SEBI withdraws recognition granted to Saurashtra Kutch Stock Exchange Ltd

SEBI has passed an Order under section 5(1) of the Securities Contracts (Regulation) Act, 1956 on July 6, 2007 withdrawing the recognition of Saurashtra Kutch Stock Exchange Ltd. (SKSE). The Order has come into force with immediate effect.

The Order inter-alia directs that funds in the Investor Protection Fund and Investor Services Fund of SKSE shall be transferred to SEBI Investor Protection and Education Fund; the exchange shall set aside sufficient funds to provide for settlement of any claims; companies exclusively listed on the exchange may consider seeking listing at other stock exchanges or provide for exit option to the shareholders; certificate of registration of trading members granted by SEBI shall stand automatically cancelled. The Order further restrains SKSE from transferring or alienating any movable or immovable property of the exchange including Bank Accounts in any manner till further directions by SEBI in this regard.

SEBI had conducted inspection of SKSE in June 2006 and later advised SKSE to rectify all the deficiencies pointed out in the inspection report. Further, SKSE was also advised to submit a weekly report regarding the same. On perusal of the compliance report, it was noted that there were deficiencies that were yet to be rectified by SKSE including failure to set up the Settlement Guarantee Fund, failure to appoint the Executive Director for its exchange, inadequate infrastructure, non recovery of dues from members and listed companies, failure to appoint the Chief Executive Officer for its subsidiary, wilful violation of SEBI’s directives, allowing broker directors to exercise financial powers, not providing adequate financial powers to the Executive Director and convening a press conference and discussing SEBI inspection report, etc.

The Whole Time Member,SBI in his aforesaid Order, observed that SKSE has time and again acted contrary to and in defiance of SEBI directives/guidelines issued from time to time. “There is prolonged vacuum at the top management, the failure of the exchange to appoint a suitable candidate for the post of Executive Director for the exchange and CEO for the subsidiary company, broker’s interference in the day-to-day functioning of the Exchange. SKSE is virtually defunct for several years and did not serve any economic purpose. Further it provides neither a trading platform nor serves any public interest and has ceased to perform the basic economic function for which it was set up.” the Order said.

NOTE- Securities Appellate Tribunal (SAT) has stayed a SEBI order against the brokers of Saurashtra Kutch Stock Exchange (SKSE) till July 13. SKSE was derecognised by SEBI on July 6 and the registration certificate of the brokers of SKSE was automatically cancelled

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