India’s capital markets regulator Securities and Exchange Board of India (SEBI) has directed Financial Technologies India Ltd and its related entities to offload their stake in MCX Stock Exchange Ltd (MCX-SX) and other exchanges within three months, as the Jignesh Shah-controlled company failed to meet the 'fit and proper' criteria required for a shareholder of an exchange.

“FTIL shall divest the equity shares and/or any instrument that provides for entitlement for equity shares or rights over equity shares at any future date, held by it, directly or indirectly, in MCX-SX, MCX-SX CCL, DSE, VSE and NSEIL within 90 days from the date of this order through sale of shares and/or instruments,” a SEBI order said.

SEBI has also cancelled the voting rights of FTIL and its related entities in all exchanges and clearing corporations.

Blackstone-backed FTIL holds 5 per cent stake and 562.5 million transferable warrants in MCX-SX; 5.65 million equity shares in MCX-SX Clearing Corporation; 1.49 million equity shares in Delhi Stock Exchange; 0.29 million equity shares in Vadodara Stock Exchange and 10,000 equity shares in National Stock Exchange.

Following the SEBI order, MCX – in which FTIL owns 26 per cent stake – will also dilute its entire holding in MCX-SX.

The capital market regulator’s order follows an earlier ruling by the commodity market regulator Forward Markets Commission (FMC) on December 17 that declared FTIL and its promoter Jignesh Shah unfit to operate any exchange in the country in light of the National Spot Exchange Ltd (NSEL) scam.

This is under litigation in the Bombay High Court.

The ruling by SEBI comes when MCX-SX has already initiated the process of rights issue expanding its capital to thrice its size. FTIL will not be participating in the rights issue and therefore its shareholding will automatically reduce to 1.72 per cent, assuming all other shareholder subscribe to the rights issue. The rights issue is expected to be completed by the end of this month.

The ruling by the capital markets watchdog follows a preliminary enquiry by CBI against former SEBI head CB Bhave and former member KM Abraham alleging irregularities in granting MCX-SX a licence.

(Edited by Joby Puthuparampil Johnson)

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