Financial Technologies-promoted stock exchange MCX-SX is ring-fenced from the troubled group firm National Spot Exchange Ltd, said SEBI chief U. K. Sinha, allaying fears of crisis at NSEL spilling over.
“I would like to clarify that the promoters of these companies (commodities bourse MCX and the crisis-hit spot exchange NSEL) are also promoters of MCX-SX that we regulate. But I would like to assure you that the entity we regulate is thoroughly ring-fenced,” he said at an ISB-organised capital markets summit in Mumbai on Saturday.
“There has been a complete change in management at MCX-SX. Two public interest directors have been appointed. We have verified the collaterals and securities to be used for settlement.” NSEL, run by Jignesh Shah-promoted Financial Technologies, was shut down on July 31 following a Rs 5,600-crore payment crisis.
Turning to SEBI’s recent moves to tighten disclosures through the listing agreement, Sinha said, “1,100 companies had violated Clause 35 (not disclosed their shareholding pattern) while 900 did not comply with Clause 49 (compliance with corporate governance norms). We have now become wise. We now have a standard operating procedure (to be followed by exchanges) for these violations. If rules are applied uniformly, it is good.”
He said law firms had been innovative in using ‘non-disposal undertaking’ for creating an encumbrance instead of a pledge to ensure that the creation of an encumbrance is not disclosed. SEBI had now plugged this loophole by including all types of encumbrances in its disclosure norms, he said.
SEBI, he said, receives a hundred alerts every day manipulations such as insider trading, round tripping, front running and sychronised trading. The regulator was acting on them.
Since getting search-and-seizure powers, SEBI had attached accounts for recovery worth over Rs 500 crore.
About the progress on setting up of self-regulatory organisations (SROs) for mutual funds, Sinha said SEBI has received three applications from AMCs’ distribution side. It should be the job of an SRO to regulate distributors and we hope to make progress on it soon, he added.
Challenges
Sinha said that he had taken up with the Government the issue of asset management companies being allowed to deploy pension money in the capital market.
On listing of stock exchanges, he said the regulations were clear that bourses cannot list on their own platforms and need to be compliant with ownership and governance regulations. They should be in existence for three years and cannot list associates and clearing corporations.