Markets regulator Sebi on Thursday (September 19) limited Axis Capital from taking up brand-new projects as a merchant lender for financialobligation securities upuntil more notification, in a case of supplying assurances for the redemption of Non-Convertible Debentures (NCDs) of Sojo Infotel.
In its interim order, Sebi stated, “ACL supplied assurance/indemnity towards redemption of NCDs in the guise of underwriting, which it was not allowed to do under the existing regulative structure. Such activity postures threat to the monetary system as it can possibly interrupt the organized operating of the market”.
After an assessment by the regulator, it was discovered that Axis Capital had offered warranties for the redemption of NCDs of Sojo Infotel Pvt. Ltd, which is not allowed for merchant lenders.
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This warranty, which oughtto haveactually been restricted to underwriting the problem at the time of membership, was seen as a kind of credit threat rather than market danger, an activity more fit for banks.
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