Motisons Commodities Barred from On-boarding New Clients for 15 Days

Moneylife Digital Team 15 May 2025

Investor Interest

Market regulator Securities and Exchange Board of India (SEBI) has imposed a 15-days restriction on Motisons Commodities Pvt Ltd, prohibiting the company from onboarding any new clients across all segments of the Multi Commodity Exchange (MCX) and the National Commodity and Derivatives Exchange (NCDEX).

Motisons Commodities, a SEBI-registered stockbroker, was subjected to a joint inspection by SEBI, MCX, and NCDEX, covering the period from 1 April 2021 to 31 August 2022. Based on the findings, SEBI initiated two proceedings: one to impose a monetary penalty under Section 15I of the SEBI Act, and another regulatory proceeding under Section 12(3) of the same Act. Both matters were overseen by the same adjudicating officer (AO).

On 31 December 2024, the AO levied a penalty of Rs4 lakh on Motisons Commodities. That same day, a report under the SEBI intermediaries regulations was submitted which led to a show-cause notice (SCN) to the broker on 6 January 2025. The notice cited two major violations: first, the company failed to deduct an overdue advance of Rs5.53 crore pending for more than three months from its net worth calculation as of 31 March 2022 and second, it extended loans and advances totalling the same amount—an activity considered outside the permissible scope for a stockbroker.

Motisons Commodities argued that it had already paid the monetary penalty and highlighted its intent to exit the broking business. It stated that its NCDEX membership had been surrendered in June 2023, while the application to relinquish its MCX membership was still pending. It claimed full compliance with all requirements for withdrawal from exchange membership.

On the overdue advance issue, Motisons Commodities submitted its balance sheet to demonstrate that it continued to meet the Rs1 crore minimum net worth requirement for trading members. Regarding the loans and advances, it argued these were made from surplus funds and did not impact client interests or its core brokerage activities. The company also referred to a SEBI interpretative letter from February 2022, which clarified that such financial activities do not constitute unrelated business as long as they don’t impose personal liabilities on brokers.

Motisons Commodities further pointed out that the NSE circular dated 7 January 2022, relied upon in part by SEBI, was currently under legal challenge in the Bombay High Court. It argued that the final outcome of that case could influence the proceedings. To support its case, the company cited previous rulings by SEBI and securities appellate tribunal (SAT) which held that temporary loans from surplus funds do not amount to unauthorised business.

However, SEBI dismissed these defences, emphasising that the broker had not formally completed the process to surrender its registration. More importantly, the regulator underscored the seriousness of the violations. SEBI made it clear that stockbrokers are not permitted to engage in lending activities unless explicitly authorised.

The regulator reiterated that inspections aim to ensure compliance and are not punitive by nature. However, significant regulatory lapses such as unauthorised lending and mis-statement of net worth require enforcement actions. SEBI concluded that Motisons Commodities had engaged in activities beyond the scope of its registration and failed to properly account for critical financial obligations.

Accordingly, SEBI passed an order, restricting Motisons Commodities from on-boarding any new clients for a period of 15 days across all market segments.

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