Finally, the ball has fallen. SEBI has found FT to be not-fit-and-proper to run a stock exchange. In an order yesterday:
- FT isn't Fit and Proper to own shares in a stock exchange.
- FT must sell its holdings (equities or warrants) in all stock exchanges, including MCX-SX.
- FT can't even have voting rights if it has indirect holdings (through a subsidiary)
Remember the NSEL Crisis? Capital Mind covered it in extreme detail. (Read our full page on all the posts)
FT owned NSEL, which was responsible for a massive Rs. 5,500 cr. scam. We've seen the whole thing in detail, and the exchange was running what was a financing scheme instead of actually trading commodities. Just 24 borrowers were on one side, while more than 12,000 investors were on the other, and the exchange , it seems, facilitated the transfer of money in one direction, as if the borrowers were "temporarily" selling commodities to the lenders, and then buying it back a few weeks later.
It has been found that exchange officials have been complicit in the process, and some of them are in jail.
The ultimate big boss of FT, Jignesh Shah, has been charged in a CBI chargesheet. Strangely, the CBI is tracking two people who were responsible for bringing the politically well connected FT group back down to earth by demanding they follow the rules in spirit and letter - CB Bhave and KM Abraham, the SEBI bigwigs. They are under investigation for "irregularities" in giving MCX-SX the licence to run a currency exchange. (Sources tell me this is being done to placate a certain very powerful person who doesn't like bad things to happen to Mr. Shah; which means the investigation into Bhave and Abraham will quietly die)
I'm very happy that FT has received what it deserved. However, the stock market loves it. Despite such an order, the stock is up to Rs. 377, and was up 5% on this news. We don't know why, and we don't really know why this stock is worth even this much. Apparently, some people continue to like a company which provides software to brokerages but isn't really "fit and proper", and they believe it will continue to sell its software. This is not going to end well.