Why Redress The Loss of NSEL Investors By Punishing The Investors of FTIL?

Ministry of Corporate Affairs has gone ahead with its proposal to merge National Spot Exchange Ltd(NSEL) with its parent, Financial Technologies(FTIL)

This move seeks to redress the grievance of the investors of NSEL, who lost around Rs5600 crores through trades they put through on the exchange by shortchanging 64,000 shareholders of FTIL

This is a classic case of ROBBING PETER TO PAY PAUL

The ERSTWHILE FORWARD MARKETS COMMISSION had concluded that the exchanges was hand in glove with defaulters and that a fraud had been perpetrated

This merger is not the only solution available to compensate investors of NSEL Various government agencies including Economic Offence Wing of the Mumbai Police, the Enforcement Directorate, the Finance Intelligence Unit and the Central Bureau of Investigation are working towards recovery

It is also important to understand who makes up the ‘public’ and on whose behalf the merger is being effected

The investors who traded in paired derivative contracts on NSEL could not have been so naïve as to be unaware of the high levels of risk in derivative trading

The MCA’s draft order states that FTIL’s shareholders should not object to the merger since equity investment carries inherent investment risk If investment is risky, trading in commodity derivatives on a fledging trading platform is ten- fold riskier

If investors NSEL were unaware of the nature of the product they were dealing with, it is the brokers who sold them the product that need to be held accountable There is no logic for saddling FTIL’s share holders with the liability

The use of section 396 of the Companies Act to push through the merger also sets a bad example The centre has used this tool four times in the past, but it was done sensibly, and in a manner that protected the interests of both the entities being merged

NSEL, which has no operations currently, will only saddle FTIL with additional liabilities, this is against the interest of the minority shareholders of the company

Ironically, this is being done to protect investors savvy enough to trade on a commodity exchange