Regulator likely to write to BSE, corporate affairs ministry on alleged violations of listing norms
The Securities and
Exchange Board of India (Sebi) will soon direct the BSE to independently check
for violations of listing agreement norms at Multi Commodity Exchange (MCX),
following PricewaterhouseCoopers’ adverse findings, said sources.
The capital market
watchdog is also likely to approach the Union ministry of corporate affairs to
probe allegations of breach of various clauses in the Companies Act, they said.
Separately, the commodity
markets regulator, the Forward Markets Commission, on Wednesday sent the PwC
audit report to MCA and the Enforcement Directorate (ED). The ED is going to
examine allegation of money laundering at MCX, sources said.
The special audit report
by PwC, a summary of which was made public on Tuesday, has highlighted serious
corporate governance lapses and non-compliance with regulations. For instance,
the audit revealed MCX had only disclosed names of 235 related party entities,
while PwC’s background checks revealed at least 670 more known or related
parties. (PWC AUDIT REPORT POINTS TO SEVERAL ADVERSE FINDINGS AGAINST MCX
OPERATIONS)
Also, the PwC audit
summary noted payouts to trading members or related parities worth millions
“without adequate substantiation”.
BSE will have to verify
whether any of the PwC findings breach any listing agreement clauses. The
latter agreement is a contract between a stock exchange and a listed company.
It comprises a little more than 50 clauses — on corporate governance and
information-based disclosures such as filing of results, shareholding data and
related party deals — which listed companies have to follow.
Failure to disclose
related party business dealings is a violation of Clause 32 of the listing
agreement.
MCX is the country’s only
listed commodity bourse. It is listed solely on the BSE; it also trades on the
National Stock Exchange, under the permitted to trade category.
At present, ensuring
compliance with the listing agreement has to be done by the exchanges.
Typically, they order suspension of trading in companies for repeated violations
of the agreement. Violators also face a penalty of up to Rs 25 crore under the
Securities Contracts Regulation Act. “Sebi will not like to undermine the
authority of BSE and will want the exchange to verify facts before taking any
action on the alleged violations,” said a person in the know.
Corporate governance
experts said the role of independent directors and the audit committee at MCX
can be questioned, given the adverse findings in the PwC audit.
Shares of MCX on Wednesday
ended at Rs 533.55, down Rs 40.55, or 7.1 per cent.
Source: http://www.business-standard.com/article/markets/sebi-may-act-on-pwc-s-mcx-audit-114043001185_1.html