The Securities and Exchange Board of India (Sebi) has served Financial Technologies with a show-cause notice calling into question FTIL’s shareholding in MCX-SX .
The blows just don’t seem to stop as far as FTIL is concerned. In its show-cause notice, Sebi has asked four critical questions:
1. Why should FTIL be considered ‘fit & proper’ for holding stake in any stock exchange,2. Why shouldn’t FTIL not be directed to divest its stake, 3. Why FTIL should not be directed to divest its stake in MCX-SX and lastly, 4. Why no action should be initiated against FTIL?It is important to point out that FTIL holds a stake not only in MCX-SX but also in MCX-SX Clearing Corporation, the BSE as well as the Vadodra Stock Exchange. So, a big fallout is what the FTIL is potentially looking at after this Sebi show-cause notice.
Importantly, FTIL has time till December 26 to come back with its reply to this Sebi show-cause notice.
While the FTIL has alleged that FMC has violated principles of natural justice arriving at the conclusion of guilt without any trial, it will still have to contend with the FMC order which came out a few days back. FTIL appears to be moving fast as it has filed a petition in the Bombay High Court. It is moving fast driven by concerns with respect to the FMC directions to divest stake in MCX.
Importantly the line of questioning, the line of arguments that FTIL is likely to take is the principle of natural justice has not be adhered to. FTIL’s contention is likely to be that Jignesh Shah or FTIL have not been deemed guilty by any court of law and hence it would be unfair atleast for the FMC to deem them unfit and improper.
One another point that they are expected to raise is that as far as the MCX board is concerned, FTIL has only one nominee and the other nominees, infact, are controlled by the FMC.
These are the multiple issues that are likely to be raised. At this point FTIL fighting multiple battles, this one against the FMC order which is scheduled for tomorrow before the Bombay High Court.
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