NSEL Scam: SEBI issues fresh notices to 20 entities

SEBI
SEBI has issued new notices to at least 20 organizations, including brokers, for allegedly indulging in irregular activities in the Rs 5,600-crore NSEL scam.

Mumbai, Feb 23: SEBI (Securities and Exchange Board of India) has issued new notices to at least 20 organizations, including brokers, for allegedly indulging in irregular activities in the Rs 5,600-crore NSEL scam.

Final orders against these 20 entities can be passed by the regulator anytime soon, sources said.

Several establishments on the list are allegedly linked to one particular broker, they added.

Multiple agencies, including SEBI, are probing the asymmetry that happened at the now-defunct National Spot Exchange Limited.

SEBI  intimated it’s board about the actions taken so far against brokers on the basis of examination of the allegation received about their role in the scam, early this month. That happened at the now-defunct National Spot Exchange Ltd.

SEBI had earlier issued notices to 5 brokers and forwarded the findings of its inspection of the role of these brokers to Mumbai Police’s Economic Offence Wing, Department of Revenue, Department of Consumer Affairs(DCA), Directorate of Enforcement (ED) and the Reserve Bank Of India for necessary action at their end, added the source.

The markets regulator, they said, had also granted the entities concerned an opportunity for inspection of the applicable documents, after which they were asked to submit their replies to the show cause notice issued by SEBI.

National Spot Exchange Ltd.(NSEL) was incorporated as a company with Financial Technologies (India) Ltd. (FTIL) holding 99.98 per cent stake, for operating a commodities spot exchange platform. It had obtained licenses under APMC Acts of various state governments to run spot exchange activities.

It was also granted exemption by the Government from the preview of the erstwhile FCRA to conduct trading of one-day duration forward contracts subject to various conditions.

The erstwhile Forward Markets Commission (FMC) was the statutory regulator under the Forward Contracts Regulation Act (FCRA) and was functioning under the administrative control of the Central government’s Consumer Affairs Ministry. Later this administrative control was transferred to the Ministry of Finance in September 2013.

While NSEL was outside the domain of regulation of the erstwhile FMC, the Government through notifications in February 2012 and August 2013 had assigned a specific role to FMC to discharge certain responsibilities vis-a-vis National Spot Exchange Ltd.

Before the merger of Forward Markets Commission with Securities and Exchange Board of India, the central Government also pull out the exemption granted to NSEL from the FCRA provisions.

However, as on the date of FMC-SEBI merger, there was no notification in existence for observance by FMC with respect to NSEL and therefore SEBI did not have any role to discharge regarding NSEL, except for defending the interest of the erstwhile regulator and the central government in various litigations pertaining to the NSEL scam.

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