Nse Asks Sebi To Settle Dual Membership Liability Issue

With the Bombay Stock Exchange (BSE) taking a tough stance on the issue of liabilities of its members in other exchanges, the National Stock Exchange (NSE) has urged the Securities and Exchange Board of India (Sebi) to settle the issue of the extent of liabilities in either exchanges in case of dual membership.

Deputy managing director of NSE, Ravi Narain, told PTI that the issue of liabilities in the case of dual membership would continue to exist till Sebi or any other regulator found out a solution.

The governing board of the BSE had yesterday decided that no BSE member, either in individual capacity or in partnership, would be permitted to extend personal guarantees to other exchanges.

 

BSE's decision was a sequel to the NSE's notice seeking an undertaking-cum-indemnity by all dominant shareholders of firms having corporate membership with it, making the members personally liable for introducing into the system, securities that are not acceptable to a company.

At present, more than 150 members of the BSE have a dual membership with the NSE in the form of a corporate membership card. Narain, however, said the BSE's decision was not relevant to the NSE's notice to its corporate members on total guarantee.

The board decided that "No BSE member can have an unlimited liability in any other exchange, which may affect the safety and integrity of this exchange," BSE president M G Damani said. According to the BSE president, even Calcutta and Delhi stock exchanges might follow the BSE in barring its members from having any liability in NSE.

The BSE's decision yesterday was under the existing by-laws of the stock exchange. "Under rule 47 (a) xi of BSE, members having personal financial liabilities in any other business, will be disqualified," Damani said.

"Only after a BSE member makes his financial disclosure he is allowed to do business. One fine day he should not say that all his net worth is wiped out after meeting his liabilities in any other exchange," he said emphatically.

Meanwhile, some members were planning to meet the NSE officials to press for scrapping the new notice that makes them totally liable to the exchange.

"When we entered into an agreement with NSE initially, there was only limited liability and now all of a sudden the NSE wants us to be totally liable," a member said.