New Delhi, Feb 27 (PTI) Market regulator Sebi Wednesday said Philips Commodities India is not "fit and proper" to act as commodity derivatives brokers in connection with the Rs 5,600-crore scam at the now-defunct National Spot Exchange Ltd (NSEL).

Besides, the regulator rejected the application of Philips Commodities for registering as commodities derivatives broker and said it would "cease to act directly or indirectly as commodities derivatives broker," according to a Sebi order.

The regulator has asked the firm to allow its clients to withdraw or transfer their securities held with the firm's custody within 45 days.

The company shall transfer its balance clients with their corresponding securities and funds to another entity, holding a valid certificate of registration to carry on such activity, within 30 days, the order added.

Earlier, Motilal Oswal Commodities, India Infoline Commodities, Geofin Comtrade and Anand Rathi Commodities faced the similar action by Sebi.

The case pertains to the payment scam at the NSEL that came to light in 2013 with many entities, including brokers, have come under the scanner of Sebi and other probe agencies.

In an order, the regulator said various courts have made adverse observations against NSEL and paired contracts that were violative of the FCRA (Forward Contracts Regulation Act) and the MPID (Maharashtra Protection of Interest of Depositors) Act.

"The Noticee (Philips Commodities), by its own admission, allowed itself to become a channel and instrument for NSEL to promote paired contracts amongst its clients," the regulator noted.

Noting that the reputation of the entity has been seriously eroded, Sebi said it finds Philips Commodities India not a "fit and proper person to be granted registration to operate as a commodity derivatives broker".

Sebi had received an application from Philips Commodities on December 16, 2015, to be registered as commodities derivatives broker.

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