Waking up after National Spot Exchange ltd (NSEl) defaulted on payments of lakhs of investors, the Centre on Thursday hinted at tough action against it, describing the exchange as an unregulated body which violated norms all along.
Finance Minister P Chidambaram citing the recommendations of a panel headed by Economic Affairs Secretary Arvind Mayaram, said that Ministry of Corporate Affairs (MCA), Central Bureau of Investigation (CBI) and the Forward Markets Commission (FMC) will take action against NSEl.
“The Mayaram panel report has suggested that the MCA, CBI and FMC must take appropriate action. They have listed out the irregularities. These authorities are looking into the matter. They will take action,” Finance Minister P Chidambaram told reporters.
The panel looked into alleged irregularities in the functioning of commodity exchange
NSEl, which is grappling with a Rs5,600 crore payment crisis after halting trading.
Chidambaram said NSEl was not a registered or recognised association under the FMC but got exemption even before it started its business.
“I think there is much more to the way NSEl started business than meets the eye. People seem to have given money to NSEl promoters with open eyes that it is not a regulated entity, which is violating conditions from day one. Yet they were giving money to NSEl. Many of them made money in initial stages and some of them lost money now,” he said.
The investors, Chidambaram added, knew that they were investing in an entity which was unregulated.
Chidambaram said although there was no fear of the NSEl crisis spilling over to other markets, he has asked capital market regulator Sebi and commodity market watchdog FMC to keep a careful watch.
“NSEl was violating the very conditions under which they claimed they could do business,” he said.
NSEl, part of the Jignesh Shah-led Financial Technologies group, had to suspend trading on July 31 after a government directive. It has defaulted on six consecutive weekly payments to be made to its investors. Financial Technologies (India) ltd has also promoted two other trading platforms - the Multi Commodity Exchange of India ltd and MCX Stock Exchange ltd.
On whether the Government is looking at changing the management of other entities with the same promoters, Chidambaram said, “let us wait for the report of the regulators. let FMC give its report. I think the FMC report will be ready in a day or two. We will see the report first.”
He said once the FMC report is received, the CBI and MCA will look into it and decide what action needs to be taken.
Chidambaram further informed that the Income Tax department is looking into the financial details of investors in NSEl to find out whether there is involvement of black money.