SEBI rejects 63 Moons’ renewal application

The Securities and Exchange Board of India (SEBI) has found 63 Moons ‘unfit’, as per the provisions of Intermediaries Regulations read with clause 3(2)(iii) of the STP Guidelines. In an order passed by the executive director of SEBI on December 3, the application for renewal (for the period June 30, 2016 to June 29, 2019) by FTIL to act as STP Service provider under the SEBI (STP Centralised Hub and STP Service Providers) Guidelines, 2004 has been rejected. It has been held that 63 Moons has been providing the STP services to Brokers, Custodians and Fund Houses without the approval of SEBI. Meanwhile, 63 moons technologies has expressed disbelief at the SEBI order. "The timing and intent of the SEBI order is totally in contradiction to the purpose for which SEBI exists i.e. for fair and transparent regulation and growth and stability of market," said a 63 Moons spokesperson. It has, however, allowed 63 Moons to provide necessary services for a period not exceeding three months from the date of its order, with a view to avoiding disruption and enabling users of such services to make alternative arrangements. In its order, SEBI noted that - while dealing with the application of renewal from 63 Moons - it found the erstwhile FMC Order dated December 17, 2013 as relevant in deciding that 63 Moons and Jignesh Shah were “not fit and proper” in the instant case of renewal of application. pSEBI, very significantly, has noted that 63 Moons and its Promoter do not carry good reputation, integrity and character in terms of Schedule II to Intermediaries Regulations. Moneycontrol contacted the spokesperson on the phone, but they did not give any response. SEBI notes that Jignesh Shah continues to be the promoter and chairman emeritus of 63 Moons, and the reconstitution of the company Board (with Jignesh Shah stated to be now not holding any executive capacity) does not change the effect on the reputation, integrity and character of FTIL, judged on the basis of the facts and conduct/role of 63 Moons and Jignesh Shah in the crisis at NSEL described in the FMC Order. it is expected that FTIL will challenge this order in the Securities Appellate Tribunal. However, this order raises serious questions on how premier exchanges like MCX and many intermediaries would like to continue dealing with 63 Moons. STP is Straight Through Processing - a mechanism that automates the end-to-end processing of transactions of the financial instruments. In 2002, SEBI first mandated the introduction of STP for electronic trade processing with a common messaging standard. In 2004, SEBI made it mandatory that all Institutional Trades executed on stock exchanges would be processed through the STP system. Currently, there are four STP Service Providers recognised to execute STP in India viz. BSE, NSE.it, NSDL and FTIL (whose application has been rejected).