COMPANY LAW
| Finmin refuses to bail out MCX in spat with SEBI Sun, 10 Oct 2010 22:07:10 GMT |
| The Economic Times Finmin refuses to bail out MCX in spat with SEBI THE MCX Stock Exchange will not get any help from the government after the stock market regulator rejected its application to set up an equity trading platform, as the finance ministry says the decision is within Sebi’s domain. "The ministry will not intervene. There is no reason to intervene," said a senior finance ministry official. Sebi had on September 23 rejected the exchange’s application to offer trading in shares citing shortcomings in compliance with norms with respect to shareholding. The official, who did not wish to be named, said ministry had forwarded the company’s representation against Sebi’s decision to the regulator as a routine process and there was no need to read more into that. MCX-SX had also requested the ministry to set up an independent panel to look into its application, but a vary government would not want to be seen doing anything more that is seen to undermine autonomy of the regulators. The central government can direct market regulator under Section 16 of the Sebi Act but such direction can only relate to policy issues. However, any decision on whether an issue relates to policy or not rests with the government, effectively giving it handle to intervene in any issue. However, another official privy to the matter said that any intervention by the government could invite the charge that the action was prompted at the behest of an applicant to the Sebi and hence was a mere transaction and not a policy issue. The government has already invited the displeasure of financial regulators over the creation of a body to handle hybrid financial instruments after Sebi-IRDA regulatory tussle over the regulation of unit-linked products or ULIPs. Its proposal to creation a Financial Stability and Development Council (FSDC) and review of financial law through a Financial Sector Legislative Reforms Commission (FSLRC) have also not gone down well for apprehensions over regulatory autonomy. The government would not want to create another controversy at this stage or seen to be interfering in regulatory functions. Finance minister Pranab Mukherjee has also repeatedly said that his ministry is not interested in interfering with regulatory function or becoming a super regulator. He has said that he was in favour of only larger policy coordination between the government and the regulators under the proposed Financial Stability and Development Council. The official also pointed that the entire judicial recourse had not yet been exhausted. Market regulator Sebi’s concerns are largely around the issue of MIMPS or Manner of Increasing and Maintaining Public Shareholding in Stock Exchanges norms. According to these norms no single share holder can hold more than 5% in stock exchanges. A select class of financial institutions, however, can own up to a maximum of 15% each. MCX-SX had commenced operations in currency derivatives in September 2008, but its application to segments like equity, interest-rate derivatives and bonds have been pending with the regulator. The exchange, promoted by Financial Technologies Group and Multi Commodities Exchange MCX , had moved the Bombay High Court in July this year, alleging delay in getting SEBI clearance despite having complied with all regulatory requirements. Financial Technologies and MCX hold 5% each though it is said that they hold warrants of the company and control more 61.9% economic interest. |
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