Securities and Exchange Board of India Chairman U. K. Sinha on Saturday allayed fears of crisis at the parent group of MCX-SX spilling over to the bourse, saying that the troubled Financial Technologies-promoted stock exchange is ring-fenced from other group firms.
“I would like to clarify that the promoters of these companies (MCX and the crisis-hit spot exchange NSEL) are also promoters of a stock exchange (MCX-SX) that we regulate. But, I would like to assure you that we are conscious that the entity we regulate is thoroughly ring-fenced,” Mr. Sinha told reporters when asked whether he fears the trouble at the promoter company would engulf MCX-SX.
Mr. Sinha was speaking on the sidelines of a capital markets summit here, organised by the Indian School of Business.
He also pointed out the change of management at the bourse saying: “I would like to point out that there was a complete change of management at MCX-SX with two public interest directors being nominated by SEBI.
“Since we are worried about risk management, we have also verified the collaterals and other securities required for this settlement. For the point of view of settlement, good governance and for insuring the market that things are alright we have taken many steps.”
Jignesh Shah-promoted Financial Technologies runs a clutch of market institutions — the stock exchange MCX-SX, commodities bourse MCX and the commodities spot exchange NSEL.
On the new disclosure norms for listed companies, Mr. Sinha said the regulator was not asking for extra disclosures, but only trying to plug the loopholes, which were rampant.
“We have decided to now look at adequacy of disclosures and not extra disclosures. Accordingly, promoter shareholding which is pledged should be disclosed, this is a requirement under SAST regulations,” he said.
“We have found that using very innovative methods, advised by powerful legal firms, companies came out with a method called NDU (non-disposal undertaking) and various other methods of creating encumbrance. We have not created a guideline that any sort of encumbrance has to be reported,” Mr. Sinha added.
On the progress made on the setting up of self-regulatory organisations (SROs) for the mutual fund industry, Mr. Sinha said SEBI had so far received three applications from the AMCs’ distribution side. It should be the job of an SRO to regulate distributors and “we hope to make progress on it soon’’, he added.
On recovery from defaulting/erring companies, Mr. Sinha said, “in the past two months that the search and seizure order has been in place, we have passed orders to recover more than Rs.500 crore. We have frozen a whole number of bank accounts. Though I don’t have the exact number of bank accounts frozen, a number of accounts and assets have been frozen worth over Rs.500 crore.”