Jignesh Shah-led Financial Technologies, which has been declared unfit to run an exchange and ordered to pare its stake in Multi Commodity Exchange of India Ltd to 2 per cent from 26 per cent currently, will have to divest its entire stake as per new guidelines issued today.
In the wake of the Rs 5,600 crore payment crisis at NSEL, commodity markets regulator Forward Markets Commission has tightened shareholding norms, under which an entity declared unfit to run an exchange cannot hold any stake in it.
“In the event of any person ceasing to be a ‘fit and proper person’ or being declared so by the Commission, such person shall forthwith divest his shareholding,” the FMC said in its new guidelines.
Until the shares are divested, the voting rights of such entities should be withdrawn and any corporate benefit in lieu of such holding should be kept in abeyance or withheld by the exchange, the FMC said.
“The exchange shall take necessary steps as it may deem fit so as to ensure that the shareholding of such person is divested forthwith,” FMC said.
Currently, Financial Technologies India Ltd (FTIL) is in the process of divesting its stake in Multi Commodity Exchange (MCX) to comply with the FMC’s orders. It has received bids from potential buyers, which have sought more time to submit binding offers following the PwC report on related-party trades between MCX and FTIL group.
Opposing the FMC’s fresh norms, FTIL said in a statement: “The legality of issuing guidelines under FCRA (Forward Contract Regulation Act) is already before the Bombay High Court and despite that FMC has issued another set of norms which are exceeding the provisions of FCRA 1952 and hence ultra-vires.”
FTIL questioned the timing of announcing the new norms.
“We are affected more directly as our original entry conditions are being changed mid-course by FMC to further compel us to exit our shareholding under policy distress with the new norms, ignoring natural justice,” it said.
The timing, content and haste in announcement of the revised norms leave doubt on the purpose, it added.
In an eight-page guideline, the FMC said an entity will be deemed to be a fit and proper person if it has a general reputation and record of fairness and integrity, including but not limited to financial integrity, good reputation and character, besides honesty.
The regulator said that an entity would be declared unfit if it or any of its whole time directors or managing partners has been convicted by a court for any offence involving moral turpitude or any economic offence, or any offence against the securities laws.
It also listed various other disqualifications for declaring a person unfit to run a commodity exchange