Sebi alleges MCX-SX concealed facts while diluting equity

Sebi alleges MCX-SX concealed facts while diluting equity

Mumbai: Securities and Exchange Board of India (Sebi) on Wednesday alleged in the Bombay high court that MCX-SX Stock Exchange (MCX-SX) had concealed some facts while diluting its equity stake under the “capital reduction cum arrangement".

Sebi counsel, additional solicitor General Darius Khambata, argued that MCX-SX had also not informed it about modalities and nitty-gritty of this scheme.

Justices DY Chandrachud and Anoop Mohata were hearing a petition filed by MCX-SX against the market regulator for not allowing it to start equity trading despite complying with all regulations.

The court observed that it was obligatory on the part of MCX-SX to disclose the buy-back to Sebi and that such negligence could not be tolerated.

The Sebi counsel brought on record that MCX-SX promoter Jignesh Shah and his wife were controlling a company called Lafin, which in turn holds 26% stake in Financial Technologies Ltd (FTIL), also promoted by Shah.

MCX-SX submitted that during discussions, Sebi executive director JN Gupta had himself mooted the idea of warrant model for diluting equity stake of the stock exchange to 5%. It was only then MCX issued warrants to 18 public sector banks with an assurance that this would not be converted into equity.

The HC had on Tuesday asked the Sebi whether it would accept an undertaking from the promoters of MCX-SX that they would maintain their equity holding at 5% and not exercise the option of converting warrants into equity. The regulator responded by saying it would seek instructions from the Sebi board in this regard.