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Ambit, Motilal Oswal among cos fined by SEC

Bangalore, Nov 28, 2012, DHNS:

The US market regulator Securities and Exchange Commission (SEC) on Tuesday charged four Indian financial services firms  for providing brokerage services to institutional investors in the United States without being registered with the SEC as required under the federal securities laws.

In a release, SEC said the four firms - Ambit Capital Private Limited, Edelweiss Financial Services Limited, JM Financial Institutional Securities Private Limited, and Motilal Oswal Securities Limited - have agreed to pay more than $1.8 million to settle the charges.

The Associate Director of SEC’s Division of Enforcement Scott W Friestad, said, “The broker-dealer registration provisions are critical safeguards for the integrity of our securities markets. These four firms and all other foreign broker-dealers must educate themselves on the US laws and regulations when they provide services to US investors.”
The SEC said the firms were engaged with US investors by sponsoring conferences in the US; meeting investors there; trading securities of India-based issuers on behalf of US investors and participating in securities offerings from India-based issuers to US investors.

The release said that in their respective settlements, the firms “agreed to be censured while neither admitting nor denying the SEC’s charges”. Ambit agreed to pay disgorgement and prejudgment interest totaling $30,910. Edelweiss agreed to pay $568,347. JM Financial agreed to pay $443,545. Motilal agreed to pay $821,594.


“The firms’ cooperation with the Commission staff and their prompt remedial measures, including entering into Rule 15a-6 chaperoning agreements with US registered broker-dealers and/or initiating registration with the Commission as a broker-dealer, were important factors in accepting the firms’ settlement offers, particularly the Commission’s decision not to impose a cease-and-desist order or a penalty,” Friestad said.

In case of Ambit, the SEC order said that brokerage services provided required registration as a broker-dealer with the Commission pursuant to Section 15(a) of the Exchange Act.  However, Ambit was not registered with the Commission as a broker-dealer. The SEC listed that from “January 2011, January 2011 through at least April 2011, using US jurisdictional means, Ambit systematically solicited US institutional investors for the purpose of providing brokerage services.”

In case of Motilal Oswal, the SEC said, “From at least 2007 until April 2011, using US jurisdictional means, Motilal solicited and provided brokerage services to US investors. Further, Motilal bought and sold the securities of Indian issuers on Indian stock exchanges on behalf of US investors...and  received compensation in the amount of approximately $13.7 million.”

For the third firm, the SEC said, “From at least October 2007 until February 2012, JM Financial solicited and provided brokerage services to US investors. During the relevant period, JM Financial received transaction-based compensation in the amount of approximately $2.3 million as a result of these transactions. During the relevant period, pursuant to these agreements, JM Financial received an additional approximately $552,000 in transaction-based compensation.” In case of Edelweiss, the SEC order said, “From at least 2007 until July 2011…Edelweiss solicited and provided brokerage services to US investors.  Edelweiss received transaction-based compensation in the amount of approximately $9.4 million as a result of these transactions.”

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