PRESS RELEASE - SEBI

 September 04, 2007
PR No. 253/2007

SEBI refuses to renew the recognition granted to

Magadh Stock Exchange Ltd.

Dr. T.C.Nair, Whole Time Member, SEBI has passed an Order under section 4(4) of the Securities Contracts (Regulation) Act, 1956 on August 30, 2007 refusing to renew the recognition granted to Magadh Stock Exchange Ltd. (MdhSEL).

The Order inter-alia directs that money available in the Investor Protection Fund and Investor Services Fund of MdhSEL shall be transferred to SEBI Investor Protection and Education Fund; the exchange shall set aside sufficient funds to provide for settlement of any claims; companies exclusively listed on the exchange may consider seeking listing at other stock exchanges or provide for exit option to the shareholders; certificate of registration of trading members granted by SEBI shall stand automatically cancelled. The Order further restrains MdhSEL from transferring or alienating any movable or immovable property of the exchange including Bank Accounts in any manner till further directions by SEBI in this regard.

SEBI had conducted inspection of MdhSEL in October 2006 in order to determine/examine whether MdhSEL has complied with the conditions of renewal of recognition, the instructions, guidelines, etc. issued by SEBI/Government of India from time to time. The inspection report observed 20 deficiencies in the functioning of the exchange including failure to appoint the Executive Director for its exchange, inadequate infrastructure, non recovery of dues from members and listed companies, failure to create the investor protection fund trust, wilful violation of SEBI�s directives, etc.

During the period August 1-12, 2005, MdhSEL allowed trading in violation of the conditions of renewal of recognition mainly in the scrip of Bhoruka Financial Services Ltd. (BFSL) which accounted for nearly 99% of the trading volume of Rs 90.06 crores wherein the buyer was DLF Commercial Developers Ltd. and the sellers were the promoters of BFSL. It was further noted that BFSL was not listed on MdhSEL and as such it was listed only on Bangalore Stock Exchange Ltd. which was last traded in the year 1988 at a price of Rs.5.00. For this violation, SEBI passed an order. Further, MdhSEL also terminated the services of the Executive Director (Officiating) for allowing the trading on MdhSEL in violation of the conditions of renewal of recognition.

The Whole Time Member, in his aforesaid Order, observed that MdhSEL has time and again acted contrary and in defiance of SEBI directives/guidelines issued from time to time. Over the years, there were major regulatory lapses that led to super-session of the Council of Management and suspension of trading on the floor of the exchange. Further, the resources available with the exchange in terms of men, material, capital etc. are inadequate to function as a stock exchange. MdhSEL neither provides a trading platform nor serves any public interest and has therefore ceased to perform the basic economic function for which it was set up, the Order said.
 

Mumbai

September 04, 2007

 


For full copy of order against MAGADH STOCK EXCHANGE ASSOCIATION LTD., click here.