Trading in MCX shares: Will SEBI investigate India’s La Rajat Gupta case?

SEBI appears to be looking the other way and not looking at serious conflict of interest issues at MCX

SEBI appears to be looking the other way and not looking at serious conflict of interest issues at MCX
SEBI appears to be looking the other way and not looking at serious conflict of interest issues at MCX

Just imagine. One of your key official partners is a board member of a large listed company, the shares of which you are heavily trading in. You are buying a large chunk of shares when some big mutual funds are selling them. The share price suddenly spurts by more than 50 percent in just weeks. Will such a ‘sweet’ set-up not fall under the ambit of insider trading regulations and the least it will do is, call for an investigation by the stock market regulator? Does India have a ‘La Rajat Gupta’ kind of an insider trading case, which market regulator the Securities and Exchange Board of India (SEBI) is aware of but is deliberately turning a blind eye?

The Multi Commodity Exchange (MCX), one of India’s largest commodity bourses has Amit Goela as its board member. Goela is also a key partner and even involved with research at Rare Enterprises, the investment firm of leading stock market trader and investor Rakesh Jhunjhunwala. Goela is also a director at Rare Shares & Stock Pvt. Ltd. along with Jhunjhunwala.

In his own words, Goela’s association with Jhunjhunwala goes back a long way when he helped him buy a stake in his long-held stock Titan (read about what Goela does for Jhunjhunwala below). Jhunjhunwala trusts Goela’s association so much that he made him a partner in his personal investment firm Rare Enterprises. Hence, it will be safe to assume that as a partner with Rare Enterprises one of the key jobs of Goela is to see that the firm makes the maximum profit. (see Goela profile put out by Flames University, which says he is also responsible for generating trading opportunities across asset classes)[1]. Now, Goela is also an insider in MCX affairs.

Mr. Goela's focus at Rare Enterprises
Figure 1. Mr. Goela’s focus at Rare Enterprises

It was revealed in the September quarter filing of MCX that Jhunjhunwala, in concert or in association with Rare Enterprises had hiked his stake in the exchange to 4.8 percent from 3.8 percent earlier[2]. It was the time when mutual funds had sold large quantities of MCX shares (essentially dumping them). Is it not unfair to the retail investors that the playing field is not level? The Aam (common and not a member of a political party!) investor cannot know the happenings in MCX the way Rare Enterprises could, via their ‘man on the company board!’

Will it be below one’s intelligence to question or seek answers in such a situation and to know if it falls under any SEBI insider trading or front running norms? Especially, when there are talks of a merger deal between NSE and MCX, something which both the exchanges have not denied yet[3]? Also, add to this the fact that MCX has been passing through some severe corporate governance issues and even a data sharing scandal[4]. Yet another board member of MCX, Madhu Jaykumar, is associated with Jhunjhunwala, who along with Rare Enterprises now hold 2.45 million shares in the exchange[5]. She is a board member of Aptech Ltd. where Jhunjhunwala is the chairman of the company and the key promoter. Jhunjhunwala has a 24% stake in Aptech.

MCX share price has rocketed by almost 56 percent to a high of Rs.1,219 on November 4 from a recent low of Rs.780 in June. PGurus has learnt that SEBI officials were looking into the matter but there has been no follow-up and turning a blind eye has become blissful.

What does SEBI law say?

Stock or commodity exchanges are first-level regulators themselves and any court of law will say that the arrangement or concept of shareholder director on board of an exchange, who are intricately connected to traders or investors dealing heavily into the shares of the exchange (like is the case of MCX and Rare Enterprises) can be a deadly precedent. It was one of the key reasons that brokers were discouraged from holding positions on the Bombay Stock Exchange (BSE) board. SEBI went hammer and tongs in the past to bring down the influence of brokers and large traders on the BSE board. How come it is now allowing the same things to happen on the MCX board now? Is SEBI top management aware of this?

SEBI has taken extra care to ensure that none of the board members, directors or key officials of the exchange get any stock options. SEBI laws explicitly prohibit directors from dealing in shares of the company and require adequate disclosures. This arrangement has been done in plain sight and should have been caught by SEBI. Should SEBI’s role itself be investigated for approving such a board? Whose interests is SEBI representing.

Bimal Jalan committee that first formed the stringent ownership norms for exchanges described them as key market infrastructure institutions and that their ownership rules should be different from other listed companies. Does SEBI even remember how it was using these same Jalan committee norms to bring down broker and trader influence on exchanges?

SEBI insider trading norms say that none of the company board of directors should indulge in trading in the shares of that company directly or indirectly and make all the adequate disclosures. Jhunjhunwala and Rare Enterprises were on a share buying spree in MCX in the past few months. When did MCX disseminate that information to the public? Can the exchange show the time of receipt of such disclosures and the exact time of its disclosures to the public?

None of the parties involved including MCX, Rare Enterprises, Goela or SEBI have responded to emails from PGurus. Their replies are welcome and can be added to the article as and when they respond.

 BSE needs to disclose

The BSE in September had raised queries about trading in MCX shares and Goela. But the exchange too has kept quiet. BSE is the designated exchange for MCX. Does it and the National Stock Exchange (NSE) not have any role as a first level regulator?

It is not just Rare Enterprises but there are even more high net-worth individuals or known market investors who have bought MCX shares in the June-September quarter, data shows.

Does SEBI know who are they or if any of them are connected to any of the MCX board members? Data shows that mutual funds sold huge shares in MCX in the past quarter but the same group of traders and investors, who entered into MCX together when the founder promoter of the exchange Jignesh Shah was forced out by SEBI, have bought huge shares in MCX. What is it that they know in MCX that all the mutual fund managers could not analyse or foresee?

It is not important when Goela was appointed to the board of MCX but it is key to note that he is now a board member and could have access to insider information by virtue of his position, which makes him a designated person. The rule is that he is considered to have insider information and pre-clearance must be taken from the listed company’s compliance department for trading. Was this done? Because this screams conflict of interest.

All this points to an expectation that somehow the marriage of NSE and MCX will take place and handy profits can be made from such an event.

SEBI must act

SEBI while recently amending its insider trading regulations has taken care to reject the proposition that access to unpublished price sensitive information (UPSI) be freely provided to the promoter(s) without the promoter(s) holding any office in the company from which the inside information emanates. In such a scenario how can it be ruled out that UPSI will not travel via a board member to his associate firm, “which is trading in the same company shares?”

In 2015, SEBI had alleged that A Vellayan, Chairman, Murugappa Group, and others had passed UPSI regarding a deal. In the current case, why is SEBI allowing MCX, a key stock market infrastructure company, to have a board member who may hold UPSI directly or indirectly and is also closely associated with trading in MCX shares?

These are the facts of the matter. This is a case and a valid scenario for SEBI to investigate. SEBI must remember that it represents the shareholders’ best interests and needs to instill confidence and keep the investor’s faith in India’s stock markets.

Goela and Jhunjhunwala: The Enduring relationship

In an interview given to CNBC-TV18 dated November 17, 2016 Amit Goela described his relationship with Jhunjhunwala and Rare Enterprises in detail. Goela said he got a great opportunity when Jhunjhunwala made him a partner at Rare Enterprises. It is a fascinating tale narrated by Goela in his own words and an interesting read:

Goela speaks to Ramesh Damani on CNBC-TV18 show “Wizards of Dalal Street[6]”.

My firm had underwritten the rights issue of Bata and I heard that Mr Rakesh Jhunjhunwala was interested in the issue and so somehow I managed to show up in his office and then he asked me yes and I said, “Sir I can get a meeting with the MD of Bata for you, it is okay to do a meeting for Saturday and from then on very enduring friendship developed”.

“Finally, I managed to get into broking in 1997 and a lot of interesting episodes which happened like one of them were like for getting grilled by a fund manager for the first time. We broke the deal for Rakeshji – – that is a very interesting deal conversation. Rakesh was buying Titan and we broke the small part of it. It was a very large deal for us, and we were pretty excited, we went for a drink to celebrate. That was an experience worth sharing both professionally as well as personally.

On how he was helping Jhunjhunwala at Rare Enterprises, Goela says:

“You don’t teach Sachin Tendulkar how to bat. But before Sachin Tendulkar pads up like he needs a pitch report, he needs a weather report, he needs some intelligence on the bowling, on the fielders – – so I do all these things for Rakesh. I do all those things which help him or at least tried to do which will help him to stay one step ahead of the market.

My engagement is far more intense on the trading side then on the investment side. Utpal is also very engaged in the investment, he looks after some of our larger investments and I am far more involved in the trading side.

When we are trading the days are elected, before 9:15 we are more ready than most of the people can even imagine or think about, we would have gone through everything possible worldwide, everything which can affect our markets and stocks we are there with it at 9:15 and both of us had a discussion also and you can imagine how prepared I have to be to talk to him for 5 minutes in 5 minutes give him distil everything and give to him.”

On whether Goela offers fact or opinions to Jhunjhunwala? Goela said:

“Fact. In Rare, opinions matter only when they are backed by price, otherwise opinions can go out of the door.”

On how he got an offer from Jhunjhunwala

I have been in Reliance for a while and then one day in the evening I got a call from Rakesh saying why don’t you come to my office, yes he did call me and he said, “Amit why don’t you come and see me in the office”, he was fairly serious and said you come and see me in the evening. I said, okay I will come and I showed up in his office and then waited for a couple of minutes I was in his room and then he was doing his normal stuff, he doesn’t normally look at you and talk, like he is doing some other stuff.

He was not watching the screen, but he was doing some other stuff and then he turned and told me, “I think you should join me”.

You don’t say no to Rakesh Jhunjhunwala…


[1] Flame Investment LabFlame University

[2] Rakesh Jhunjhunwala hikes stake in MCX to 4.8%Oct 23, 2019, The Hindu Business Line

[3] NSE-MCX merger – The setupApr 11, 2019,

[4] Why CBI should probe MCX data theft? Sep 10, 2019,

[5] Aptech Board of DirectorsAptech web site

[6] Wizards of Dalal Street – Amit Goela, CNBC TV-18

We are a team of focused individuals with expertise in at least one of the following fields viz. Journalism, Technology, Economics, Politics, Sports & Business. We are factual, accurate and unbiased.
Team PGurus


  1. Your post is useless. He didn’t buy additional shares in open market. Shares were transferred from rare enterprises to individual name. Whole argument doesn’t make any sense.

  2. PGurus impact? MCX head of Agri Deepak Mehta (who was mainly responsible for Cotton contracts resigns). PGurus had highlighted scam in MCX Cotton contracts for which MCX tried to intimidate the news portal with a legal notice. But finally, it had to sack its Agribusiness head. What is going on? May b PGurus can fund out more. PGurus expose’ on MCX has been entertaining.

  3. u are idiot … data of MCX is as transparent ..daily trade volume report etc… the stock price increased as the trade volumes increased.. there is nothing magical about it…. did u also make a report when MCX price crashed from 1350 to 650 … why was it…

    • Here is another example of sound emanating from an orifice other than the mouth. The facts are all out there in the post. Perhaps you need to know how to click on the blue text, given under the section References. Do not insult the knowledgeable readers with tripe.

    • Seems like a spokesperson for RJ and SEBI … better guess is the person wirting such comment has to be either from SEBI or RJ’s office. Or is it Goela himself? If this is not a classic case of insider trading, what is? What share price rise fall you are talking about when RJ’s Man Friday is on MCX board is giving him all the information? Better read the section what all work Goela does for RJ. Let us all have our Person on Board of the Company and then v can trade the same shares… hahaha…. Joke is on whom?

  4. We small investors always believe that there is a watch dog called SEBI who deter Promoters/insiders from doing malpractices in the Stock Exchanges & protect small investors through fair trading in Stock Exchange. The Article content shocks investors to know that stock market sharks can still penetrate highly secured Port of SEBI one way or other & can take ride & make money. It seems stock market is not for small investors but only for shark traders who have means to inside information to take entry in a particular Script at right time & exit at right time to go home with bundle of profit & laugh at foolish small investors who burn their finger loosing their hard earned Money in share market by buying share at wrong time & selling in Panic. Thank you PGurus for article & hope SEBI will wake up,take suitable action to ensure Trust in Share Market for fair trading.


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