In a move to expedite demutualisation of the bourses, Securities and Exchange Board of India chairman DR Mehta today directed all stock exchanges to suitably amend their bye-laws to bar member-brokers from being office-bearers and holding any position as president, vice-president or treasurer.
Exercising powers under Section 8 of the Securities Contracts (Regulation) Act, 1956, Mehta has asked all the recognised stock exchanges to suitably amend its rules, articles before March 10 to give effect to the Sebi board decision of December 28, 2001.
Mehta further warned the stock exchanges that if they failed or neglected to comply with his order within the next two months, the regulator might make or amend their rules in accordance with the provisions of Section 8 read with Section 4(3) of the Sebi Act, 1992.
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Meanwhile, the presidents of all stock exchanges have convened a meeting in Bangalore on January 12 to chart out the future course of action following the Sebi board decision. The exchanges, a top member-broker in Delhi Stock Exchange said, would be up in arms against the regulator and a showdown between the Federation of Indian Stock Exchanges and Sebi was inevitable.
The amendment to the rules and bye-laws of the stock exchanges, as proposed by Sebi, are largely a result of the Mayya committee recommendations. The committee was set up in May 1997 for examining the existing articles and memorandum of association, rules, byelaws and regulations of the bourses.
Sebi officials, however, said the amendment to the bye-laws did not quite affect the subsidiaries of the stock exchanges. Barring a couple of bourses, all of them have subsidiaries which have are active members of the National Stock Exchange or the Bombay Stock Exchange.
The move, which in effect, corporatises the stock exchanges, follows the announcement of finance minister Yashwant Sinha in Parliament on March 13, 2001 that corporatisation of stock exchanges would be undertaken soon segregating the ownership, management and trading rights. He had promised administrative steps and legislative changes, if required.
The Section 8 of SCRA empowers the Centre to direct the stock exchanges to amend their rules failing which it can form its rules and publish the same in the Gazette of India. It can further file a writ petition too against the stock exchanges if they do not act as per the guidelines issued.