Shah: Facing flak
Mumbai, Dec. 18: The Forward Markets Commission has ruled that Jignesh Shah and Financial Technologies (India) Ltd (FTIL) are not “fit and proper” to run any exchange.
The commodity markets regulator also charged Shah of being the “highest beneficiary” in the National Spot Exchange (NSEL) scam.
In an 80-page order, the commission, which went into the running of NSEL following payment defaults at the exchange, held that FTIL is not a “fit and proper person” to hold anything more than 2 per cent shareholding in Multi Commodity Exchange (MCX).
FTIL, which is the promoter of the commodity exchange, currently has a 26 per cent stake in MCX and it will have to cut its stake following the FMC order.
The commission said that FTIL, despite its contentions that it was ignorant of the affairs and conduct of NSEL, exerted a dominant influence on the management, and directed, controlled and supervised the governance of NSEL.
“In the face of a fraud of such a magnitude involving a settlement crisis of Rs 5,500 crore involving over 13,000 sellers/investors on the trading platform of NSEL, Financial Technologies cannot seek to take refuge behind the corporate veil so as to isolate itself from the fraudulent actions that took place at NSEL,’’ it observed.
It further directed that Shah individually, or through any company/entity controlled by him, either directly or indirectly, should not hold any shares in any association/exchange in excess of the threshold of the total paid-up equity capital as prescribed under FMC guidelines.
The commission further said, “It is because of the huge profit of Rs 125 crore earned by NSEL during 2012-13 that the value of the shares of Jignesh Shah in FTIL shot up manifold, giving him the benefit of a spectacular market capitalisation of his investment in FTIL running into thousands of crores.”
“Jignesh Shah as the promoter of FTIL and NSEL has misused his position to create a confidence in the minds of participants regarding the legitimacy of the business and operations in NSEL,’’ it said.
The FMC also ordered Joseph Massey and Shreekant Javalgekar, former directors of MCX, not “fit and proper” persons to hold any position in the management and board of any exchange.