MCX to advise FTIL to cut stake in bourse to 2%

Mumbai: The board of Multi Commodity Exchange (MCX) on Thursday has decided to write to Financial Technologies (FTIL), its main promoter, to reduce the latter's stake in the commodity bourse to 2% or even less within the next one month to comply with an order by Forward Markets Commission (FMC), that found FTIL failing to meet the 'fit & proper' criteria to be a promoter of an exchange. The decision by the MCX board was taken after the Bombay high court last week did not put a stay on the FMC directive of December 17. 

    In a communication to BSE, MCX said its board of directors has decided to advise FTIL "to implement FMC order dated December 17 by reducing its stake in the company (MCX) from 26% to 2% or below, within a period of one month." The commodity bourse also withdrew the representation of Miten Mehta on MCX board in view of the FMC letter. Mehta was designated as FTIL's nominee on MCX board after the group's main promoter, Jignesh Shah resigned from MCX board last month. 
    Earlier this month, FMC had found that FTIL, along with Shah and two other former executives at the group, Joseph Massey and Shreekant Javalgekar, not 'fit & proper' to hold more than 2% stake in MCX for their role in the Rs 5,600-crore NSEL scam. The order also implies that Shah, Massey and Javalgekar can neither run nor be on the board of any commodities exchange. 
    In its order, FMC said several shortcomings were noticed in the functioning of NSEL, which included problems with warehousing, risk management, corporate governance and related party transactions. 
    The regulator also said that because of the huge profit of about Rs 125 crore earned by NSEL during fiscal 2013, the value of the shares of Shah in FTIL shot up manifold, which gave him the benefit of a spectacular market capitalization of his investments in FTIL running into thousands of crores of rupees.In an unrelated development, a group of NSEL investors have written to the Economic Offences Wing of city police, pointing out the role of brokers in the NSEL scam.