The Telegraph
Since 1st March, 1999
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Sebi threatens to supersede CSE

Calcutta, Sept. 9: Lyons Range is in the midst of a crisis with the securities market regulator threatening to supersede the management of the Calcutta Stock Exchange, and all the public representative directors, including president Supriyo Gupta, resigning from the board in a space of nine days.

In its missive dated August 28, the Securities and Exchange Board of India (Sebi) points out various failures in the management of the exchange particularly in implementing its directives. Sebi alleges that the directors of the exchange were unable to conduct meetings and consider key issues in a “proper and responsible manner”.

Gupta and Biswajit Chowdhury — former chairman of United Bank of India — resigned from the CSE board on September 4, following on the footsteps of former Justice Prabir Majumdar, who stepped down on September 1.

B. B. Chakraborty, a professor of the Indian Institute of Management, Calcutta — the last public representative director on the board of the bourse — put in his papers after the notice from Sebi was discussed at a meeting today.

After the recent spate of resignations, the exchange is left with a 10-member board. Besides the officer-on-special duty P. K. Das, who for all practical purposes is acting as the executive director, there are seven brokers and two Sebi nominees on the board of the exchange at present.

The notice sent by Sebi under section 11(1) of the Securities Contract (Regulations) Act, demands explanation as to why the board of the exchange should not be superseded. It is quite clear from the notice that the market regulator is upset with the broker-directors’ resistance to the demutualisation of the exchange.

Though all the public representative directors cited personal difficulties for quitting, they revealed in confidence that they were upset with the way other directors had conducted themselves in the last few board meetings.

“The demutualisation of the exchange has reached a complete stalemate with brokers determined to stall the process. Things hadn’t moved one bit in the last few meetings. What is the point of continuing in a state like this'” asks one of the directors who quit.

“The writing on the wall is clear. Sebi has decided to supersede the management of the exchange. It’s going to do so regardless of whatever the exchange says in response to the show-cause notice,” said a Lyons Range veteran. “It’s the worst crisis since the Rs 120-crore default (that hit the bourse in March 2001). Sebi’s move is reminiscent of its action against a few other regional exchanges,” said another broker.

Fortunes of the exchange have not changed much despite the ongoing rally in the equity market. Turnover has barely climbed up to Rs 8 crore, whereas business at the two leading bourses — BSE and NSE — have jumped manifold. The crisis will to hit the 125 employees of the exchange more than the brokers.

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