SummaryForward Markets Commission show-cause notice to Financial Technologies likely next week.
Matters could soon come to a head for Financial Technologies (India) or FTIL, the promoter of the crisis-ridden National Spot Exchange (NSEL), with the Forward Markets Commission (FMC) likely to issue a show-cause notice next week questioning the group�s �fit & proper� status.
The regulator is in the final stages of drafting the notice which will be sent out next week, confirmed sources close to the development.
If the �fit and proper� tag is withdrawn, FTIL would have to sell its 26% stake in Multi Commodity Exchange (MCX), which is regulated by the FMC. The FMC will take a final call after giving time to the promoters to respond.
�In the eventuality of you losing your status as a fit and proper person, you cannot continue to hold directorship or shareholding in any of the recognised futures commodity exchange,� said the FMC in a letter dated August 20, 2013.
The letter to the NSEL board said the non-settlement of outstanding trades on NSEL �reflects on your credibility and reputation which is a key ingredient in meeting the fit & proper criteria�.
FTIL holds close to a 100% stake in NSEL. FTIL chairman and group CEO Jignesh Shah is also the NSEL vice-chairman. NSEL has been battling a R5,600-crore settlement crisis since late July.
Withdrawal of the �fit and proper� status could also have a bearing on FTIL-promoted equity exchange MCX-SX, which falls under the regulatory purview of the Securities and Exchange Board of India (Sebi). According to the Stock Exchange and Clearing Corporation (SECC) Regulations 2012, if a person or entity is declared not �fit and proper� by any regulatory body, Sebi can also do the same.
Earlier this month, Sebi granted a renewal of recognition to MCX-SX for a period of one year beginning September 16. The renewal, however, came with significant riders including the setting up of a committee to oversee all financial transactions, capital expenditure and key management appointments.
Meanwhile, more instances of wrongdoing by the ousted management at NSEL have come to light after a forensic audit by Grant Thornton stated there were various instances
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