FTIL not ‘fit and proper’ to hold equity in exchange: Sebi

Regulator orders Jignesh Shah firm to sell stakes in 90 days.

The Securities and Exchange Board of India (Sebi) on Wednesday declared that Financial Technologies India Ltd (FTIL), promoted by Jignesh Shah, is not a ‘fit and proper person’ to acquire or hold any equity share or any convertible instrument in a recognised stock exchange or clearing corporation.

In an order issued by Sebi whole-time member Rajeev Kumar Agarwal, Sebi said that FTIL should divest the equity shares and/or any instrument that provides for entitlement for equity shares or rights over equity shares at any future date in MCX Stock Exchange, MCX-SX Clearing Corporation, Delhi Stock Exchange, Vadodara Stock Exchange and National Stock Exchange of India Limited (NSEIL) within 90 days.

“A person who is not ‘fit and proper’ to hold shares in commodity future exchange cannot be a ‘fit a proper person’ to hold share in the recognised stock exchange and the clearing corporation. He poses same danger to the interest of securities market as to the commodity futures market as both the markets require the same standard of integrity,” the Sebi order said.

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FTIL doesn’t have a nominee on the MCX-SX board, which is now controlled by a professional board. The Sebi order came a week after the CBI filed preliminary enquiry against former Sebi chairman CB Bhave and director KM Abraham for lapses in granting approvals to MCX-SX.

There is no doubt that the declaration of FTIL as not ‘fit and proper person’ by the Forward Markets Commission (FMC) has direct bearing on the securities market, it said. “FTIL, therefore, has to be held not ‘fit and proper’ for holding shares in a stock exchange also in view of provision of regulation 20(1)(b)(v) of the SECC Regulations,” Sebi said.

In its 80-page order in December 2013, the FMC, which went into the running of National Spot Exchange Limited (NSEL) following payment defaults of Rs 5,500 crore to investors, said FTIL and its directors were not ‘fit and proper’ persons to hold any position in the management and the board of any exchange registered under FCRA, 1952.

“Commodity future exchange and stock exchange basically discharge similar functions and obligations except that the two exchanges deal in different underlyings – physical commodity being underlying in the commodity futures exchange and the securities being the underlying in the stock exchange,” Sebi said.

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Meanwhile, coming out strongly in support of Sebi’s former chief Bhave, eminent banker Deepak Parekh on Wednesday was quoted by PTI as saying that probe against such “upright” public officers would further vitiate decision-making environment in the country. “I have know Bhave for a long time and I can say that you can not find a more upright person. He is a person who walks straight as a straight line…,” he said.