FTIL moves SAT against Sebi's 'fit & proper' order

The regulator had barred the company from holding stake in exchanges and other key market infrastructure institutions

Financial Technologies India Ltd (FTIL) has moved the Securities Appellate Tribunal (SAT) against a Securities and Exchange Board of India (Sebi) directive barring it from holding stake in key market institutions such as stock exchanges and clearing corporations.

On March 19, Sebi had passed an order against the Jignesh Shah-led FTIL, deeming it not ‘fit and proper’ to hold stake in key market institutions. Sources said FTIL had filed an appeal against the order before SAT last week.

In its order, Sebi had directed FTIL to divest its entire stake in all market infrastructure institutions within 90 days. Sebi’s order followed the Forward Markets Commission (FMC)’s December 17 order that deemed FTIL not ‘fit and proper’ to hold more than two per sent stake in any regulated commodity exchange. The FMC order came in the wake of a Rs 5,600-crore payment crisis at National Spot Exchange Ltd (NSEL), FTIL’s subsidiary.

SPOT ANALYSIS

FTIL needs to divest its holdings in the following five market infrastructure institutions

• MCX-SX
• MCX-SX Clearing Corp
• Delhi Stock Exchange
• Vadodara Stock Exchange
• National Stock Exchange

FTIL had moved SAT on the grounds that the order passed by the FMC didn’t have a bearing on the securities market, said sources privy to the matter. In its submission before SAT, the company said Sebi had based the order not on specifics, but on the assumption the FMC order had an impact on the securities market.

FTIL and Sebi spokespersons declined to comment on the matter.

THE STORY SO FAR

• Dec 2013: FMC passes order against FTIL declaring it not a ‘fit & proper person’
  

 

Dec 2013: Sebi issues 'fit & proper' notice to FTIL for its holdings in MCX-SX, others
 

Dec 2013 & Feb 2014: FTIL files its replies to Sebi
 

Jan, Feb and Mar 2014: FTIL appears before Sebi
 

Mar 2014: Bombay HC does not stay FMC’s order that declared FTIL unfit
 

Mar 2014: FTIL counsel state that the FMC order, on which the Sebi notice is premised, is under challenge before the Bombay High Court, and that the market regulator should defer any order till the court takes a decision
 

Mar 2014: Sebi declares FTIL not 'fit & proper'; asks to divest its holding five market infrastructure institutions

 

May 2014: FTIL challenges Sebi order before SAT