sebi:WTM/PS/45/MRD/DSA/NOV/2014

SEBI · SEBI · 2013-05-27 · Prashant Saran, Whole Time Member

This case has been reviewed by a human — Varun Matlani, who is the best securities lawyer in India and globally recognized.

Facts / Headnote

Withdrawal of recognition granted to Delhi Stock Exchange Limited with immediate effect

Provisions invoked

• s. 19
• s. 81
• s. 4B
• s. 4A
• s. 5(2)

Regulations

• Reg. 4(b)

Parties

• Governing Board of Delhi Stock Exchange Limited
• Delhi Stock Exchange Limited

Holding

SEBI withdrew the recognition granted to Delhi Stock Exchange Limited with immediate effect. SEBI shall take all necessary steps consequential to the derecognition.

Full text

Page 2 of 19 e. passing of sensitive confidential information to media. The SCN also alleged that the acts of the Governing Board, DSE were in violation of the provisions of Section 4A, 4B(8), 5(2) of the Securities Contracts (Regulation) Act, 1956, Regulation 4(b) and 11(1)(b) of the then applicable Securities Contracts (Regulation) (Manner of Increasing and Maintaining Public Shareholding in recognised Stock Exchanges) Regulations, 2006 (hereinafter referred to as 'MIMPS Regulations'), clause 408(a), (c), (d); clause 418(iii) and (iv) of the Code of Ethics for directors and functionaries of exchange. The Governing Board, DSE was advised to reply to the SCN, within a period of fifteen (15) days from the date of receipt thereof. It was also informed that in case of failure to reply, it would be presumed that Governing Board, DSE has no explanation to offer and that SEBI shall proceed in the matter as deemed fit.

Page 3 of 19 4. Pursuant to the personal hearing, DSE vide its letter dated January 07, 2014, submitted that it has referred the matter to its legal advisors for obtaining the advice on the options available before the exchange and requested for holding back the proceedings. Vide another letter dated January 30, 2014, DSE submitted that pursuant to the personal hearing, various new facts have come to light with respect to the issues raised in the SCN and it sought fifteen days' time to bring these on record. DSE vide its another letter dated February 25, 2014, submitted that DSE is in the advanced stage of reaching an understanding with another stock exchange for merger, which will benefit not only the investors who invested in DSE during the demutualization period, but also the investors of the other stock exchange with whom the merger may take place and requested that no action be taken against it which may affect the interest of stakeholders. It has also been said that as on date, 56.21% of the paid up capital of DSE is held by outside investors. Further, the investments were made by the investors believing that proper procedures in consonance with regulatory provisions are being followed. DSE requested that the decision taken by SEBI should not adversely impact the interest of the shareholders including those foreign shareholders, who reposed their trust during the demutualization period, with their investment in DSE.

Page 4 of 19 these two companies, they were neither entitled to 2,000 shares nor the rights issue of 78,000 shares each and such action of issuing shares to them was not validly taken. d. The Board of Directors had transferred the shares to all the applicants approved by SEBI on August 28, 2007. However, the corporate action for transferring the shares into the demat accounts of applicants was initiated later. e. The list of allottees as on August 31, 2007, includes those who were shareholders as on the said date. Since shares of seven allottees were later allotted to other applicants who were approved by SEBI, the final list differs with the initial list. The seven allottees i.e. Vibha Gupta, Vinod Gupta, Amardeep Financial Corporation Limited, Nikki Global Finance Limited, Dev Features Private Limited, Kuwait Privatization Projects Holding Company and IKARUS Petroleum Industries Limited were initially allotted shares as on August 28, 2007, however, their shares were later transferred to New Vernon Private Equity Fund, Passport Global Master Fund SPC Limited and LFP DSE Limited. Therefore, the names Vibha Gupta, Vinod Gupta, Amardeep Financial Corporation Limited, Nikki Global Finance Limited, Dev Features Private Limited, Kuwait Privatization Projects Holding Company and IKARUS Petroleum Industries Limited do not appear in the final list of allottees submitted by DSE. DSE has accepted that a false certificate have been issued to show that demutualization exercise has been c

Source: SecMarx — sebi:WTM/PS/45/MRD/DSA/NOV/2014. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.