The UPSE board had called for a meeting on September 15 to decide on implementing the new norms
Promoters and members of the Uttar Pradesh Stock Exchange (UPSE) have moved court against the Securities and Exchange Board of India (Sebi) for prescribing stringent norms for regional stock exchanges (RSEs). The Allahabad High Court has admitted a petition filed by the UP Brokers Forum and cautioned the UPSE board against passing any resolution in the matter till a final decision is arrived.
The court has said any resolution passed by the UPSE will be subject to the petition.
There are 16 RSEs in the country and Sebi’s new regulations have not gone down well with most. The UPSE board had called for a meeting on September 15 to decide on implementing the new norms. Apart from UPSE shareholders, promoters of exchanges in Gujarat, too, will approach court by next month, said a member of the Ahmadabad Stock Exchange, requesting anonymity.
Among the criteria these exchanges disapprove of are the Rs 100-crore networth requirement, the Rs 1,000-crore trading turnover and the five per cent cap on shareholding, except for a select category of shareholders. Also, there is a curb on voting right of shareholders who are brokers, which is being opposed. Brokers say these norms were made keeping only the national level bourses like the National Stock Exchange and BSE in mind.
“The court has directed UPSE against passing any resolution on Sebi’s new norms till there is a decision on the petition. The key issues being raised include curbing voting rights of brokers, who are also promoters of the RSE, and the networth criteria and many other such norms, which are favorable for the national level stock exchanges,” said Saurabh Srivastava, a lawyer appearing for the UPSE Brokers Forum.
The contention of most RSE promoters and members is that stringent norms were prescribed post the de-mutialisation process. Those who bought stake in these exchanges around 2007 had no idea that Sebi will implement rules keeping only the national level exchanges in mind, which can lead to the shutdown of smaller exchanges, said a promoter of UPSE, also on condition of anonymity.
RSEs are also citing the Securities Contract and Regulation Act, the base law for the capital market, according to which an exchange can be shut down only if it is found acting against the public or trade interest. Also, discussions between exchanges and the regulator are required in this context.
In a letter to the finance minister, promoters and members of an RSE had stated that while Sebi was keen on pressuring RSEs to shut down, it was not going behind promoters of suspended companies on national level exchanges, where more than Rs 1 lakh crore worth of investor money was lost.
There are 949 suspended companies on BSE, with 89.78 billion shares ranging from Rs 20 to Rs 500 (a total of about Rs 1.8 lakh crore). Those who invested in these companies’ shares are yet to be compensated. There has been a long standing demand that Sebi use investor protection fund and even attach assets of promoters of the suspended companies to compensate investors.
Sebi has given three years to stock exchanges to meet the norm of at least Rs 100-crore networth. Except the one at Kolkata, no other RSE has seen any trading on its platform for many years now.
