Sebi vigilance clears its officials in MCX-SX license grant case
Mumbai: The market regulator’s vigilance cell has given a clean chit to three officials and one former official suspected of wrongdoing in the grant of recognition to MCX Stock Exchange (MCX-SX), said three people with knowledge of the matter.
The vigilance cell, which is required to keep a check on the conduct of Securities and Exchange Board of India (Sebi) officials, had started a probe of the four after the Central Bureau of Investigation (CBI) conducted raids on their residences in September.
It is unclear that why the market regulator initiated internal examination in the matter so long after the CBI registered a case in 2014.
An email and text message sent to the Sebi spokesperson was not answered.
CBI had filed an FIR against the Sebi officials in August 2014, stating that it had observed irregularities in grant and renewal of license to MCX-SX. The enquiry was registered in March 2014.
While registering the enquiry, the CBI cited “alleged irregularities in according recognition to MCX-SX by Sebi in 2008 and further renewing the recognition in 2009 and 2010.”
In a report submitted by chief vigilance officer P.K. Nagpal, the vigilance committee said that there were no lapses in the way the license was granted to MCX-SX and its subsequent renewal, said the first person.
“The matter was presented to the Sebi board in the previous board meeting, when it was being headed by U.K. Sinha,” said the second person. He too declined to be named.
The internal examination of the role of Sebi officials in the grant and renewal of license to MCX-SX started after Sebi Employee Association (SEA) wrote to the Sebi chairman and the finance ministry following the CBI raids in September.
The letter said that the selective action was disheartening when the decision had been taken at the highest level.
MCX-SX, set up by Financial Technologies of India Ltd (FTIL), and its commodity exchange arm Multi-Commodity Exchange (MCX), started operations in 2008 with just currency derivatives trading and became a full-fledged exchange in 2013 after a prolonged legal battle with Sebi.
The capital market regulator had initially refused to grant a license for equity trading, citing high promoter shareholding in the exchange. The promoters reduced their direct holding by issuing warrants to themselves—a mechanism Sebi frowned upon.
Later, MCX-SX took Sebi to court and the Supreme Court asked the regulator to take a “fresh look” at MCX-SX’s application. Sebi finally granted a conditional license in 2012.
In the past three years, the number of inquiries by external agencies against Sebi officials has increased. One of every 10 Sebi officials is currently facing a scrutiny by external agencies.
SEA, which represents the 655 Sebi employees, has been seeking an institutional mechanism wherein the vigilance officer does an independent assessment of alleged irregularities and communicates his findings to investigative agencies.