Market regulator Sebi has barred Axis Capital (ACL) from undertaking any new assignment in the capacity of merchant banker, arranger or underwriter for any issue of securities in the debt segment until further orders. In an interim order issued on September 19, Sebi has also asked ACL to respond to the observations made in the order within 21 days. The regulator investigated allegations that ACL acted beyond the permitted merchant banker in the issuance of listed non-convertible debentures (NCDs) of Sojo Infotel.

 

While underwriting an issue, a merchant banker is permitted to take market risk. While underwriting an issue, a merchant banker is permitted to take market risk. That is, it is permitted to subscribe or obtain subscriptions for securities issued or offered for sale, which are unsubscribed.

What in the order But according to the order, ACL through its agreement with Sozo was taking credit risk by providing credit-risk cover to NCD subscribers. According to the order, ACL's transactions in respect of Sozo's NCDs were not part of issue management but part of the security enforcement mechanism, which essentially falls within the jurisdiction of the debenture trustee (which in this case was Axis DT or an associate company of ACL).