FMC tells NSEL to sell defaulter‘s assets to clear dues

Regulator Forward Markets Commission (FMC) today instructed National Spot Exchange Ltd to take control of stocks and assets of the defaulting members and liquidate them to meet payment obligations, reports Sajeet Mangat.

In a strongly worded letter FMC accused NSEL board for not replying to its queries. The regulator of commodity exchanges asked NSEL why it had not taken any action against the defaulting members and why some of the members were not declared defaulters yet.
FMC's order comes a day after NSEL defaulted on the first payment obligation to investors. NSEL was able to pay only Rs 92 crore out of the scheduled Rs 174.72 crore. The exchange had informed that nine members (buyers) did not pay their dues.
The regulator wants NSEL to auction all the stocks and assets of defaulters post taking over control. These stocks will be then auctioned and the money received would be used to pay-up the investors. Also read: NSEL crisis: MCA to look into possible Companies Act breach
“The Exchange, therefore should proceed to liquidate all realizable assets of the defaulter members to meet his/their pay-in obligations," FMC said in a letter to the NSEL board.
The proceeds of commodities auctioned and realisation of assets of defaulter should be deposited in escrow account and should be paid to selling members with the approval of the Commission, FMC directed
FMC also sought terms of appointment of Collateral Management Agency like Group 4 and SGS. It also demanded information about preliminary reports of these agencies.
Many of the participants feel that this is one of the precursor moves by the FMC before it goes ahead and takes charge of the NSEL.
NSEL is facing the problem of settling Rs 5,600 crore dues after its suspended trade on July 31, following the government direction in the wake of found violation of certain rules by the exchange.