Supersession of the Council of Management of Bhubaneshwar Stock Exchange (BhSE)
Secondary Market Department

SEBI has by Order issued under section 11 of the Securities Contracts (Regulation) Act, 1956, superseded the Council of Management of the Bhubaneshwar Stock Exchange, with effect from January 3, 2003 and have appointed Shri Jai Prakash Verma, IPS (Retd) as the Administrator of the Exchange to exercise and perform all the powers and duties of the Board. 

SEBI has received several representations/ complaints from members of parliament and SEBI Nominee Directors on the Council regarding siphoning of funds from the Bhubaneshwar Stock Exchange through the Bhubaneshwar Stock Exchange Members Welfare Trust Fund (hereinafter referred to as "MWT") to the tune of approx. Rs. 1.30 crs. Thereupon, SEBI ordered an inquiry and based on the recommendations of the inquiry officer :

• The exchange was directed under Rule 11 of the Securities Contracts (Regulation) Rules,1957, to take certain actions, but, the exchange failed to implement the directives.

• Responding to various media reports and irregularities taking place in the exchange, SEBI undertook an inspection during the period August 29 to August 30, 2002. However, there was not much improvement.

• The conflict between various functionaries continued to exist.

• The exchange has failed to adopt the accounts for the years 2000-01 and 2001-2002, indicating financial mis-management. Accounts for the year 2001-2002 are yet to be adopted.

SEBI therefore was of the opinion that the Board has failed to ensure proper governance, implementation of the provisions of the Securities Contracts (Regulation) Act, 1956, byelaws of the exchange and SEBI directions/ guidelines. 

In view of the above serious deficiencies, SEBI issued a notice u/s 11 of the Securities Contracts (Regulation) Act, 1956 to the Council of the BhSE as to why they should not be superseded. One opportunity of hearing was given on November 20, 2002. However, it was observed that the Council had not rectified or addressed the issues. The Council has failed to ensure proper governance, implementation of the provisions of the Securities Contracts (Regulation) Act, 1956, byelaws of the exchange and SEBI directives. As a result of this, the confidence of investors in transparent and impartial working of the stock exchange has been impaired.

Therefore it was felt that it is essential to adopt immediate measures to ensure the safety and integrity of the stock exchange and further to ensure that transactions on Bhubaneshwar Stock Exchange are carried out as per the regulatory framework and the interest of investors are not jeopardized further. Accordingly, SEBI has superseded the Council of Management of Bhubaneshwar Stock Exchange.