FMC and Ramesh Abhishek – A Thousand Lies Can’t Cover Up The Real Truth

A series on Ramesh Abhishek and the regulatory abuse that he indulged in regard to the National Spot Exchange Limited (NSEL) that PGurus published[1] (March 9-27,2019) got a response from a loyal journalist[2]. The article published in the ‘Prime’ edition of leading financial newspaper is from the one who showed allegiance to the likes of Ramesh Abhishek from the very beginning in this one-sided war of all agencies against Financial Technologies (India) Limited (FTIL).

The merit of any argument lies in the facts. PGurus takes up public causes that are of national interest and in this process checks various aspects in detail before going with any story. Instead of whitewashing and citing credentials from sources of dispute, can Ramesh Abhishek answer a few questions, if he is so convinced and committed to pursuing the truth as he claims?

A problem that could have been solved in the first few weeks by swift action on brokers and defaulters, but you chose to make it into a complex one that remained unsolved even after five years.

1. When NSEL is given specific exemption under the Forward Contracts Regulation Act (FCRA) for one-day forward contracts, how do you justify the application of 11-day restriction in your action? In regard to the Show Cause issued to NSEL, have you ever obtained a legal view or an occasion to thoroughly study the background and the context for the issue that you intended to pursue? While NSEL gave a detailed point-by-point reply to the Show Cause have you ever received similar responses from NCDEX Spot Exchange (NSPOT)? Did you even bother to see if they gave a reply to the show cause?
2. When NSEL provided information on the entire market activity every fortnight including contracts traded, positions, participants and outstandings in the spot market, what was the information for which you were waiting long to establish the role of brokers?
3. When the Economic Offenses Wing (EOW) sent you a report on certain market abuses that it found on brokers and asked you to take action in addition to some steps taken by them, what was preventing you from launching your own investigation with what the EOW had already found, perhaps in cooperation and conjunction with them?
4. Can you tell the process that needs to be adopted by a government regulatory authority while declaring an entity “Fit and Proper” or vice-versa? Can you cite an instance from the regulatory record in India where a regulatory agency declares ‘Not Fit and Proper” based on an ad-hoc audit report full of disclaimers, notwithstanding some of these auditors were found to have made lapses in some recent cases? By the way, have you cared to read and understand all those disclaimers that they mentioned in letter and spirit?
5. For the public posture and media, you have been claiming that you do not have regulatory powers over spot exchanges, but gave different written information to an authority confirming your regulatory power over spot exchanges (FMC letter dated 5^th August 2011)? How would such misreporting by a responsible regulatory authority be dealt with?
6. Where did you lose or misplace the minutes of the most important meeting presided over by you on the 4^th of August, 2013 where all stakeholders assembled including brokers and defaulters confirming the position of stocks and assuring to abide by the payment schedule drawn and accepted by all?
7. When the entire outstanding amount pertaining to the payment default was traced to the 24 defaulters of which just 7 defaulters accounting for 85% of the amount, what specific actions were initiated by you to recover from this small number that would have resolved the problem to a large extent?
8. Instead of pursuing defaulters and making a quick recovery of money so essential to settle the clients, what was your motive and objective to put all your focus on NSEL and its promoters when it was proved unequivocally and confirmed by multiple agencies that no money was ever traced to them?
9. When granting an exemption to NSPOT, its promoter company was insulated from any omissions and commissions of the subsidiary, a caveat that was extended to all other spot exchanges including NSEL. On what basis, you overlooked this caveat when attacking FTIL and what was the view of the Law Ministry in regard to in your proposal to involve promoters in your pursuit despite agencies confirming no money in regard to the payment default was traced to them?
10. What do you call the affected people in the NSEL payment default? Are they clients, or traders or customers or investors? Did you verify during your regime at FMC to check their records to assess and ensure how they should be called and treated and accordingly advise the investigative agencies?
11. What could be the limitation that you faced to not book brokers and defaulters in the very first instance while taking all the stringent action on the exchange and its promoters that would have helped quick recovery? What would have prompted you not to extend any help to FTIL when it released a loan of Rs.175 crores to NSEL to provide immediate relief to smaller clients as also for helping with settling full claims of e-series contracts while putting in place several measures to strengthen recovery process?
12. Who and which statute of India gave you regulatory sanction to recommend merger of NSEL with FTIL which is meant to harm the 63000 plus shareholders of FTIL group whereas most of the recovery could have been effected if you had pursued a small number of defaulters with intense action that could have helped settle the clients within a short time?
13. Were you able to prove the legality of the contract traded on which you took action on NSEL saying that it is illegal? Can you confirm that such contracts were not traded in any institution including competitor spot exchange of NSEL and some banks?
14. Even if you thought to enforce even without a legal check, what made you not to listen to the exchange management for an orderly unwinding of the positions in a phased manner that would have averted the crisis of a nature that you have created? Did you ever think or visualize the consequences of a sudden closure of a financial operation as a regulator?
15. What do you think is your contribution in regard to the entire NSEL saga? Were you able to add anything to the good of the country or people or clients or the entire ecosystem? Other than making your masters happy by destroying fast-growing market segment and harming beyond repair a vast ecosystem of exchanges which were proving to be a shining example of “Make in India”.

Read this story in Hindi

After reading the defense of you put up by your loyal journalist, I tried to search about major upheavals in the financial markets across the world to look for an instance, where a regulatory authority has completely destroyed a budding market segment and distorted the interpretation of a contract to demolish a fast growing financial infrastructure group. A problem that could have been solved in the first few weeks by swift action on brokers and defaulters, but you chose to make it into a complex one that remained unsolved even after five years.  I could not find such an instance.

For this feat of gross regulatory abuse and mismanagement added with liberal doses of dishonesty and duplicity, you will surely stand out.

References:

[1] India – Of the Few, For the Few, By the Few – Mar 27, 2019, PGurus.com

[2] Ramesh Abhishek, who got India a boost in Ease of Doing Business, has been put in the dock. Here’s why the charges are untenable – Apr 8, 2019, ETPrime

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