Matters could soon come to a head for
Financial Technologies India Ltd (FTIL),
the promoter of the crisis-ridden National Spot Exchange (NSEL), with
the Forward Markets Commission (FMC) likely to issue a show-cause notice
next week questioning the group’s “fit & proper” status.
The regulator is in the final stages of drafting the
notice which will be sent out next week, confirmed sources
close to the
development.
If the “fit and proper” tag is withdrawn, FTIL would have
to sell its 26% stake in Multi Commodity Exchange (MCX), which is
regulated by the FMC. The FMC will take a final call after giving time
to the promoters to respond.
“In the eventuality of you losing your status as a fit and
proper person, you cannot continue to hold directorship or shareholding
in any of the recognised futures commodity exchange,” said the FMC in a
letter dated August 20, 2013.
The letter to the NSEL board said the non-settlement of
outstanding trades on NSEL “reflects on your credibility and reputation
which is a key ingredient in meeting the fit & proper criteria”.
FTIL holds close to a 100% stake in NSEL. FTIL chairman
and group CEO Jignesh Shah is also the NSEL vice-chairman. NSEL has been
battling a R5,600-crore settlement crisis since late July.
Withdrawal of the “fit and proper” status could also have a
bearing on FTIL-promoted equity exchange MCX-SX, which falls under the
regulatory purview of the Securities and Exchange Board of India (Sebi).
According to the Stock Exchange and Clearing Corporation (SECC)
Regulations 2012, if a person or entity is declared not “fit and proper”
by any regulatory body, Sebi can also do the same.
Earlier this month, Sebi granted a renewal of recognition
to MCX-SX for a period of one year beginning September 16. The renewal,
however, came with significant riders including the setting up of a
committee to oversee all financial transactions, capital expenditure and
key management appointments.
Meanwhile, more instances of wrongdoing by the ousted
management at NSEL have come to light after a forensic audit by Grant
Thornton stated there