A wave of public anger and demand for justice has surged as thousands of investors continue to suffer from the fallout of the National Spot Exchange Limited (NSEL) crisis. The crisis, which erupted over a decade ago, saw brokers misleading investors with false promises of safe and assured returns, leaving them in financial turmoil. Despite clear court directives and the stringent provisions of the MPID Act, many brokers' assets remain unattached, and justice delayed.
The NSEL Crisis: A Recap
The NSEL provided a platform for buyers and sellers to trade in commodities, involving clients, traders, and investors registered through their respective brokers. These brokers, in turn, were registered on the NSEL exchange. However, investigations have revealed that brokers exploited this system, engaging in fraudulent activities that defrauded thousands of investors.
Key Findings of the Investigation:
- Brokers took Power of Attorney from clients and executed trades on NSEL on their behalf.
- They misrepresented NSEL contracts as fixed return products, inducing traders to invest with promises of risk-free returns.
- Brokers funded their clients beyond their repayment capacity and traded without proper authority, sometimes using clients' names and PAN details for benami transactions.
- Rampant client code modifications were performed by brokers to cover up their illicit activities.
Legal Actions Taken:
In March 2015, the Economic Offences Wing (EOW) arrested directors of three major brokerage firms. By December 2018, these brokers and their directors were charge-sheeted under various charges, including being declared Financial Establishments under the MPID Act. In December 2022, the EOW filed a final charge sheet against 16 additional brokers and their directors.
Court Orders and Delays:
Despite these actions, significant delays in attaching the brokers' assets have frustrated investors. The MPID Act allows for the attachment of properties of entities declared as Financial Establishments to protect depositors' interests. However, the assets of brokers who accepted deposits from investors and failed to repay them remain largely unattached.
In May 2023, the MPID Court ordered the attachment of properties belonging to India Infoline Commodities Limited (IICL). However, the State of Maharashtra has only attached a fraction of the required assets. The High Court upheld the MPID Court's directive, emphasizing that the government's inaction should not hinder the attachment process.
Investors' Struggle for Justice:
Investors, frustrated by the lack of progress, have taken legal action to expedite the attachment of assets. An application filed by an investor led to a court hearing where the Competent Authority confirmed that brokers had induced investors with false promises of guaranteed returns. The court ordered the attachment of IICL's properties, but significant progress is still lacking.
Public Outcry and Social Media Campaign:
The ongoing delays and perceived favoritism towards certain brokers have sparked a public outcry. A social media campaign under the hashtag #ActionOnNSELBrokers has gained momentum, demanding swift justice and accountability. Prominent figures and social media influencers have joined the call for justice, amplifying the voices of affected investors.
Thousands of investors are still waiting for justice years after the NSEL crisis. They were promised safe returns by their brokers but are left empty-handed.
