MCX sets in motion process to strip FTIL of voting rights

May 10 2014, 12:51 IST
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SummaryThis is the first step taken by MCX to strip Jignesh Shah-promoted Financial Technologies.

The board of Multi Commodity Exchange of India Ltd (MCX) decided on Friday to change its Articles of Association to incorporate latest guidelines on shareholdings, among others, issued by the commodity market regulator, the exchange said in a statement. This is the first step taken by the exchange to strip Jignesh Shah-promoted Financial Technologies India Ltd (FTIL), which has a 26% stake in the bourse, of its voting rights, as both Shah and FTIL have been declared ‘not fit and proper’ by the Forward Markets Commission (FMC).

Once approved by the FMC, the changed guidelines will also empower MCX to ensure FTIL reduces its stake in the commodity exchange to 2%, as directed by the regulator. The board also decided to relieve the exchange’s managing director & chief executive Manoj Vaish, who has already tendered his resignation, from his service on Saturday. It constituted a panel of senior executives to manage the day-to-day affairs.

It agreed to slightly change its objective under the company's Memorandum of Association, which will bar it from dealing in any equity-related products now. Market sources said such a step was aimed at keeping the focus purely on commodities, and not any other products in the garb of commodity derivatives. This was essential to prevent any NSEL-like crisis in which the spot exchange was offering financial products in the garb of commodities, they added.

Earlier in the day, MCX said it had initiated action against some employees based on concerns brought to focus in a special audit report by PricewaterhouseCoopers (PwC).

In a filing to the Bombay Stock Exchange, MCX said it has started action “such as filing complaints before appropriate authorities, and issued notices to certain employees”. The commodity futures exchange didn't elaborate.

At a meeting on April 26, the MCX board had directed the management to take action after taking required approvals. The executive summary of the report by PwC, which conducted a forensic audit of MCX at the behest of FMC, pointed out that operations at the Jignesh Shah-promoted exchange were significantly dependent on FTIL— the anchor investor of the commodity bourse. MCX spent approximately Rs 649 crore over the years for services stipulated to have been rendered by FTIL under various agreements, the audit said, adding the total amount of money paid by MCX to disclosed related parties was approximately Rs 709 crore.

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