"Fit and Proper" criteria
The Forward Markets Commission's letter to the board of directors of National Spot Exchange Ltd (NSEL), saying it is considering a declaration that the exchange failed to meet the "fit and proper" criteria, has put the focus on other group entities such as MCX and MCX Stock Exchange, whose ownership might also get affected. Business Standard brings to you the regulations governing the Securities and Exchange Board of India's Fit and Proper criteria for exchanges.
Which regulation provides for Fit and Proper criteria for stock exchanges?
Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012
When did it come into effect?
June 20, 2012
Which clause under these regulations defines the criteria?
Clause 20
Who is a fit and proper person?
Person shall be deemed to be a fit and proper if:
(a) Such person has a general reputation and record of fairness and integrity, including but not limited to:
(i) Financial integrity;
(ii) Good reputation and character; and
(iii) Honesty;
How many disqualifications are listed by the regulations?
Seven
What are these disqualifications?
(i) The person, or any of his whole-time directors or managing partners, has been convicted by a court for any offence involving moral turpitude or any economic offence or any offence against the securities laws
(ii) An order for winding up has been passed against the person
(iii) The person, or any of its whole time directors or managing partners, has been declared insolvent and has not been discharged
(iv) An order, restraining, prohibiting or debarring the person, or any of its whole time directors or managing partners, from dealing in securities or from accessing the securities market, has been passed by the board or any other regulatory authority, and a period of three years from the date of the expiry of the period specified in the order has not elapsed
(v) Any other order against the person, or any of his whole-time directors or managing partners, which has a bearing on the securities market, has been passed by the board or any other regulatory authority, and a period of three years from the date of the order has not elapsed
(vi) The person has been found to be of unsound mind by a court of competent jurisdiction and the finding is in force
(vii) The person is financially not sound
Can the decision be challenged?
The regulation says if any question arises as to whether a person is fit and proper, the board's decision on such question shall be final.
