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

July 12, 2002
PR No. 127/2002

Supersession of the Board of Directors of The Uttar Pradesh Stock Exchange Association Ltd (UPSE)

SEBI has today by Order issued under section 11 of the Securities Contracts (Regulation) Act, 1956 superseded the Board of Uttar Pradesh Stock Exchange Association Ltd (UPSE), with effect from July 12, 2002 and have appointed Shri M N Sabharwal, IPS (Retd) as the Administrator of the Exchange to exercise and perform all the powers and duties of the Board. 

SEBI has received several complaints from the Public Representative Directors of UPSE, SEBI Nominee Directors, the ex-Executive Director on the Board of the UPSE. There has also been several observations in the report of the inspection of UPSE conducted by SEBI in March 2001 and in subsequent reports, various compliance reports and monthly development reports etc. Some of the irregularities and non-compliance issues brought out in the above complaints/reports are as follows:

  1. Allegations of un-authorised carry forward transactions;

  2. Continued non-compliance of SEBI directives;

  3. Continued interference from elected directors and brokers in the functioning of the exchange preventing the Executive Director/Public representatives from discharging their functions effectively;

  4. Delays in considering and redressing the deficiencies pointed out in the SEBI inspection reports and forwarding compliance reports with reference to SEBI directives;

  5. Board meetings of UPSE not conducted as per rules and bye-laws of UPSE; and

  6. Not rectifying lacunae existing in the trading software and settlement mechanism. 

In view of the above and other serious deficiencies SEBI issued a notice dated September 03, 2001 u/s 11 of the SCRA to the Board of the UPSE as to why they should not be superseded. Two opportunities of hearing were given on November 19, 2001 and March 15, 2002. Thereafter SEBI vide its letter dated March 26, 2002 called upon the UPSE to inter alia comply with the conditions mentioned in the letter and submit a compliance report within one month failing which SEBI would be constrained to take such measures as it deem fit including supersession. Subsequently, SEBI vide its letter dated May 17, 2002 informed UPSE that since the undertaking given by the UPSE pertaining to the conditions as directed by SEBI in its letter dated March 26, 2002 were found to be un-satisfactory, SEBI would be constrained to take action against UPSE which may include supersession of the Board of UPSE. However, the Board of UPSE did not rectify or address these issues. The Board of UPSE failed to ensure proper governance, implementation of the provisions of the SCRA as well as Rules and Notifications issued thereunder, byelaws of the Exchange and SEBI directives.
Besides, the President and Vice President of UPSE who were brokers have not resigned from their posts despite the clear directives of SEBI and the Board of UPSE appointed the Executive Director without the prior approval of SEBI and have not made him quit despite several communications both verbal and written from SEBI. 
In the view of SEBI, the confidence of investors in the transparent and impartial working of the Exchange has been impaired. Therefore it was felt that it is essential to adopt immediate measures to ensure the safety and integrity of the UPSE and further to ensure that transactions on UPSE are carried out as per the regulatory framework and that the interest of investors are not jeopardized further. Accordingly, SEBI has superseded the Board of Directors of UPSE.