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The Forward Markets Commission (FMC) has directed Multi Commodities Exchange (MCX) not to have a permanent seat on its board for Financial Technologies promoter Jignesh Shah. It has asked MCX, and all other commodity exchanges not to have any permanent director on its board.
There are six commodities exchanges, of which two have permanent directors — MCX and Universal Commodity Exchange (UCX). UCX, of which Ketan Sheth is the permanent director, would also have to amend its articles of association to implement FMC’s directive.
In 2006, Shah was appointed a permanent director by amending the articles of association of the exchange. He is the only permanent director on the exchange’s board.
An MCX spokesperson said, “FMC had issued new guidelines for the reconstitution of the board of directors of commodity exchanges on August 12, and September 13. MCX is in the process of implementing these and would comply accordingly. MCX has one permanent director on its board and, according to the new directive issued by FMC, we will now amend the articles of association of the exchange.” Sources in the know said as exchanges were regulated entities, FMC wanted the directors appointed on their boards to be “fit and proper”; no shareholder director should be a permanent one.
The issue is crucial for the MCX because just a fortnight ago the FMC had issued a show cause notice to Jignesh Shah and others in the NSEL case asking why their status as ‘fit and proper person’ should not be revoked following the NSEL fiasco. Last week Jignesh Shah was forced to resign from the board of the MCX-SX, stock exchange promoted by the FT and MCX along with Joseph Messy, MD of the MCX-SX.
Last month FMC had also issued new norms for commodity exchanges regarding the board level appointments among others which will restrict board seat to only one for the FT which is a promoter and anchor shareholder of the MCX. At present Jignesh Shah (non-executive vice chairman) and Paras Ajmera are two shareholder directors on the exchange’s board.
He was founder MD of the exchange and he has been the real brain behind the success of the exchange as he could develop the exchange to make it a market leader and benchmarks that has managed to achieve with his team is something that no other Indian commodity exchange has been able to meet so far.
From this point of view, asking not to keep him and for that matter any one as a permanent director on the board is crucial. In 2006 when Joseph Massey took over as MD, Jignesh shah was appointed as permanent director by amending the Article of Association (AoA).
FMC has asked the exchange to amend the AoA again to give effect to its directive. There are six commodities exchanges of which two have permanent directors. Another one is latest entrant the Universal Commodity Exchange (UCX) where its promoter Ketan Sheth has been the permanent director. He will also have to amend AoA to give effect to the FMC’s directive.
