The authority has observed that the nominee cannot replace the regulator himself. The powers of the regulator remain quite distinct and separate from that of his nominee.

"The nominee may not discharge certain duties in certain cases in the ideal fashion. This, however, cannot take away from the fact that the stock exchange has to follow procedures in the interest of investors. In view of this, the contention of the appellant on this front cannot be accepted", the appellate authority has observed in its order in the JC Parekh sacking case.

BSE executive RC Mathur had, in a letter written to Sebi chairman DR Mehta on February 18, maintained that Sebi's senior executive director LK Singhvi had been kept abreast of all developments and was aware that the BSE had collected margins inthe form of cash, had put through prearranged deals after normal trading hours and averted a payments crisis through a broker bailout.

Sebi contended that this claim was incorrect. It cited minutes of the June 14 BSE governing board meeting where Singhvi had criticised the handling of the market conditions at the time. "In view of the above, it is difficult to state that Singhvi had acquiesed and the contention of the waiver can be accepted. Secondly, the responsibilities of the president of the stock exchange to follow the regulations and directions of Sebi and follow transparent procedures for trading cannot be diluted by any acquiesance on the part of the Sebi nominee", states the appellate authority order.

On the BSE decision to accept margins in the form of shares and that too of those scrips which were volatile, the AA has observed: "Shares of companies, as a matter of normal prudence, are taken by financial institutions in respect of loan or other transactions as security. These are, however,always of other companies whose shares may be held by the promoter of a company. To take by way of margin the very shares in which volatility was expected was really not an adequate safeguard and a very prudent measure."

On BSE's contention that the measures were taken to protect the interests of investors, the AA has observed: "The vital reason for the development of the crisis, therefore, cannot but be traced to these decisions to reduce the margin which was influenced by directions of the president after some brokers had met him and represented that such larger margins were resulting in diversion of business to other stock exchanges.....If the crisis was of such magnitude the exchange should have sought formal approvals from Sebi chairman or at least taken the governing board fully into confidence prior to such vital decisions. The decision taken was clearly against the existing norms and it in fact was designed to save the position of the brokers who had built up large positions and were not in aposition to honour their commitments."

On the opening of trading terminals after trading hours the AA has observed: "Firstly, the deal benefited only a few brokers who had payment problems and discriminated against those other BSE brokers who had similar payment problems but were denied participation in these trading sessions...We are inclined to agree with the view that these could not be termed as a market arrangement but (were) actually a structured or negotiated deal particularly to benefit a few brokers".

On whether the punishment is too harsh, the AA has observed: "If a president of stock exchanges, particularly that of an important one in India, namely the BSE, violates the norms of an exchange and disregards regulations, then it is necessary that deterrent action is taken to save the investors from the possibility of any such future attempts and bring transparency."