Thursday, September 04, 2014

Financial Technologies Ltd: What are its Future Short Term Targets?
Some points need to be highlighted here:
(i) According to NDTV Profit, August 27, 2014: 
Jignesh Shah-led FTIL asserted that promoters of MCX-SX did not conceal facts while seeking extension of recognition of the exchange in 2009 from capital market regulator Sebi.
The Bombay High Court did not find anything illegal in the buyback arrangement.
"...it was expressly held that the said buy back arrangement is not in violation of the Securities Contract Regulation Act (SCRA), 1956, and the Securities Contract (Regulation) (Manner of Increasing and Maintaining Public Shareholding in Recognised Stock Exchanges) Regulation, 2006 (MIMPS)," it said.
This Bombay High Court order was challenged by Sebi in the Supreme Court.
"The Supreme Court passed a consent order. Finally, Sebi granted permission to MCX-SX to undertake the business for all segments in addition to currency derivative segment after being satisfied that MCX-SX has complied with all the legal requirements."
"Thus the matter regarding the alleged violation of SCRA and MIMPS regulations stands adjudicated at the highest judicial level and cannot be re-opened," the statement said.

Regarding alleged irregularities in grant of extension to MCX-SX, FTIL said promoters of the exchange had always believed that the inter-se arrangements amongst the shareholders were legal.
"Further at the time of extension of recognition of MCX-SX in the year 2009, we understand that MCX-SX only sought time from Sebi for reducing the shareholding to comply with applicable Sebi regulations."
"We understand that at that point of time, no statement/representation was made by MCX-SX to Sebi in its application for extension that it was in compliance with all the relevant Sebi regulations. Therefore, the question of concealing certain facts by the promoters of MCX-SX does not arise," FTIL said.
Stating that the application for extension of recognition was made by MCX-SX and not by FTIL or Mr Shah, the company said it was surprising that promoters of MCX-SX and Jignesh Shah are being implicated in the FIR for certain alleged non-disclosures in the application.
(ii) The Bombay High Court recently appointed a three-member committee to audit NSEL and liquidate assets of its defaulting borrowers to facilitate a refund of investors’ money. Authorities claim they have attached properties worth about Rs.5,000 crore of the defaulting borrowers. 

(iii) Justice AM Thipsay of the Bombay High Court, said the transactions in question were being entered through brokers who had knowledge of the commercial market. He said: "Those terming themselves as investors were actually traders". And, so, the judge also questioned whether the Maharashtra Protection of Interests of Depositors (in Financial Establishments) Act was at all valid in this case.

The judge says the fact that transactions in question were not genuine ones of sale or purchase was known to both sides. The so-called investors and their brokers were pursuing high returns without bothering about the legalities of the trades in question. That these trades were fictitious were quite clear to the investors, too, said the judge, and they’d “entered into the transactions purely as financial investments”.
“Going by the broad probabilities of the case, it cannot be accepted that the persons who are now crying foul, were not aware of the fact that their transactions were not genuine. They were looking at these transactions clearly as an investment of their monies yielding safe returns,” the court said.
(iii) Merging NSEL with FTIL, according to the experts would be difficult to undertake, given that FTIL was a publicly-listed company and such a move may be opposed by minority shareholders.

(iv) According to Forbes India, 4 September, 2014:
As in some financial market scams, investors entered into these contracts through registered brokers, lured by expectations of capital growth. 
How much did (Jinesh) Shah know about this and what could he have done? His closest friends and business associates told Forbes India that while he expanded operations to Southeast Asia, the Middle East and Africa, he began losing the plot. Shah had spent years battling with regulator Securities and Exchange Board of India (Sebi) to acquire a stock licence for his newest exchange, MCX-SX. He won that mandate, but probably did not bother to monitor what was unfolding at NSEL. 
The imbroglio also revealed more about Shah’s personality. Some friends and associates, seen as part of Shah’s “inner circle”, revealed that he could have actually walked out of the mess with his head held high. There were at least two possible corporate suitors, who were in talks for a potential bailout of FTIL, if Shah had agreed to move out. But ego and the need for control perhaps prevented him from going ahead with the deal. 
Also, unlike most previous cases, several investors who lost money in the NSEL scam were well-off. As an investment consultant told us he had “no sympathy” for investors who–keen on making quick bucks and higher returns-lost money. They did not do their due diligence. 
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