MCX-SX and its clearing corporation MCX-SX CCL have to appoint a five-member committee to strengthen their corporate governance as a condition for renewal of recognition for one year starting September 16, 2013, capital market regulator SEBI has said.
Non-compliance with its directions and any adverse findings by any other regulator may result in de-recognition, it had cautioned late on Wednesday.
The directions are significant due to the fact that Financial Technologies, one of the promoters of MCX-SX, is embroiled in a payment crisis related to its subsidiary National Spot Exchange Ltd (NSEL) and SEBI’s conditional grant of recognition is seen as a measure to prevent recurrence of the crisis in MCX-SX.
5-member panel
The committee has to be constituted within two days of renewal of recognition and will consist of two public interest directors and three nominees from institutional investors in MCX-SX, said the directive.
The committee will advise the exchange’s board on all policy matters. It will oversee the financial transactions related to investment, lending and borrowing of funds and related party transactions.
The panel will also have a say in the appointment of key management personnel; all facility/infrastructure sharing arrangements and all major capital expenditure.
MCX-SX CCL, a subsidiary of MCX-SX also has to constitute a committee on the same lines. The committee shall oversee the clearing and settlement functions in addition to those listed above.
Scrutiny on conflict of interest
To further secure the management of the exchange and clearing corporation, SEBI has directed the shareholders of MCX-SX and MCX-SX CCL to examine the conflict of interest and compliance with Stock Exchanges and Clearing Corporations Regulations (SECC Regulations) 2012.
The scrutiny on conflict of interest pertains to the directors and key management personnel including managing director.
The shareholders then have to take appropriate action including reconstitution of board, reappointment of any key management personnel and report to SEBI within 30 days from the date of renewal of recognition.