SECURITIES AND EXCHANGE BOARD OF INDIA 
SMD 
 
Supersession of the Governing Board of Ahmedabad Stock Exchange (ASE)

SEBI has by Order issued under section 11 of the Securities Contracts (Regulation) Act, 1956, superseded the Governing Board of the Ahmedabad Stock Exchange, with effect from March 25, 2003 and have appointed Shri P K Ghosh IAS (Retd.) as the administrator of the exchange to exercise and perform all the powers and duties of the Board. 

During the course of inspection, SEBI had observed that a parallel exchange/ Market appears to exist at the Stock Exchange in the form of an unofficial market with open out-cry and the same is conducted at the ground floor of the premises. 

SEBI had advised the Stock Exchange to take immediate steps to stop the unofficial market. The exchange was also advised to investigate the matter and take immediate action against the members if any involved in the unofficial market. The exchange was also advised to send a status report on action taken to SEBI latest by September 02, 2002. The Stock Exchange vide its letter dated August 30, 2002, informed that the exchange is initiating an enquiry into the matter and will submit a report within a short time. It was also furnished that the exchange had issued a circular warning the members against participation in illegal transactions. The exchange has shown disregard to the deadline given by SEBI to investigate the matter and submit the status report on unofficial market by September 02, 2002 as advised by SEBI. 

Subsequently, on September 19, 2002, SEBI conducted a surprise inspection of ASE, the inspecting officer of SEBI observed that an unofficial market in an open out-cry fashion was being held within the stock exchange premises and members of the exchange were also participating in the same. 

Further, the inspecting officer mentioned that :

• ASE has not taken any steps to stop the unofficial market despite instructions from SEBI.

• ASE submitted a false report to SEBI that the unofficial market was not conducted within the official premises of the stock exchange and that members of ASE are not participating in such unofficial market. 

ASE in their police complaint mentioned that some unscrupulous persons are carrying out illegal transactions in securities within the premises of the stock exchange and that the same is a cognizable offence under the SC(R)A. 

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, Bye-Laws of the Exchange and SEBI direction/Guidelines. 

In view of the above serious deficiencies, SEBI issued a notice under Sec. 11 of the Securities Contracts (Regulation) Act, 1956 to the Governing Board of the Ahmedabad Stock Exchange as to why they should not be superceded. An opportunity of hearing was given on November 20, 20002 however, it was observed that the Governing Board had not rectified or addressed the issues. The Governing Board has failed to ensure proper governance, implementation of the provisions of the Securities Contracts (Regulation) Act, 1956, Bye-Laws of the Exchange and SEBI Directives. As a result of this, the confidence of the 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 Ahmedabad stock exchange are carried out as per the regulatory frame work and the interest of the investors are not jeopardized further. Accordingly SEBI has superceded the Governing Board of Ahmedabad Stock Exchange.