NSEL questions FMC 'silence' on brokers

Scam-struck National Spot Exchange Ltd (NSEL) has accused the commodity regulator Forward Markets Commission (FMC) of being lenient towards brokers and the forged investors.

This comes in the wake of a final call to merge NSEL with its promoter Financial Technologies India (FTIL) in order to allow NSEL investors to recover their lost investments.

In October 2014, the government issued a draft order for the merger of the two entities. A final decision by Ministry of Corporate Affairs on the proposed merger is likely on July 8.

Prakash Chaturvedi, joint managing director, NSEL, alleged that FMC has not taken any recognisable action pertaining to brokers who indulged in wrong doing. "They (FMC) illegally declared FTIL not 'fit and proper' while maintaining silence against the brokers."

"FMC despite being aware of the complaints filed by a few trading clients against their brokers has not taken any action to rectify the issue. The regulators have not found it prudent to even send a show-cause notice to the brokers on the complaints," said Chaturvedi.

He said, "FMC had all the powers to take any action deemed appropriate against defaulters and brokers, but the FMC chairman chose to turn a blind eye. NSEL and its board are sympathetic to the genuine trading clients, 'we too have been vitimised."

"The allegation made by the NSEL on the regulators seems as to be the only left out option to avoid merger," said a senior government official, on the condition of anonymity.

NSEL has also questioned the authenticity of numbers of investors (13,000) with it as claimed by various forums.

According to Chaturvedi, the High Court Committee (HCC) appointed to resolve the NSEL crisis, as on June 30, has received only 4,500 responses in its demand for KYC as against 13,000 trading members' number floated. "It is becoming evident that brokers may have mis-sold, mis-represented, induced and forged client signatures for benami transactions using the PAN and KYC lending mechanism."

The investors, however, view the claim as a part of NSEL's legal game, which has a sole purpose of delaying the entire matter.

Arun Dalmia, secretary, NSEL Investors Forum, told dna, "NSEL and its promoters are trying their best to delay the merger process. As far as KYC is concerned, each and every investor has provided their details to the income-tax department in 2013 itself.

"These are ideas generated by their legal team, to manage FTIL shareholders and NSEL investors. However, Pankaj Saraf's case is surprising for all of us," said Dalmia.

Pankaj Saraf is an investor on whose complaint Economic Offences Wing of Mumbai police filed the FIR in the Rs 5,600 crore NSEL scam, according to Ketan Shah-led NSEL investors' action group.

On Sunday, NSEL investors questioned the agreement between Ram Naresh Saraf and Primezone Developers, a firm floated by former CFO of defaulter PD Agro.

The group alleged that the deal, in which Primezone has purchased the dues of Saraf for Rs 54 lakh, is a clear attempt of FTIL to bribe the first informant to influence the probe.

Strangely, NSEL which is supposed to give duped investors money back, claimed that no investors are interested in supporting the recovery of money from 24 defaulters, to whom the money trail is clearly established by the EOW of Mumbai police.

In a press release on Monday, NSEL said, "It is suspected that leaders of vested interest groups may be receiving money from defaulters and plan to extract money from FTIL. The exchange also claimed the close nexus between trading clients, brokers and defaulters."

dna has learnt that so far that NSEL has managed to disburse Rs 527 crore to the account of NSEL investors, which are mostly small investors who have invested below Rs 5 lakh in the commodity exchange.

So far, EOW has attached Rs 6,000 crore of assets -- both movable and immovable. The assets attached by EOW can only be liquidated and auctioned by the special Maharashtra Protection of Interest of Depositors (MPID) court.