The stakeholders of Universal Commodity Exchange Ltd (UCX) — which has been defunct for over a year — include state-owned IDBI, REC and NABARD. (Photo: Reuters)
Commodity exchange UCX’s Managing Director and CEO Praveen Pillai is not a “fit and proper person” to run the bourse due to professional misconduct and financial irregularities, the regulator Forward Markets Comission has said in a order.
After the NSEL fiasco, this is the second time FMC has issued such a ruling and comes less than a week before the regulator’s merger with capital market watchdog Sebi.
The stakeholders of Universal Commodity Exchange Ltd (UCX) — which has been defunct for over a year — include state-owned IDBI, REC and NABARD.
Pillai’s “conduct through the series of events that led to the irregularities and mis-management of funds at UCX, has certainly eroded his good reputation and character, financial integrity and honesty which has adversely affected his status as a ‘fit and proper person’ to be a Managing Director and CEO on the board of a regulated exchange,” FMC said in the order.
In the detailed 50-page order, FMC said that Pillai neither individually, nor any company/entity controlled by him, either directly or indirectly, shall hold any shares in an exchange regulated by the government.
According to the commodity regulator, even prior to his appointment as Managing Director and CEO, Pillai actively associated himself with Ketan Sheth, promoter of UCX, in his misdemeanors, ignoring the conflict of interest he was indulging in at the time of dealing with financial transactions with UCX.
“Praveen Pillai has also failed to comply with the regulatory directives as revealed from the forensic audit report and has grossly failed in managing the affairs of UCX with transparency, fairness and integrity, thereby, prejudicing and threatening the interests of trade and public who participated on its trading platform.
“The aforesaid irregularities at UCX also signifies palpable unprofessional conduct, negligence and malpractice on his part, putting his general reputation and record of fairness, integrity and honesty at serious risk,” the order issued on Tuesday said.
In a forensic audit of UCX, ordered last year, done by KPMG found gross financial irregularities and diversion of funds from SDF.
“The said forensic auditors have come out with various disturbing findings that give an insight into the murky details of financial irregularities and mismanagement of funds that the Exchange has suffered at the hands of its promoter and his group companies holding shares in UCX, apparently with the knowledge and acquiescence of the MD & CEO of the Exchange,” the order said.
The Commission has also received information that one of the shareholders of UCX, NABARD has filed a criminal complaint on their own against Ketan Sheth on July 21 this year.
UCX, which was launched in April 2013, discontinued trading in all commodities in July last year after a sharp fall in volumes and probe by the regulator.
It offered futures trading in oil seeds, pulses, crude oil and natural gas.
UCX is promoted by Commex Technologies chief Ketan Sheth, who owns 40 per cent stake in the exchange.
He was not available for comments.
In 2013, FMC had issued ‘not fit and proper’ notices to Jignesh Shah, founder of FTIL, and three other officials to operate group company MCX, following the NSEL payment crisis. But the notice has been challenged in the court.
FMC guidelines require exchange board directors to satisfy fit and proper criteria such as a general reputation and record of fairness and financial integrity.
FMC has seven conditions for disqualification, including involvement in acts of fraud or dishonesty and conviction by a court for moral turpitude or economic offences.
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