FMC finds Shah, FTIL not 'fit and proper' - Times of India

The author has posted comments on this articleTNN | Dec 19, 2013, 03.21AM IST

NEW DELHI: The Forward Markets Commission has declared Financial Technologies India (FTIL) not "fit and proper" to hold more than 2% stake in Multi Commodities Exchange (MCX) besides barring its chief executive Jignesh Shah and two other executives-Joseph Massey and Shreekant Javalgekar-from being part of the management or board of any commodities exchange.

The order issued late Tuesday night relates to the National Spot Exchange (NSEL) which could not settle trades worth Rs 5,500 crore and sets the stage for FTIL to dilute its holdings in MCX from the current 26% by offloading the shares. The news resulted in an over 8% rise in MCX shares as investors loo ked forward to a change of shareholder at the exchange which has a daily turnover of around Rs 24,000 crore.

The FMC ruling will be a big blow for Shah, who was described as "the highest beneficiary of the fraud perpetrated" at NSEL. His fate at MCX-SX, the stock exchange he had floated, also hangs in balance with FMC order now expected to weigh on Sebi's decision. "It is because of the huge profit of Rs 125 crore (approx) earned by NSEL during FY2012-13 that the value of the shares of Jignesh Shah in FTIL shot up manifold, giving him the benefit of a spectacular market capitalization of his investment in FTIL running into thousands of crores of rupees," FMC, the commodities futures regulator, said in its 80-page order.

The regulator listed a series of lapses at NSEL and blamed FTIL, Shah, Massey and Javalgekar. The regulator said that several shortcomings were noticed in the functioning of NSEL, which included problems with warehousing, risk management and corporate governance and related party transactions.

It also dismissed attempts to put the entire blame on Anjani Sinha, the managing director of NSEL. "Strangely enough, it is the board of directors of NSEL who had showered praises on Anjani Sinha in the board meeting held on March 30, 2012 for the performance of the company in FY2011-12 and had congratulated him. This shows that Jignesh Shah and other directors were aware of the activities of NSEL that resulted in such a dramatic turnaround and supported the performance of the management and the business model and practices that were bei ng followed by NSEL management," FMC said.

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