At the heart of an enquiry by the Central Bureau of Investigation (CBI) against CB Bhave and KM Abraham, former chairman and former member, respectively, of the Securities and Exchange Board of India (Sebi), is the alleged “undue haste” in granting licence for currency futures trading to MCX-SX, an exchange set up by Jignesh Shah-promoted Financial Technologies Ltd, according to a senior CBI official.
The CBI’s preliminary enquiry revolves around 17 signatures obtained from various Sebi officials for approval to Multi Commodity Exchange of India Ltd , all on the same day and instructions by Abraham and Bhave to grant in-principle approval despite a finance ministry communication not to grant licence without the closure of income tax case registered against MCX and FTIL.
Incidentally, in a response by Sebi in 2010, it was stated that the income tax case had been noted by the regulator but no further action was warranted at that point.
One of the files sent by Sebi in response to the queries by CBI includes a note dated August 22, 2008, regarding the approval of MCX-SX, which stated, “As desired by WTM (KMA) and chairman, the same may be circulated to CoED for granting in-principle approval.” WTM (KMA) stands for whole-time member KM Abraham and CoED stands for committee of executive directors.
“Prima facie, it seems the licence was granted on the instruction of the two officers, despite clear instructions from the finance ministry that no proposal shall be processed until the outcome of income tax investigation. We are enquiring this aspect why such haste in granting licence,” a CBI official said, requesting not to be quoted.
The income tax department had raided the offices of MCX and FTIL on June 19, 2007, and the finance ministry letter referred to this event.
When contacted, Bhave refused to comment on specifics but said, “CBI chose to ignore the fact that I-T department found no merit in its probe against Shah. And three Sebi chairmen have arrived at the same conclusion and had similar views, yet they filed a PE against us.”
The CBI official pointed out that the file for approval of MCX-SX was moved just a day after receiving the application.
The Sebi file dated August 22, 2008, stated that “as desired by chairman, a team of Sebi officials visited MCX on August 21, 2008,…MCX has submitted the above details vide letter dated August 21,