Commodity market regulator Forward Markets Commission (FMC) has ruled that Jignesh Shah and his firm Financial Technologies India Ltd (FTIL), the holding company of Shah's business group, which runs several exchanges, are unfit to run any exchange in the country.
FMC has ruled that Jignesh Shah, Joseph Massey and Shreekant Javalgekar, all former directors of the troubled National Spot Exchange Ltd (NSEL), are not 'fit and proper' to hold any position in the management and board of any recognised commodity exchange.
"The commission is of the view that the general reputation and character, record of fairness, honesty and integrity of Shri Jignesh Shah has been substantially eroded in view of his role in the affairs of NSEL as its vice-chairman and director and also as the chairman of the holding company of NSEL," the order said.
In its 80-page order issued on Wednesday, the regulator said FTIL is also not fit and proper to continue as a shareholder of two per cent or more of the paid-up capital of Multi Commodity Exchange (MCX).
It further directed that neither Shah individually, nor though any company or entity controlled by him, either directly or indirectly, should hold any shares in any association / exchange in excess of the threshold limit of the total paid-up equity capital as prescribed under FMC guidelines.
"Shri Jignesh Shah, as the promoter of FTIL and NSEL has misused his position to create a confidence in the minds of the participants regarding the legitimacy of the business and its operations in the exchange platform of NSEL," the order said.
"Shri Shah consciously used his position to represent to the public at large about the attractive features of the contracts being traded on NSEL platform while taking no steps to introduce any effective governance mechanism including risk management, due diligence, assured collaterals etc., to ensure the legitimacy of his claims and to prevent frauds," it added.
Jignesh Shah is currently the chairman of FTIL, which holds 26 per cent stake in MCX, the country's largest commodity exchange and will need to cut the stake following the FMC order.
Shah, who founded the Multi-Commodity Exchange or MCX in November 2003 and then went on to set up a stock exchange, MCS-SX, this year, charged him of being the "highest beneficiary" in the Rs5,500 crore National Spot Exchange Ltd scam.
Regulators and investigating agencies are currently probing a Rs5,500 crore payment crisis at the NSEL.
The NSEL settlement crisis involved Rs5,500 crore the bourse owed to over 13,000 sellers/investors on its trading platform.
On 9 October 2013, Shah quit as vice-chairman and shareholder director of MCX-SX, the third major stock exchange in the country, and resigned from the post a few weeks later.
Shah was "practically the highest beneficiary of the fraud perpetrated at the NSEL Exchange", the FMC noted, while ruling "Shri Jignesh P Shah is not a 'fit and proper' person to hold any position in the management and the board of any exchange recognised or registered by the Government of India/Forward Markets Commission under FCRA, 1952".
Besides the huge profits from NSE, FMC noted that Shah also benefited from the rising value of FTIL shares, which shot up manifold taking the value of his investment to thousands of crores of rupees.
NSEL yesterday paid about Rs11.50 crore against the scheduled payment amount of Rs174.72 crore, defaulting for the 18th straight time. It has so far settled about Rs263.50 crore against about Rs5,500 crore.