and are not being given pool account shares and money, despite contacting top management, including Milan Parekh who is chairman and managing director (CMD) of the brokerage.
AFSL has also witnessed the exit of independent directors. Earlier this month, Harbhajan Singh Dhillon and Bindiya Joshi, both independent directors, resigned from AFSL. While Mr Dhillon cited prolonged illness, Ms Joshi clearly stated that she resigned due to "personal reasons as well as owing to the decision of the company to voluntary close the membership registration with the BSE and NSE."
Earlier on 25 August 2020, its joint managing director (Jt MD) and chief financial officer (CFO) Bakul Parekh resigned. Bakul Parekh is one of the promoters of AFSL along with his brother Milan Parekh. This explains why despite resigning as Jt MD and CFO, Bakul Parekh remains as non-executive, non-independent director of AFSL.
While there was so much action happening in AFSL, market regulator Securities and Exchange Board of India (SEBI) was either too slow to act or not bothered at all.
Set up in 1992, AFSL is in the retail broking business and had membership of the NSE, BSE and National Securities Depository Ltd (NSDL).
AFSL has two subsidiaries, Action Securities Ltd and Action Commodities Ltd, which are yet to start full-fledged operations. AFSL has not yet declared its financial results for the year ended in March 2020.