Sebi clears own staff on MCX-SX licence

In wake of earlier CBI case, report by regulator's vigilance head says no procedural lapse

An internal probe commissioned by the markets regulator has cleared its staff of any wrongdoing in the grant of a licence to the MCX Stock Exchange (since renamed as Metropolitan Stock Exchange).

The chief vigilance officer (CVO) of the Securities and Exchange Board of India (Sebi) studied the process followed in the grant of licence. “The CVO has concluded there were no procedural lapses or wrongdoing. The report was taken on record at the February board meeting,” said a source.

The probe was initiated late last year by U K Sinha, the then regulator’s head. This was after the employees under a shadow had written to him, asking for closure on the issue. The entire hierarchy which dealt with the files in question were probed.

An e-mail to the Sebi spokesperson last week for comments got no response.

The regulator's approval of MCX-SX was a long-drawn process, across the terms of three Sebi chairmen — M Damodaran, C B Bhave and Sinha. The first No Objection certificates for the promoter group’s stake purchase in the Delhi Stock Exchange and Vadodara Stock Exchange were issued in 2007, during Damodaran’s term. Licence for approval of a currency exchange was during Bhave’s term.

However, permission to operate a full-fledged stock exchange was denied, due to a controversy over compliance with shareholding norms. After a long legal battle till the apex court, Sebi under Sinha agreed to reconsider the application, under amended norms. And, MCX-SX got the licence to operate a full-fledged stock exchange in late 2012. It commenced equities trading in February 2013. The National Spot Exchange crisis erupted later that year and the licence grant became the subject of a Central Bureau of Investigation (CBI) probe.

Executive Director S V Murlidhar Rao, Deputy General Manager Rajesh Dangeti, Assistant GM Vishakha More and former executive director J N Gupta were among the officials CBI had indicted under the anti-corruption law for alleged lapses. The case was registered on the basis of a preliminary enquiry against C B Bhave, the officials mentioned above and others. This was despite CBI not finding any criminality on the part of Bhave, while it recommended departmental action against wholetime member K M Abraham.

In September, CBI searched the houses of some of these officials. After this, the Sebi Employees Association (SEA) had written to Sinha for intervention to ensure an institutional mechanism to respond to such inquiries by external investigation agencies. SEA also called for an environment where officers could discharge their duties without fear of selective scrutiny. A little over 70 Sebi officials have been called for questioning in several high-profile cases in recent years.

The story so far

2008: MCX-SX gets  approval to launch currency exchange 

2009: Gets conditional extension requiring compliance with shareholding norms

2010: Moves court after not getting permission to operate equities

2012: Permission granted under amended norms 

2013: MCX-SX starts equities trading

2014: CBI registers preliminary enquiry against several entities including Sebi officials alleging irregularities