ANMI, BBF ought not to take up cases of a few brokers and fight for them as a group: Prakash Chaturvedi

NSEL has been working towards the recovery of money from defaulters and has successfully obtained decrees for about ₹3,6000000000, says NSEL CEO It has been almost five years since the ₹5,600-crore settlement crisis at the National Spot Exchange Limited (NSEL) came to light. While not much money has yet been recovered, the scam is once again in the limelight. NSEL CEO Prakash Chaturvedi speaks on recent developments. Excerpts What are your views on the Association of National Exchanges Members of India (ANMI) and BSE Brokers’ Forum (BBF) calling for crowd-funding from their members to fight law suits against the NSEL? All these years, these associations have positioned themselves as self-regulatory organisations working towards market development and policy support, among other things. Investigation by various agencies has revealed the criminal role played by certain brokers in luring derivative traders through various alleged malpractices to participate in trading of forward contracts and then hardening the payment crisis by refusing to cooperate with the NSEL for recovering money from defaulters. Now, by siding with some of the top brokers, these associations are gearing up to fight against the investigating agencies, regulators and also the judiciary. This is purportedly for the benefit of a few large brokers now seeking refuge behind their brother brokers in the association, most of whom would have traded with bona fide intentions. Why do you think it’s not proper for broker bodies to defend those named in various probe reports? Criminal liability has been alleged against certain brokers and not against brokers as a group. Hence, those brokers who are accused of criminal malpractices and are under the radar of investigating and regulatory agencies should ideally defend themselves on their own. Ideally, these associations have no mandate to take up the case of few select brokers and fight it as a group. So, you are saying that ANMI and BBF have no authority to defend select brokers? This step is not in consonance with these institutions’ mandate as they are supporting few brokers who have already been charge-sheeted for various wrongdoings and regulatory non-compliance. These associations are supposed to deal in policy matters towards market development and overall interest of the industry. This step by ANMI and BBF is beyond their mandate of market development and is sheer misuse of their organisation to shield a few large brokers from criminal prosecution and regulatory action. Nobody is above law and all should operate within the confines of jurisdiction. The issues being raised that brokers earned only brokerage is also not correct as the broker did provide lending services that gave them additional direct and indirect revenue. Section 4 of the MPID Act covers brokers for their role in inducing clients, buying and selling commodities for their clients, receiving money from and remitting money to the counter party brokers through the exchange and brokers also visited the warehouses. Industry associations across sectors are known to lobby for their members. So why should ANMI and BBF be faulted for trying to help their members? Various investigating agencies and regulators have been probing the NSEL matter for malpractices over the last five years. SEBI itself has sent show cause notices to 300 brokers and the Serious Fraud Investigation Office (SFIO) has recommended winding up of 148 brokerage firms for conducting businesses in fraudulent manner. EOW has recently filed charge sheet against three brokerages whose directors were arrested in 2014. The regulators and the agencies should probe whether the associations can force all member-brokers to contribute money for funding the fight of a few brokers who are already accused in the case. Does the NSEL have any plans for the speedy recovery of money to repay genuine investors? NSEL has been working towards the recovery of money from the defaulters and has successfully obtained decrees of about ₹3,6000000000.It’s a case of natural justice that money has to be recovered from these very same defaulting entities to whom the entire money trail has been traced. The defaulters’ assets of approximately ₹6,0000000000, that have been attached, can be liquidated and the proceeds paid to genuine claimants, post verification. The Bombay high court has observed in its order dated 24th October 2018 – “... the state has other options to attach properties of the brokers/ defaulters who fall within Section 4...” Consequently, in November 2018, NSEL filed a writ petition in the HC seeking attachment of properties and assets of the brokers. This is in the larger interest of small and genuine traders and investors. Despite claiming to be working in the interest of all brokers and the industry, none of the associations have initiated legal proceedings against the defaulting brokers for recovery of dues.