Fwd: NOOSE TIGHTENS AROUND FT GROUP OWNER

FMC Show-Cause to MCX Promoter FT

Lookout notices against Jignesh Shah, Anjani Sinha and NSEL defaulters

The Forward Markets Commission (FMC) has issued a notice to Financial Technologies (FT), the promoter of commodity exchange MCX, FT Group owner Jignesh Shah and other officials, asking them to show cause why they should not be declared not 'fit and proper' to be shareholders and directors on MCX. 
Besides Shah, who is the chairman & CEO of FT Group, notices have also been issued to Joseph Massey, MD & CEO of MCX Stock Exchange, and Shreekant Javalgekar, MD & CEO of MCX. 
"The show-cause notice has been issued on Friday," said two government officials privy to the development. "Financial Technologies and the three officials have been given two weeks to reply to the notice." 
In a potentially significant finding, the officials added, the notice found the board of National Spot Exchange (NSEL) was aware of the happenings that led to the . 5,500-crore payments crisis. 
"The board approved the paired contracts in 2009, which were not allowed as they were a financing activity. Bye-laws on warehousing too were not followed. FMC has found there were 2,000 payment defaults in two years through 2012," one of the officials said. 'Board can't Absolve Itself' 
Despite the payment defaults on NSEL, "the borrowers were not barred from trading. On the contrary, they were given margin exemption and allowed to do more trading on NSEL, resulting in their outstanding exposure rising from . 2,009 crore in March 2011 to . 6,800 crore by June this year", one of the officials said. While Shah continues to be a director on NSEL, Javalgekar and Massey were past directors on the board. Shah and Javalgekar are also on the MCX board while Massey resigned as a director on September 30. 
The show cause notice also says that trading by group company Indian Bullion Market Association on NSEL and MCX was against rules. Further, former MD & CEO of NSEL, Anjani Sinha, was a key management personnel on the exchange and according to Accounting Standard 18, such a person's role is defined and approved by the board. Thus, the board cannot absolve itself of any responsibility for the fiasco, the officials added. Another potentially significant finding, according to them, was that the NSEL board gave corporate guarantees to banks against which some of the defaulting members could borrow. 
LOOKOUT NOTICE AGAINST 
SHAH, OTHERS 
In a related development, the Maharashtra Police unit investigating the NSEL defaults case issued a lookout notice against Jignesh Shah, who will now not be allowed to leave India without permission. 
"We have issued such notices against 22-24 persons, including the promoters, office-bearers and certain defaulters on NSEL," said Rajvardhan Sinha, additional police commissioner, Economic Offences 
Wing (EOW), Maharashtra Police. "This is a normal legal procedure whereby a criminal case is filed and it is (feared) that a person with financial standing could possibly leave the country to evade the consequences. It is done as a matter of abundant caution." 
The so-called lookout notices have been issued by EOW against Shah, Anjani Sinha, other office-bearers of NSEL and key personnel of some of the biggest defaulters, including Mohan India, NK Proteins and Lotus Refineries. 
The lookout notices have been sent to all immigration check posts in the country. 
NSEL and its promoter Financial Technologies are among entities facing police investigation following a complaint filed by an investor with EOW. Around two dozen members have defaulted on payments amounting to Rs 5,500 crore to more than 13,000 investors. 
The money was borrowed on NSEL through paired contracts. First, an investor bought commodities from a borrower on the second day of placing a trade. In the second part, the investor undertook to sell the commodity back to the borrower after 25-36 days. In the bargain, the investor earned an annualised return of more than 13%. The crisis erupted when it was found that most exchange-accredited warehouses had inadequate or non-existent stocks against which borrowers had raised funds. 
Apart from EOW, other agencies examining the matter include FMC, the ministry of corporate affairs and the income-tax department.

India, Japan in $50bn currency swap

The rupee surged 87 paise on Friday after Japan extended support to India's fight against currency volatility by agreeing to more than treble the scope of the bilateral swap arrangement to $50 billion. 

    The facility between the Reserve Bank of India and the Bank of Japan enables both countries to swap Japanese yen or the Indian rupee for US dollars in an unforeseen situation. It is essentially an arrangement to tide over short-term foreign exchange crunch. The deal was first signed in 2008 and was limited to $3 billion, but the size was increased to $15 billion when the arrangement was renewed in 2011. 
    The rupee opened at 66 up from its previous close of 66.12 against the dollar and gained during the day to close at 65.25 against the dollar. "The swap arrangement with Japan was a positive factor for the rupee. This supplements RBI's earlier measures 
whereby it has agreed to swap dollars raised by banks through long-term non-resident deposits and borrowings at 350 basis points," said Ashish Vaidya, head of fixed income, currencies and commodities, at UBS India. He added that these measures under which RBI borrows dollars will complement its swap facility with oil companies where it lends dollars. 
    "The two governments expect that this will contribute to the stability of global financial markets, including emerging economies," India and Japan said in a joint statement after a meeting between Prime Minister Manmohan Singh and Japanese deputy PM Taro Aso on the sidelines of the G-20 summit. 
    Forex dealers said that the tide appears to have turned for the rupee and this could result in unwinding of long dollar positions. But uncertainty continues to hang over the market in respect of the situation in Syria and the outcome of the meeting of the US Federal Reserve on September 17. "A reduction in the Fed's bond buyback has already been factored in. The question now is how much?" said a dealer.