NSEL case: EOW begins probing 138 brokers

EOW has asked at least 138 brokers to submit their books of accounts and client-wise details of transactions
Mumbai: The economic offences wing (EOW) of Mumbai police has asked at least 138 brokers to submit their books of accounts and client-wise details of transactions in connection with the Rs.5,574.34 crore payments crisis at the National Spot Exchange Ltd (NSEL).

“We have sent notices to the brokers asking them to disclose their loan books, among other things,” Rajvardhan Sinha, additional commissioner of police at EOW, said on Tuesday.

Sinha said the ministry of corporate affairs had asked the agency to submit a status report on the investigations into the payment crisis at the commodity spot exchange, controlled by Jignesh Shah’s Financial Technologies (India) Ltd, or FTIL. This report will shared by the ministry in Parliament during the winter session.

The settlement crisis at NSEL came to light on 31 July when the exchange abruptly suspended trading in all but its e-series contracts. These, too, were suspended a week later. The closure of trading may have been prompted by an instruction from the ministry of consumer affairs to the exchange asking it not to offer futures contracts. A spot exchange isn’t supposed to do so, but NSEL was doing that.

NSEL tried to implement the change but because its appeal was to investors and members who were not interested in spot trades, it eventually had to suspend all trading. It later emerged that all trading on NSEL happened in paired contracts, with investors, through brokers, buying a spot contract and selling a futures one for the same commodity.

The entities selling on spot and buying futures were planters or processors and members of the exchange. It turned out there were only 24 of them, and they used the paired contracts as a way to raise easy money. When the trading was suspended, the investors were left holding contracts that the members couldn’t buy because they didn’t have the money to do so.

On 14 August, NSEL proposed a payout plan, but it has been unable to stick to the schedule and has not made a single successful payout ever since.

Courtesy:
Khushboo Narayan
First Published: Tue, Dec 10 2013. 08 12 PM IST
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