ASE members likely to challenge new Sebi norms in HC

Contemplating action in a week's time

Shareholders and members of the Ahmedabad Stock Exchange (ASE) have decided to move court next week against the stringent norms issued by the capital market regulator for regional stock exchanges (RSEs).

The rift between the Securities and Exchange Board of India (Sebi) and RSEs seems to be gaining momentum with five members and shareholders from ASE deciding to file a writ petition in the Gujarat High Court against the new norms. RSEs says the Sebi norms would lead to their complete closure.

According to sources close to the development, five shareholders and five members of the Gujarat-based stock exchange are likely to challenge Sebi’s order, prescribing RSEs to maintain Rs 100-crore net worth, Rs 1,000-crore trading turnover and five per cent cap on shareholding.

“There are five shareholders and five members of ASE and an NGO (non-governmental organisation) working for investors and brokers will file a case against Sebi’s order in the high court over the next one week,” said a member of ASE, on condition of anonymity.

Earlier this month, promoters and members of the Uttar Pradesh Stock Exchange had moved the Allahabad High Court against Sebi for prescribing stringent norms for RSEs. The court has admitted a petition filed by the UP Brokers Forum. According to insiders, members of most of the 16 RSEs are in the process to take a legal recourse against Sebi’s order.

“The order may lead to closure of RSEs, if the new norms are not met. This is a threat on the existence of RSEs. After UP, soon there will be many others who will file case against Sebi’s order,” said a shareholder of ASE, who also requested anonymity.

It may be noted here that Gujarat’s three regional exchanges, ASE, the Vadodara Stock Exchange (VSE) and the Saurashtra and Kutch Stock Exchange (SKSE) are considering to merge after Sebi’s new norms announced. Experts believe it is difficult for RSEs to meet the requirements stated in the Sebi’s circular mainly during the present market conditions, when the national exchanges like BSE and the National Stock Exchange (NSE) are facing reduced volumes in the cash segment.