SEBI has for the first time declared a state-owned company as ‘Not Fit and Proper’.
The Securities and Exchange Board of India (SEBI) has declared a state-owned company as ‘Not Fit and Proper’ for the first time. PEC Ltd., which is a 100% state-owned company, has been declared ‘not fit and proper’ for operating as a broker between 2010 and 2013 and carrying out illegal trades on the spot exchange platform of NSEL.
What do experts say on the matter?
According to a report by Hindu Business Line, it has reviewed a copy of the order issued on October 8. Experts say that this order can become a test case as the President of India can be tagged as ‘not fit and proper’, who has all the government ownership inside it. This is being said in view of the similar action taken against private units.
According to the report, legal experts are of the view that it is a question settled in the courts that the company cannot be dishonest on its own. She cannot on her own be involved in any illegal activity or carry any bad reputation, as it may be the responsibility of the main management or the board, which needs to be looked into.
According to experts, the cancellation of the registration of a 100 per cent government-owned company raises questions on the conduct of the government’s nominee, who was managing the company. Earlier, whenever SEBI has declared entities not fit and proper in high-profile cases, including those of Sahara India and Financial Technologies (63 Moons Technologies), the regulator studied the role of its management, board and promoters.
Secretary of Ministry of Commerce included in the board of PEC
According to the report, in the case of PEC, SEBI in its order stated that the company has failed to conduct its business in accordance with the parameters to be followed by the Registered Securities Market Intermediaries. The board of PEC consists of secretary-level officers from the Ministry of Commerce and the company needs the approval of the ministry to carry on its business. Experts say that therefore, if SEBI is considering PEC as not fit and proper, the responsibility falls on all those who allow the company to carry on its business. Apart from this, since NSEL has been declared an illegal exchange, how can the ministry allow PEC to trade on it.
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