SEBI Eases Restrictions on Axis Capital's Debt Securities Management

The market regulator, SEBI, has rolled back some of the restrictions it had placed on Axis Capital (ACL) in an earlier order. Here’s what’s changed:

Back in September 2024, SEBI had barred Axis Capital from working as an investment banker in the debt market indefinitely. But in a fresh order dated November 26, SEBI has clarified that the restrictions now only apply to specific activities. These include providing credit risk cover, guarantees, indemnities tied to pledged shares, and certain secured credit transactions, as mentioned in the interim order.

What Led to the Ban?

The original September order stemmed from SEBI’s investigation into whether Axis Capital crossed the boundaries of its role as a merchant banker. The case involved listed non-convertible debentures (NCDs) issued by Sojo Infotel. SEBI found that Axis Capital had offered guarantees for redeeming the NCDs under the guise of underwriting. This, according to SEBI, violated regulations, created risks for the broader financial system, and jeopardized market stability.

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Axis Capital’s Appeal for Relief

At a personal hearing, ACL’s legal team argued against the complete ban. They suggested narrowing the restrictions to only the activities flagged in the interim order. To address concerns, they even volunteered to stop engaging in any activities that might breach the Merchant Bankers Regulations, 1992.

SEBI acknowledged their willingness to cooperate. However, the regulator stressed that the original restrictions were essential to safeguard market integrity. In its latest order, SEBI decided to ease the restrictions but kept them focused on the regulatory breaches mentioned earlier.

The Current Status

For now, Axis Capital is still barred from engaging in specific debt market activities while SEBI’s investigation continues. These include guarantees, structured secured credit transactions, and related actions flagged as violations in the interim order. SEBI made it clear that these measures are necessary to ensure the financial market remains stable and secure.