The investors, under the aegis of NSEL Investors Action Group, have asked the probe agencies to conduct a forensic audit of all major brokers that were selling NSEL products. They allege that the brokers did not exercise proper checks before inducing clients into trading on the spot exchange.
The NSEL settlement crisis has seen large brokerages, including Anand Rathi Commodities, Motilal Oswal Commodities Brokers, India Infoline, Emkay Commotrade and Geojit Comtrade, reporting exposure over R100 crore each.
According to the complaint, the brokers failed to collect delivery orders or warehouse receipts, which would prove the title of the goods. In a criminal breach of trust, the brokers gave away investors money without securing the investor in return by collecting negotiable document like warehouse receipt/delivery order, says the complaint.
The complaint has also highlighted the fact that there was a huge disparity between the number of entities on the buy and sell sides of pair trades. There were only 18 borrowers (after removing related entities) on one side and 13,000 odd investors on the other, says the five-page complaint letter.
In another major allegation, the investors have said that some brokers could have used their connections to take money out of the settlement guarantee fund (SGF). Incidentally, soon after the crisis emerged, exchange officials said that there was around R800 crore in the SGF, which later on was reported to be only around R60 crore. It is believed some brokers may have used their connections and taken money out of this SGF at the last moment before default... In case of any shortfall in SGF, the clearing members (brokers) should make up this shortfall, says the complaint.
Shah knocks HC door against FMC order
Jignesh Shah has filed a petition in the Bombay High Court, challenging the order passed by the Forward Markets Commission (FMC) that ruled that Shah cannot be a shareholder in any exchange. Along with Shah, his close confidantes Joseph Massey and Shreekant Javalgekar have also filed separate cases in the court, challenging the FMC order.
On December 18, FMC had said the three individuals are not fit & proper and cannot be a shareholder in any exchange. All the three individuals have already resigned from the directorship of all exchanges that are owned or controlled by the FTIL group.
FMC had also ruled that Shah-promoted FTIL is unfit to act as an anchor investor in any commodity exchange and its stake in Multi Commodity Exchange (MCX) should be reduced from the current 26% to 2%.
FTIL has already filed a petition in the high court and the case has been posted for hearing on January 8.