InvestorQ : Why has SEBI asked Edelweiss to deposit Rs.460 crore and what does it mean for the stock?
Juvina Maggie made post

Why has SEBI asked Edelweiss to deposit Rs.460 crore and what does it mean for the stock?

Deepa Salunkhe answered.
2 years ago

In a detailed order, the NSE Clearing Corporation Ltd or NSCCL has asked Edelweiss Custodial Services to pay up Rs.460 crore provided as bank guarantee by the bankrupt Anugrah Stock & Broking, which went belly up after making ridiculous promises to clients.

The NSE has asked Edelweiss to reinstate the money and the securities in an escrow account within 15 days or face a huge penalty. A copy of the order has also been sent by NSE to the regulator SEBI. The response of the regulator and Edelweiss Custodial is awaited.

Anugrah currently faces litigation from over 500 investors who have been apparently taken for a ride by the broking by making tall promises and then losing most of the money in complex derivative strategies. The total scam is worth Rs.1300 crore in terms of losses caused.

The principal allegation that NSCCL has made against Edelweiss Custodial Services is that they deliberately invoked the bank guarantees of Anugrah Stock Broking and partly sold off the securities when they realized that securities pledged belonged to broker’s individual clients.

As of now Edelweiss plans to move the Securities Appellate Tribunal or SAT against the NSE order. However, it faces similar allegations in a previous case also and that is unlikely to show the custodian in very good light. However, if one goes by the precedent of a similar case by Axis Bank in the case of Modex International Securities, the SAT turned it down.

In September this year, NSE had withdrawn all trading rights of Anugrah Stock Broking after it failed to meet settlement obligations as per the schedule. This included the withdrawal of trading rights also. Anugrah had raised Rs1300 crore via a Ponzi pyramid scheme. Edelweiss may have a lot of explaining to do with SEBI, considering it already has a history.