NSEL CRISIS – A Case of

Complexity

Agenda

*Introduction

*FMC Role

*Outcomes of investigation

*FTIL-NSEL Merger met with Opposition

*What is ahead?

*Conclusion

Introduction

*The National Spot Exchange Limited (NSEL) crisis broke in July 2013

*All the trades were halted by Forward Markets Commission (FMC)

*Exchange members defaulted on payments to the tune of Rs. 5600 crore

*22 defaulters members are held responsible for payment default

FMC Role

*Forward Markets Commission (FMC) is a regulatory authority, overseen by the Ministry of Finance, Govt. of India

*FMC, as regulator of forward markets had no jurisdiction over a spot exchange & is supposed to be regulated by the Ministry of Consumer Affairs

*FMC should take more aggressive actions towards defaulters than just simply going behind NSEL

Outcomes of Investigation

*Upon investigation, it was revealed that the warehouse receipts on the basis of which the trades are executed were worthless

*Many of the warehouses did not have the claimed stocks of commodities

*22 defaulters are accountable for the circumstances that led to the NSEL crisis and payment defaults

FTIL-NSEL Merger met with Opposition

*Under Companies Act, the Centre has proposed the compulsory merger of NSEL with parent company FTIL

*The decision of merging NSEL & FTIL has met with an opposition by FTIL’s shareholder

*The Centre now requires additional time to pass final verdict on the matter

What is ahead?

*NSEL on its part is cooperating with government, whereas the defaulter’s refuse to comply and cooperate

*Bombay High Court has appointed a special committee to oversee the attachment & liquidation of assets of the defaulters

*Economic Offences Wing of the Mumbai Police under directions of Bombay HC has attached assets of defaulters

*FTIL & NSEL have put forth a ‘settlement deal’ in front of investors which is being met with opposition by brokers

Conclusion

*Only time will tell how and when NSEL crisis case will get resolved

*The government should go behind defaulters rather than debating on tangential issues

*What’s the way forward for investors? How will they get refunds of the money lost?

THANK YOU

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