The new set of guidelines for stock exchange ownership could see the Sebi stepping in if the Forward Markets Commission (FMC) declares that members of the board of the directors of the crisis-hit National Spot Exchange (NSEL) is not ‘fit and proper’.

Persons familiar with the development said that the Securities Contracts (Regulation) – (Stock Exchanges and Clearing Corporations) Regulations 2012 ? popularly known as SECC ? clearly lays down that if any person or entity has been declared not ‘fit and proper’ by any regulatory body, then Sebi can also declare the same.

This would mean that a person, who is currently part of the board of NSEL, can no longer be on the board of any equity bourse. In other words, Jignesh Shah and Joseph Massey may no longer be able to continue on the board of MCX Stock Exchange (MCX-SX) if FMC formally passes an order declaring them as not being “fit & proper”. While Shah is the vice-chairman in both the bourses, Massey is the MD & CEO of MCX-SX and a director on the board of NSEL.

Sources, however, add that the capital market regulator is expected to act only after a formal order is passed by the FMC.

Late last night, FMC, in a letter to the board of NSEL, stated that “non-settlement” of outstanding trade on NSEL seriously reflects on your credibility and reputation which is a key ingredient in meeting the criteria for ?fit and proper? person.” Your status as a ‘fit and proper’ person is at serious risk and may lead to consequential actions, it added.

The commodity market regulator has further stated that if the status of ‘fit and proper’ person is lost, then the entities “cannot continue to hold directorship or share holding in any of the recognized futures commodity exchange.” This would mean that along with Shah and Massey, Shreekant Javalgekar may lose his MD & CEO’s chair at MCX.

“The law states that Sebi would act if there is a bearing on the securities market, which does not seem to be the case as of now. But Sebi can act under the generic clauses that mention that if there are issues with general reputation, financial integrity and honesty, then an entity can lose the tag of ‘fit and proper’,” said a lawyer specialising in securities market regulations.