Sebi charges former and current MCX, FTIL executives with insider trading
Mumbai: The Securities and Exchange Board of India (Sebi) on Wednesday charged 16 current and former executives of Jignesh Shah-led 63 Moons Technologies Ltd (previously Financial Technologies India Ltd, or FTIL), and Multi-Commodity Exchange Ltd (MCX), with insider trading. The regulator sought to know why it should not seize unlawful gains and interest from these individuals totalling Rs125 crore.
In two separate interim orders, the Securities and Exchange Board of India (Sebi) said these key management personnel (KMP) had traded in FTIL and MCX shares with unpublished price-sensitive information (UPSI), and averted losses of Rs4.1 crore in FTIL and Rs81 crore in MCX.
In the interim order, S. Raman, whole-time member of Sebi, asked why stringent action should not be taken against individuals including impounding of the illegal gains with interest, adding up to Rs125 crore. Sebi also froze assets of the 16 individuals.
To be sure, Shah and the companies themselves have not been accused of insider trading. The move comes after an investor in National Spot Exchange Ltd, majority-owned by 63 Moons, filed a writ petition in the Bombay high court over Sebi’s investigation into insider trading.
The regulator then gave an undertaking to the court that it would complete the investigation by July end.
In an email statement, 63 Moons said, “The 63 Moons Technologies Ltd (formerly known as FTIL) notes that the order passed by the Sebi today is pertaining to certain individuals and not pertaining to the company. The company will be studying the said order and take necessary action as it may deem fit.”
A spokesperson for MCX declined to comment as the order as it doesn’t pertain to the company.
Some of the individuals mentioned in the Sebi order who Mint could reach out to said that they are examining the order.
According to the Sebi order, unpublished price sensitive information was the implication of show cause notice by the department of consumer affairs on 27 April 2012, threatening suspension of trading at NSEL. The Sebi order comes four years after the settlement crisis at NSEL.
After the showcause notice on 31 July 2013, NSEL issued a late-night statement suspending all spot contracts. What seemed to be a mere case of following a government directive turned out to be a Rs.5,574 crore payments scam that busted an exchange for the first time in India. It led to losses for 13,000 investors.
“The issuance of the SCN (show cause notice) dated April 27, 2012, by DCA, triggered a chain of events in respect of NSEL, its holding company i.e. FTIL and also MCX, a company promoted by FTIL,” Sebi said in the order.
According to Sebi, the implication of the showcause notice was the suspension of contracts and deferral of settlement and payment default.
The order pertaining to alleged insider trading in the MCX stock names Joseph Massey, a former managing director and chief executive officer of MCX-SX and a director at NSEL; Shreekant Javalgekar, a former managing director and CEO of MCX and non-executive director on the NSEL board; Paras Ajmera former non-executive, non-independent director of MCX; and Anjani Sinha, former managing director and CEO of NSEL, in addition to four others.
As per the Sebi order, Ajmera averted the largest amount of losses: Rs 72 crore including interest.
The order pertaining to alleged insider trading in FTIL includes relatives of Jignesh Shah, founder of FTIL and NSEL and Bharat K. Sheth, chairman and managing director of GE Shipping, who was serving as a director on the board of FTIL during 2012-13. An email sent to GE Shipping was not answered immediately.