Sebi strips FTIL of ‘fit and proper’ tag
MUMBAI: Market regulator Sebi on Wednesday said that Jignesh Shah-promoted Financial Technologies (FTIL) was not a 'fit and proper' entity to hold stake in any stock exchange or a clearing corporation for a stock exchange. Sebi also directed FTIL to divest all its stakes in MCX Stock Exchange (MCX-SX), MCX-SX Clearing Corporation, Delhi Stock Exchange (DSE), Vadodara Stock Exchange (VSE) and National Stock Exchange (NSE) within the next three months.
The regulatory order came in relation to FTIL's role in the Rs 5,600-crore NSEL scam, which in turn had prompted the Forward Markets Commission (FMC), the regulator for the commodity derivatives market, declaring FTIL as not a 'fit and proper' entity to hold stakes in any commodity exchange.
The late evening order from Sebi said that FTIL was not a "'fit and proper person' to acquire or hold any equity share or any instrument that provides for entitlement for equity shares or rights over equity shares at any future date, in a recognized stock exchange or clearing corporation, either directly or indirectly." It also directed that FTIL and the related entities which hold equity shares or any instrument entitling voting rights in MCX-SX, MCX-SX CCL, DSE, VSE and NSE should cease to be entitled to such rights with immediate effect.
The 11-page order by Rajeev Kumar Agarwal, a whole-time Sebi member, said that it was primarily based on an FMC order of December 17 last year that said that FTIL was being declared not a 'fit and proper person' to hold shares in Multi Commodity Exchange "in public interest and in the interest of the commodities derivatives market".
The genesis of these regulatory orders date back to July 31 last when NSEL declared its inability to pay about Rs 5,600 crore to investors and a payment crisis ensued. Later several of the top NSEL officials were arrested by the investigative agencies. Shah and other current and former directors of the group were also questioned. Recently CBI also started a probe against two former top Sebi officials, C B Bhave and K M Abraham, and also Shah to look into how the group managed to get the regulatory nod to start a stock exchange. Last week, FTIL also sold its 100% holding in National Bulk Handling Corp (NBHC), its warehousing business, for about Rs 240 crore.
The Sebi order said that FTIL was issued a show-cause notice as to why it should not be declared 'fit and proper' entity. Subsequently, representatives of FTIL had presented their case to the regulator. One of the main points presented by FTIL to Sebi was that FMC did not 'direct' FTIL to divest its stake in MCX but merely 'advised' it to do so. However, Sebi found FTIL's was a fit case to declare it as an entity not 'fit and proper person' to hold any stake in any stock exchange or a clearing corporation.
The late evening order from Sebi said that FTIL was not a "'fit and proper person' to acquire or hold any equity share or any instrument that provides for entitlement for equity shares or rights over equity shares at any future date, in a recognized stock exchange or clearing corporation, either directly or indirectly." It also directed that FTIL and the related entities which hold equity shares or any instrument entitling voting rights in MCX-SX, MCX-SX CCL, DSE, VSE and NSE should cease to be entitled to such rights with immediate effect.
The 11-page order by Rajeev Kumar Agarwal, a whole-time Sebi member, said that it was primarily based on an FMC order of December 17 last year that said that FTIL was being declared not a 'fit and proper person' to hold shares in Multi Commodity Exchange "in public interest and in the interest of the commodities derivatives market".
The genesis of these regulatory orders date back to July 31 last when NSEL declared its inability to pay about Rs 5,600 crore to investors and a payment crisis ensued. Later several of the top NSEL officials were arrested by the investigative agencies. Shah and other current and former directors of the group were also questioned. Recently CBI also started a probe against two former top Sebi officials, C B Bhave and K M Abraham, and also Shah to look into how the group managed to get the regulatory nod to start a stock exchange. Last week, FTIL also sold its 100% holding in National Bulk Handling Corp (NBHC), its warehousing business, for about Rs 240 crore.
The Sebi order said that FTIL was issued a show-cause notice as to why it should not be declared 'fit and proper' entity. Subsequently, representatives of FTIL had presented their case to the regulator. One of the main points presented by FTIL to Sebi was that FMC did not 'direct' FTIL to divest its stake in MCX but merely 'advised' it to do so. However, Sebi found FTIL's was a fit case to declare it as an entity not 'fit and proper person' to hold any stake in any stock exchange or a clearing corporation.
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