Modex Securities: BSE Asks Investors with Outstanding Claims To File Their Claims
Investors of Modex International, a brokerage firm, which has apparently duped investors of around Rs100 crore can finally hope to get some money from stock exchange investor protection funds.  Although the largest default was on the National Stock Exchange (NSE), the Bombay Stock Exchange (BSE), which also had some client losses due to the default, has issued a public notice calling for investors with outstanding claims against Delhi-based Modex International Securities to file their claims.
 
NSE declared Modex a defaulter last month and the formalities of compensating investors from the investor protection fund have begun after that. 
 
The public notice says “Investors having any outstanding claims against Modex International Securities Ltd are advised to file their claims with BSE within 90 days from the date of issue of the notice i.e by 17 December 2020.”
 
The eligible claims filed during the specified period would be considered for compensation from the IPF as per the SEBI (Securities and Exchange Board of India) provisions to the maximum extent of Rs15 lakh per client.
 
As per this notice, investors can file their claim against Modex International at the concerned regional investor centre of BSE Ltd (list available at this link https://www.bseindia.com/static/investors/cac_tm.aspx )
 
The notice adds that investors can alternatively lodge their claims through the BSE website under the Complaint Registration link given here :
 
Investors have been advised to go through the documentation required for filing their claims against the defaulter by going through the detailed checklist here
 
Investors have also been advised to go through the norms for the eligibility of claims for compensation fro IPF to the clients of the defaulter at the following link: https://www.bseindia.com/downloads1/Normseligibilityclaimsdefaultermember.pdf
 
Investors filing their claims after the specified period would be required to provide reasons for delay in filing their claims and will need to satisfy the IPF that the claims could not be filed during the specified period for reasons beyond the claimant’s control. 
 
In May 2020, Moneylife had written about the misappropriation of about 100 crores of client money in Modex International. Last month, National Stock Exchange (NSE) had expelled Modex International Securities Ltd from its membership.  This happened after market regulator SEBI refused to lift the ban imposed on Modex International Securities and its two directors for misusing clients' funds and securities.
 
BSE has also posted another notice, which says that trading in Modex International Securities will be suspended with effect from 21 October 2020 on account of non-compliance with Regulation 33 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 for two consecutive quarters i.e. December 2019 and March 2020. 
 
The notice adds that this includes “freezing of the entire shareholding of the promoter and promoter group in the noncompliant listed entity as well as all other securities held in the demat account(s) of the promoter and promoter group w.e.f September 29, 2020 till further notice.”
 
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    mr.singhvi

    2 weeks ago

    when will NSE will take action against, KARVY , who have also, duped investor, as defaultor, and put up the notice against them as above, so that investor like us can file claim against KARVY.

    Bombay High Court: Investors Plead for Multi-Agency Special Investigation Team Probe into Rs1,300 Crore Anugraha Scam
    In a petition before the Bombay High Court, hundreds of investors of Anugrah Stock & Broking Ltd have come together to demand the setting up of a multi-agency special investigation team so that the assets are consolidated and auctioned efficiently. The petition has made the National Stock Exchange (NSE), the NSE Clearing Corporation and Edelweiss Custodial Services as respondents. 
     
    The petitions (CRI WPST/2876/2020 and CRI WPST/2878/2020) were listed before Justice SS Shinde and Justice MS Karnik on 13 October 2020. The high-profile case had advocate Yusuf Iqbal Yusuf representing several hundred investors who have come together to try and recover their money. The amount involved and believed to be lost exceeds Rs1,300 crore. Moneylife has covered the details of this case extensively. Our articles can be read here:  https://www.moneylife.in/tags/anugrah.html
     
    Following a detailed hearing, the Bombay High Court, while hearing the Anugrah Stock & Broking Pvt Ltd fraud case, has asked the public prosecutor to submit status report on investigation being carried out by economic offences wing (EOW) of Mumbai police and the enforcement directorate (ED).
     
    During the hearing, senior counsel Amit Desai, representing NSE, contended that there was no need to implead NSE in this matter. However Adv Yusuf submitted that NSE had the investor protection fund (IPF) which cover losses for investors up to Rs25 lakh per investor and urged the Exchange to be asked to release this amount immediately so that relief can be provided to the small investors. 
     
    Appearing for Edelweiss Custodial Services Ltd, counsel Sameer Pandit claimed that Edelweiss Custodial Services was not a party to the fraud, had no contractual relations with investors of Anugrah and, therefore, investors should opt for arbitration. 
     
    Similar objection was raised by senior counsel Venkatesh Dhond, representing NSE Clearing Ltd. 
     
    However, advocate Yusuf pointed to a circular, issued by SEBI (Securities and Exchange Board of India), which explains the role of the depository and clearing member in ensuring that individual securities are not sold for meeting other obligations.
     
    After the hearing, the bench posted the matter for 19th October, while asking the PP (public prosecutor) to submit status report of EOW and ED investigations.
     
    The bulk of investors in Anugrah have come through an associate firm, called Teji Mandi Analytics, which was apparently running a derivatives portfolio of over Rs1,000 crore like a Ponzi scheme with assured monthly returns. 
     
    On 4th September, the National Stock Exchange (NSE) had withdrawn all trading rights of crisis-hit Anugrah Stock and Broking Pvt Ltd. Earlier on 1st September, the stock exchange had withdrawn Anugrah's trading rights in future & options (F&O), currency derivatives and commodity derivatives segment.
     
    In a circular, NSE says, "On account of the regulatory concerns observed, the relevant authority of Exchange has decided to withdraw the trading rights of the member in all segments of the Exchange with immediate effect. Accordingly, in addition to the aforementioned segments, Anugrah Stock & Broking Pvt Ltd shall also be disabled in all other segments of the Exchange from 4 September 2020 before market hours."
     
    Anugrah Stock and Broking, which won a reprieve from Securities Appellate Tribunal (SAT) on 17th August, was unable to deposit Rs165 crore with the NSE by 1st September. The Exchange then had withdrawn its trading rights and also seized its computers and books, the brokerage firm has told investors thronging to its office. 
     
    Last month, the EOW of Mumbai police has registered a case of cheating against the troubled stock-broking house, Anugrah Stock & Broking Pvt Ltd, for duping an investor of Rs8 crore. As Moneylife has reported in the past, the extent of investor losses in Anugrah could be as high as Rs1,000 crore and investigators have confirmed that more complaints having been subsequently coming to the EOW.
     
    The case was registered by Ashutosh Shah at Juhu police station against the firm’s director Paresh Kariya, and Kalap Shah and Anil Gandhi of Teji Mandi Analytics and others, under criminal breach of trust and criminal conspiracy. However, no arrests have been made yet.

     

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    mr.singhvi

    2 weeks ago

    let us form an investors association cheated by karvy, and file a case against them in High court, otherwise they will siphon off the Assets, and investors will be left with nothing.

    SEBI Restricts Retail Investors from Investing in Fresh AT1 Bond Issues of Banks
    The Securities and Exchange Board of India (SEBI) has now tightened rules for fresh issues of AT1 (additional tier-1) bonds issued by banks, to restrict retail investors from investing in them. The new rules for issuance, listing and trading of these perpetual non-cumulative preference shares (PNCPS) and innovative perpetual debt instruments (IPDIs)/ perpetual debt instruments (PDIs) (commonly referred to as AT1 bonds/instruments) will come into effect from 12 October 2020. This will protect retail investors from investing in these highly risky instruments. Last week Moneylife reported how blatant mis-selling of these AT1 bonds continues at the distributor and agent level. 
     
    AT1 bonds have come under a long shadow in the wake of the Yes Bank event where the entire value of the Bank’s AT1 bonds (Rs8,415 crore) was written-off when the rescue package led by ( the State Bank of India (SBI) was announced; investors in these bonds lost all their money. SBI’s AT1 bonds, which yield more than SBI’s fixed deposits, are being hawked in a similar manner. Several distributors and agents are wrongly advertising these bonds with claims that AT1 bonds are better than fixed deposits. Hundreds of retail investors have complained about the mis-selling of these instruments. The new changes in rules seem to be an effort to address this mis-selling to the average non-savvy retail investors, as exposed by Moneylife.
     
    SEBI has also made it mandatory for banks to issue AT1 bonds on the electronic book provider (EBP) platform irrespective of issue size. "The issuance of AT1 instruments shall be done mandatorily on the EBP platform irrespective of the issue size," it said.
     
    In the latest circular issued on 6th October, SEBI has announced the following rules: 
     
    "1. The issuance of AT1 instruments shall be done mandatorily on the electronic book provider (EBP) platform irrespective of the issue size. 
     
    2. Issuers and stock exchanges will ensure that only qualified institutional buyers (QIBs) are allowed to participate in the issuance of AT1 instruments. 
     
    3. The minimum allotment of AT1 instruments shall be Rs one crore.
     
    4. The minimum trading lot for AT1 instruments shall be Rs one crore."
     
    The market regulator has also specified in the circular that issuers will need to comply with enhanced disclosure requirements. This includes details of the conditions under which the call option included in these bonds may be exercised. The issuer also needs to clearly state the inherent features of AT-1 bonds in the risk factors.
     
    In addition, the ‘point of non viability clause’, which gives the Reserve Bank of India (RBI) absolute right to direct a bank to write down the entire value of its outstanding AT1 instruments/bonds, if it thinks the bank has passed the point of non viability (PONV), or requires a public sector capital infusion to remain a going concern.
     
    AT1 bonds have certain unique features which grant the issuer (i.e., banks, in consultation with RBI) a discretion in terms of writing down the principal / interest, to skip interest payments, to make an early recall, etc, without commensurate right for investors to legal recourse. 
     
    The regulator seems to acknowledge the backlash after the Yes Bank episode and admitted that the “the nature and contingency impact of these AT1 instruments and the fact that full import of the discretion available to an issuer, may not be understood in the truest form by retail individual investors." The matter was discussed in SEBI’s advisory committee on the development of corporate bond market in India, viz., corporate bonds and securitisation advisory committee (CoBoSAC) and based on the recommendations of the CoBoSAC, the new framework was designed. 
     
    The changed rules effectively restrict AT1 bond buying by non-QIBs (qualified institutional buyers) only to secondary markets and someone buying more than Rs1 crore worth of these bonds would be implicitly assumed to be an informed buyer. This, however, means that large corporates would be deprived of the opportunity and will not be able to buy these bonds in the primary market since they are not QIBs. 
     
    The other possible mid-term to long-term effect is that when the call option in the already issued AT1 bonds is triggered over the next few years, a lack of market appetite for fresh issues of these bonds might lead to a problem and could upset the banking sector.
     
    However, a lot of retail investors might continue to have an exposure to AT1 bonds through mutual fund fixed-income schemes, which are allowed to invest in them. Public sector banks, like SBI and Bank of Baroda, have issued large volumes of AT1 bonds in the past few weeks. 
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    COMMENTS

    Ramesh Popat

    3 weeks ago

    Many Trusts have invested in the bonds lured by banks and
    intermediaries for higher interest and Trusts have fallen in
    trap. They might have lost the capital.

    m.prabhu.shankar

    3 weeks ago

    Excellent Money Life. Great Work.

    Rupesh Chatterjee

    3 weeks ago

    "The new changes in rules seem to be an effort to address this mis-selling to the average non-savvy retail investors, as exposed by Moneylife."

    Articles on MoneyLife helps bring the attention of financial policy makers to matters of importance. This effort by the team in organising all the information and presenting their case needs to be appreciated.

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