CSE could have avoided SGF erosion: auditors

Calcutta Stock Exchange (CSE) special auditor L B Jha and Company has pointed out severe discrepancies in utilisation of settlement guarantee fund (SGF) by the former committee of the bourse to meet the payment shortfall in March 2001, and said the event could have been avoided.

The findings of the auditors have enraged a section of brokers, who are now planning to stall adoption of the exchange's account for the financial year 2001-02 and 2002-03 at annual general meeting to be held on January 7 next.

A section of the CSE brokers were planning to meet tomorrow in the trading hall to adopt strategies in view of special audit report.

The auditors had clearly pointed that "under the bye-laws SGF funds were to be utilised for genuine trade defaults and not for trades which could be considered as bad. In the payment crisis of settlement numbers 2001148 and 2001150 investigations were carried out to detect presence of non genuine trades, if any, and there were strong indications of the presence of non bona fide trades."

"In view of this, there was a strong case for declaring that settlement deficiency had arisen mainly as an outcome of such bad trades," it said.

Thereafter the members could have been investigated to establish the existence of non-bona fide trades of the members which was not done possibly because the magnitude of the default was too large and the fact that investigation would have taken considerable time and this could have resulted in chaos in the stock market, the report said.