Sebi fines MSEI, its MD, CFO for flouting Securities Contracts rules

It was further advised to the Governing Board of MSEI to take suitable action on the observations in the Forensic Audit Report (FAR) against the entities/ persons found to be involved in the malpractices.

Capital markets regulator Sebi on Tuesday imposed a penalty totalling Rs 12 lakh on Metropolitan Stock Exchange of India Ltd (MSEI), its managing director Latika Kundu and HR head as well as chief financial officer Saket Bhansali for violating Securities Contracts rules. They have been directed to pay the fine within 45 days, the Securities and Exchange Board of India (Sebi) said in its order.

In its order, Sebi found that MSEI during preparation of the books of accounts on a going concern basis failed to provide necessary projections in terms of Indian AS1 (Accounting Standard 1) and failed to seek relaxation regarding Key Management Personnel (KMP). Further, Kundu has failed to follow Standard Operating Procedure (SOP) while appointing employees, failed to designate a few employees as KMP and gave clean chit to the exchange's two officials -- Kundan Zamvar and Kunal Sanghavi, even after knowing the fact that their names were highlighted in anomalies concerning mismanagement in uTrade contract.

Also, Bhansali gave clean chit to Zamvar and Sanghavi, even after knowing the fact that their names were highlighted in anomalies. Through such acts, they violated the provisions of Securities Contracts rules and accordingly the regulator levied a fine of Rs 4 lakh each on MSEI and Kundu, and Rs 2 lakh on Bhansali.

The regulator said it has considered the steps taken by Kundu after joining MSEI and efforts made by Kundu and Bhansali for revival of the exchange as mitigating factor. During the July 2019-2021 period, Sebi received various complaints against MSEI, wherein, irregularities in working of the management of MSEI were alleged. Given such complaints, the regulator had advised the bourse to appoint a forensic auditor to conduct the audit of MSEI covering the allegations.

It was further advised to the Governing Board of MSEI to take suitable action on the observations in the Forensic Audit Report (FAR) against the entities/ persons found to be involved in the malpractices. In June, three individuals settled with Sebi alleged violations of Securities Contracts rules in the matter of former officials of MSEI after collectively paying over Rs 33 lakh towards the settlement amount.

Those who settled the case were Balu Nair, who was the interim CEO of MSEI, Kunal Sanghavi, then Chief Financial Officer of the bourse, and Kundan Zamvar, who was holding the position of Vice President - IT and Chief Information Security Officer (CISCO) at the time of the alleged violation.