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Brokers’ demands for a multi-agency probe into the National Spot Exchange Ltd (NSEL) crisis is getting louder. But regulatory gaps, it seemed on Friday, are making various government departments pass the buck on who will probe the Rs 5,600-crore payment mess.
Today was the first day of settlement of dues in phases. An NSEL spokesperson said it was successful and pay out to investors would be done on August 20. However, NSEL Investors Forum, whose representatives will meet Finance Secretary R S Gujral and Consumer Affairs Secretary Pankaj Agarwal on Monday,.was bit apprehensive of the claim.
A calling attention motion is expected to be taken up in Parliament on Tuesday over the NSEL payment crisis.
As the issue of regulatory gaps surfaced, the Warehouse Development and Regulatory Authority (WDRA) demanded that it be entrusted with the task of regulating spot exchanges.
The Prime Minister’s Office (PMO) has already asked the finance ministry to form a task force to look into the NSEL crisis.
However, a finance ministry official said, “Legal authority doesn’t rest with us. It is with the consumer affairs ministry.” He said the task force could only give recommendations.
Another official said the finance ministry has no jurisdictions over NSEL.
When asked whether a multi-agency probe was being initiated into the matter, Economic Affairs Secretary Arvind Mayaram said the finance ministry has not looked into the issue yet. He said the Department of Economic Affairs will lead the task force, but its terms of reference are yet to be worked out.
The task force would comprise secretaries of the Department of Consumer Affairs and the Ministry of Corporate Affairs, officials said. It would also have officials of the Reserve Bank of India, the Securities and Exchange Board of India (Sebi), the Directorate of Revenue Intelligence and the Enforcement Directorate.
Department of consumer affairs is also in favour of a multi-agency inquiry, officials said.
In another development, Minister of State for Telecom and Shipping Milind Deora wrote to Prime Minister Manmohan Singh and sought his intervention to resolve the settlement crisis in NSEL.
The payment crisis came into fore after the exchange suspended trading in all future contracts, following objections from the government. Subsequently, there were allegations that the exchange had in violation of law allowed trading in forward contracts and pre-sold commodities without having adequate stocks.
Later, a group of investors alleged the exchange did not have adequate stocks in its warehouses and would defaul in payments. The brokers also demanded a multi-agency probe into the issue, which would in involve ministries of consumer affairs, finance and regulators such as Sebi, among others.
Reverberations of the crisis would be heard in Parliament on Tuesday when a calling attention motion is expected to be taken up, Consumer Affairs Minister K V Thomas said.However, there will be no voting on the motion, WDRA expressed willingness to probe into the stocks in NSEL warehouses and also urged the regulator Forward Markets Commission (FMC) to give it powers to regulate spot exchanges — a demand it has been making for long.
In the overall falling market share price of the Financial Technologies, promoter of NSEL, went up 3% to close at Rs.151 on BSE after opening 15% lower in the morning trade. Intra-day shares went up 20% to touch Rs.178. Multi Commodity Exchange (MCX) share closed 4% lower.
Meanwhile, FMC , the authority overseeing payment of investors’ dues at NSEL, assured investors of taking active steps to ensure smooth settlement.
NSEL Investors Forum, a consortium of leading brokers and investors , met with the FMC chairman Ramesh Abhishek with a request to instruct Jignesh Shah, promoter of Financial Technologies, to pledge his shares in FT, other group companies including MCX and use the money so raised to clear investors’ dues.
Today was the first day of settlement of dues by NSEL. Its spokesperson said it was successful and pay out (to investors) will be done on 20th august.
On August 14, NSEL came out with a detailed settlement plan with Rs 174.72 crore every week for 20 weeks beginning August 20. The exchange also agreed to pay Rs 86.02 crore every week thereafter to complete the payment dues in 30 weeks.
FMC has asked NSEL not to make payment to India Bullion Markets Association (IBMA), a company floated by NSEL. IBMA is a clearing company which was doing clearing process of all transactions done by members.
Since it is an associate company, FMC said the payment to investors will not be through that company but through an escrow account.
