The Arvind Mayaram committee, formed to look into alleged irregularities at the National Spot Exchange Ltd (NSEL), is doubtful whether the process of attachment of properties and assets of the accused will lead to immediate recovery of money.
In mid-October, the Enforcement Directorate (ED) had registered a case against the exchange and its promoters under the Prevention of Money Laundering Act. The Mayaram committee, in its report submitted a little over a month ago, a copy of which was seen by Business Line , said the Enforcement Directoratecould attach the properties but the Act does not have powers similar to the SEBI Act, which allows the money to be returned to the investors by the process of attachment and auctioning of assets.
The committee is also cautious about taking any harsh steps against Financial Technologies India Ltd (FTIL), the parent company of NSEL. In its report, it has pointed that given the gamut of activities of FTIL, including providing trading software to Indian and overseas exchanges, any kind of interruption or cessation of its services will have an adverse effect on the business and operations of the exchanges.
In countries such as Singapore, Dubai, Botswana and Bahrain, exchanges use FTIL software.
“Failure to safeguard the infrastructure operated by FTIL may also affect the company’s operations in overseas exchanges and could have reputational implications for the country,” the report said.
It further said that the ownership, governance and management structure at FTIL and the exchanges promoted by FTIL need to be examined and necessary steps taken, in a “non-disruptive manner”, which will ensure the stability and integrity of the capital and commodity markets.
It added that at FTIL there is a need to explore the possibility of bringing institutionalised framework with diversified ownership to ensure better corporate governance practices. There is a need to segregate ownership and management of institutions such as FTIL and other exchanges.