 "SAT reserves FTIL 'fit & proper' order")
The order came following a similar directive from the commodities regulator, the Forward Markets Commission (FMC), against FTIL, after a payment crisis of nearly Rs 5,600 crore at the National Spot Exchange Limited (NSEL). NSEL is a subsidiary of FTIL.
The Sebi order said FTIL cannot be allowed to continue as a stakeholder in the securities market either, having been declared unfit by FMC.
“A person who is not fit and proper to hold shares in a commodity futures exchange cannot be fit and proper to hold shares in recognised stock exchanges and clearing corporations. He poses the same danger to the interest of securities market as he does to the commodity futures market, as both require the same standard of integrity. So, there is no doubt that the declaration of FTIL as not fit and proper by FMC has direct bearing on the securities market,” the order said.
FTIL has a stake in the MCX-Stock Exchange and its clearing corporation, MCX-SX Clearing Corporation. It also has stakes in the Delhi Stock Exchange and the Vadodara Stock Exchange; in addition to a small holding in the National Stock Exchange. The regulator had also said FTIL’s voting rights in these entities should be frozen.
The regulator had granted FTIL a 90-day window divesting its stake in these entities. Lawyers for FTIL had asked the tribunal to extend the deadline in the previous hearing on June 18, saying that the deadline would expire before the appeal was heard on June 26.
Sources from both sides confirmed that the extension would continue till the final order is passed by the tribunal.
Janak Dwarkadas represented FTIL while Shiraz Rustomjee represented Sebi in the matter.
Dwarkadas argued that Sebi had not independently applied its mind on whether FTIL was fit and proper and had merely relied on the FMC order to pass its own directions. Rustomjee said that in light of the similar mechanisms for settlement and trading in the commodities and securities market, it follows naturally that an entity which is not fit and proper in one cannot be fit and proper in the other.
FTIL and Multi Commodity Exchange (MCX) held just under five per cent stake in MCX-SX at the time of the Sebi order. They also held warrants in the exchange which on conversion into shares would have raised their collective stake to 70 per cent.
Awaiting Orders
- FMC in December declared FTIL unfit following Rs.5600 crore NSEL crises
- Sebi passed similar order in March
- Sebi asked FTIL to divest stake in MCX-SX, its clearing corporation
- It was also required to sell its stakes in the Delhi, Vadodara and National stock exchanges
- Appeal in SAT concluded on Thursday
- Tribunal has reserved its order, deadline on stake sale extended till it is passed