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The Central Bureau of Investigation has registered a case against Jignesh Shah, four former SEBI officials, and three institutions for granting recognition to the Multi-Commodity Stock Exchange in 2012.
Although, no case has been registered against former chairman of SEBI CB Bhave, and former member, SEBI, KM Abraham, in the same matter, their names have been referred to the Finance Ministry for regular departmental action.
MCX-SX was set up by FTIL and its commodity exchange arm MCX, and began functioning as a full-fledged stock exchange early last year.
“Apart from Jignesh Shah, then SEBI officials Vishakha More, Rajesh Dangeti, SV Muralidhar Rao and a former SEBI official JN Gupta have been made accused in the case,” a senior CBI official said, adding that MCX, MCX-SX and FTIL have also been named in this matter.
Buyback pact The case has been registered on the basis of findings of a preliminary enquiry (PE) registered earlier this year. MCX and MC-SX were earlier affiliates of FTIL, which was founded by Shah.
According to an official statement by CBI, it has been alleged that the promoters of the stock exchange had entered into a buyback arrangement with a nationalised bank in violation of the Securities Contract Regulation Act, 1956, and the Securities Contract (Regulation) (Manner of Increasing and Maintaining Public Shareholdings in Recognised Stock Exchanges) Regulation, 2006. The accused, allegedly in connivance with SEBI officials, deliberately suppressed this material fact while applying for extension of recognition of the stock exchange, to conduct trade in currency derivatives, and, fraudulently obtained the extension of recognition of the exchange in the year 2009 by cheating SEBI, it said.
It has been further alleged that the SEBI officials deliberately did not issue notice to the stock exchange for cancellation of its recognition in currency derivatives, when SEBI had already rejected the request of the same stock exchange for trading in other segments.
On Bhave and Abraham, officials said their role in granting permission to the private exchange was not of serious nature to warrant registering a case. That is why, only department action has been recommended. Bhave, a 1975 batch IAS officer of Maharashtra cadre, was Chairman of SEBI during 2008 to 2011. Abraham’s tenure as SEBI member ended in 2011.
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