SEBI refuses to renew Magadh SE’s recognition

MUMBAI: Time appears to be running out for the regional stock exchanges in the country. A day after derecognising Hyderabad Stock Exchange for its failure to complete the demutualisation process, the Securities and Exchange Board of India (SEBI) on Tuesday trained its guns on the Magadh Stock Exchange (MSE). The regulator has refused to renew the recognition of the regional stock exchange, citing some 20 deficiencies. SEBI has also restrained MSE from transferring or alienating any of its movable or immovable property.

The grounds for refusal to renew its recognition include failure to appoint an executive director for the exchange, inadequate infrastructure, non-recovery of dues from members and listed companies, and failure to create an investor protection fund trust, among others.

It specifically highlighted the instance of Bhoruka Financial Services (BFSL) scrip, which accounted for nearly 99% of the trading volume of Rs 90.06 crore, wherein the buyer was DLF Commercial Developers and the sellers were the promoters of BFSL. “BFSL was not listed on Magadh SE and as such it was listed only on Bangalore Stock Exchange which was last traded in the year 1988 at a price of Rs 5,” the SEBI order said.

In an order signed by whole-time member Dr TC Nair has asked the exchange to direct all the money available in the Investor Protection Fund and Investor Services Fund to SEBI Investor Protection and Education Fund. It also said that the exchange should set aside sufficient funds to provide for settlement of any claims.

For companies exclusively listed on the exchange, the SEBI advised them to consider seeking listing at other stock exchanges or provide for an exit option to the shareholders. SEBI has also cancelled the certificates of registration of trading members and restrained the exchange from opening any further accounts.

“Magadh SE has time and again acted contrary and in defiance of SEBI directives and guidelines issued from time to time,” the SEBI order said.