FTIL gets time to pare holdings

Deadline to cut stake in exchanges extended till hearing on appeal

The Securities Appellate Tribunal (SAT), which hears appeals against decisions by the Securities and Exchange Board of India (Sebi), has extended a deadline to Financial Technologies India Ltd (FTIL) to divest its stake in key stock market entities.

Earlier, Sebi had asked FTIL to divest its stake in these market institutions, after declaring it not “fit and proper” to be a stakeholder in such entities.

FTIL has investments in Multi Commodity Exchange-Stock Exchange (MCX-SX), MCX-SX Clearing Corporation and the National Stock Exchange, as well as in non-operational bourses such as the Delhi Stock Exchange and the Vadodara Stock Exchange. Of the four, FTIL’s stake is the highest in MCX-SX.

FTIL VS SEBI

• Dec 17, ’13  FMC declares FTIL not ‘fit & proper’
• Dec 20, ’13 Sebi showcause notice on ‘fit and proper’ to FTIL related to its stake in MCX-SX, other market-sensitive entities
• Dec 21 & 26, ’13 and Feb 10, ’14 FTIL files its replies to Sebi
• Jan 7 & 13, Feb 11 and Mar 6 FTIL appears before Sebi for personal hearing
• Mar 6  FTIL counsel seeks time till March 18 to file written submissions. Says in replies & submissions the FMC order, on which the Sebi notice is based, is under challenge before the Bombay HC. So, Sebi should defer order till the court’s decision
• Mar 19 Sebi declares FTIL not ‘fit & proper’, asks it to divest its holding in MCX-SX, MCX-SX Clearing Corp, Delhi Stock Exchange, Vadodara Stock Exchange and National Stock Exchange
• June 13  SAT hears appeal against Sebi decision; hearing adjourned till June 26
• June 18 FTIL asks SAT to extend deadline for divesting stake;
  

SAT grants extension till June 26
In March, Sebi had granted FTIL a 90-day window for compliance in this regard. “A person who is not fit & proper to hold shares in a commodity futures exchange cannot be fit & proper to hold shares in recognised stock exchanges and clearing corporations. He poses the same danger to the interest of the securities market as he does to the commodity futures market, as both require the same standard of integrity. So, there is no doubt the declaration of FTIL as not fit & proper by FMC has direct bearing on the securities market,” Sebi’s March 19 order had said.

The regulator had also ordered an immediate freeze on FTIL’s voting rights in these entities.

The Sebi order followed a similar directive from the Forward Markets Commission (FMC) on December 17, declaring FTIL not “fit and proper” to hold stake in commodity exchanges. Earlier, a Rs 5,600-payment crisis had broken out at National Spot Exchange Ltd, an FTIL subsidiary.

Subsequently, FTIL lawyers had sought the intervention of the tribunal on the grounds that the next hearing of the appeal against the order was scheduled for June 26, by when the deadline would have expired.

The tribunal said the deadline could be extended till the next hearing. “The only question to be considered is…(whether)…the decision of the FMC has a bearing on the securities market. Since the whole-time member of Sebi has granted 90 days for implementation of the impugned order and this case…(is to be heard on June 26)….it would be just and proper (that the deadline be) extended to June 26,” said the tribunal’s order.

At the time Sebi had issued its order in this regard., both FTIL and MCX held stakes of about five per cent each in MCX-SX. They also held warrants which, on conversion, would result in about 70 per cent stake in MCX-SX.