Gives them 2 weeks to try and find ‘workable solution’, suggests a couple of ways to do so.
The high court here has put the ball once again in the capital market regulator’s court in the legal tussle involving MCX Stock Exchange (MCX-SX). The judges have asked the Securities and Exchange Board of India (Sebi) to reconsider and arrive at a solution by September 30.
A two-member bench headed by D Y Chandrachud asked Sebi to discuss with promoters of the exchange to find a “workable solution”. “Let us have a full reconsideration of the matter and find a business-like solution. Give them an opportunity for rectification,” said Chandrachud after hearing counsels for both parties. “We will take instruction and come back to you with their response within two weeks,” said Sebi counsel Darius Khambatta, in response to the court’s suggestion.
| SIT & TALK |
| * Court asks Sebi to reconsider and find a solution |
| * Time till Sept 30 to try and resolve the issue |
| * We do not want monopolies, notes HC |
| * Persons acting in concert emerges as the primary issue |
| * Sebi can ask for fresh undertakings, guarantees from MCX-SX promoters |
The court’s directions would come as welcome relief for MCX-SX. It has been in a bitter tussle with the regulator since its application for functioning as a full-fledged exchange was rejected in September last year. The exchange had then taken the regulator to court, challenging the order passed by former wholetime member K M Abraham.
“Extreme measures are not the only course of action... We do not want monopolies... We want competitive institutions in the market... Bringing down institutions like this sends a wrong signal,” said the bench, asking Sebi to give the exchange a dispassionate hearing.
The bench also suggested two ways to end the dispute, that saw both Sebi and MCX-SX trade allegations regarding alleged favouritism and suppression of facts, among others. It said the regulator could tell the promoters to address the areas of concern and seek the needed undertakings. Thereafter, the order and the showcause notice (SCN) at issue could be withdrawn. Or, the regulator could recall the order and the SCN, issue a fresh notice and then hear the arguments, based on the documents and materials placed before the court.
The suggestion came after the MCX counsel presented to the court several items of correspondence between promoter Jignesh Shah and Sebi. The counsel argued the regulator was well aware of the promoter’s background while allowing the exchange to operate in the currency derivatives segment. Shah is the promoter of Financial Technologies India (FTIL) and also MCX, which colectively hold 10 per cent equity in MCX-SX.
The noted the issue of ‘persons acting in concert’ had emerged as the primary one. The regulator’s order had said the promoters of MCX-SX-FTIL and MCX were under the same management and collectively held 10 per cent equity in the exchange. Jignesh Shah is the chairman and group CEO of FTIL and non-executive vice-chairman of MCX. Sebi guidelines stipulate that no individual or entity, directly or indirectly, other than public financial institutions, can hold more than five per cent stake in a recognised stock exchange.