Regulator imposes fine on National Stock Exchange for investing in unrelated business
National Stock Exchange (NSE) has been fined by SEBI of Rs 6 Crore for investing in six companies which are unrelated to the stock exchange business. These companies are Power Exchange India (PXIL), Computer Age Management System (CAMS), NSEIT, E–Governance Infrastructure (NEIL), Market Simplified India (MSIL), and Receivable Exchange of India (RXIL). NSE held 25 to 100 percent stake in these companies through its subsidiary NSE Investments.
The allegation was that the NSE invested in these companies without taking the approval from SEBI. However, NSE stated in its defence that most of the investments made into these companies were related to the stock exchange business. But the market regulator disagreed by giving reference to CAMS and stated that the company generally performs the task of a market intermediary and not that of stock exchange business and provides back-end services to market participants.
The market intermediaries perform the task of assisting in the buying and selling of securities such as merchant bankers, underwriters, stock brokers etc. On the other hand, the functions of stock exchanges are assisting, regulating or controlling the business of buying, selling or dealing in securities which is actually different from the market intermediary business.
