Bonds, Currencies & Commodities
NSEL fiasco: EOW conduct searches in 184 places, including Shah’s residence

According to reports, besides NSEL offices, residences of Jignesh Shah, Joseph Massey are also being searched in connection with the payment crisis at the Spot Exchange

The economic offences wing (EOW) of Mumbai police on Monday searched 184 places across 16 states, including residences of Jignesh Shah, chairman and managing director of Financial Technologies (India) Ltd (FTIL), and Joseph Massey, managing director and chief executive of MCX-SX. According to media reports, a first information report (FIR) has been filed against NSEL, its promoters, directors and defaulting brokers in MRA Marg Police Station.


The searches are being conducted in connection with the payments crisis at National Spot Exchange Ltd (NSEL), following the Mayaram Committee report, which implicated the Spot Exchange and its promoters, directors. There are 24 buyers and members who have to pay Rs5,600 crore to the Spot Exchange for settling dues of the investors.


In a statement, NSEL said, it had filed complaints with the EOW. "We understand that investors have also filed several complaints. Today, EOW officials initiated searches on the 24 NSEL borrowers' premises across the country. EOW has also searched NSEL premises today. We welcome any action by the government authorities. It is to help recover the money from the borrowers. NSEL and Financial Technologies Group will fully co-operate with the government authorities in these investigations and is open to any scrutiny to bring the actual culprits to book," the statement said.

According to Livemint, the searches are being conducted following submission of a preliminary enquiry (PE) case by EOW against NSEL, Shah and others in the payment crisis case.


"EoW personals also searched the 4th floor of Andheri based FT tower where NSEL offices are based. EoW has converted the complaint filed by the NSEL against its former MD and other senior management officials who have been removed from the duty following the NSEL fiasco and default by its borrowers," says a report from Business Standard.


The report says, "Police also converted the affidavit filed by the Anjani Sinha (former chief executive and managing director of NSEL) who had been removed from duty post the Exchange’s default. Sinha in his affidavit had alleged some of the officials had taken personal benefits and allowed the borrowers to take money."

Meanwhile, Sachin Pilot, minister for corporate affairs said he is expecting financial reports and other details from Registrar of Companies (RoC) on crisis-ridden NSEL's parent company FTIL group and other related entities in few weeks.


"We asked the department to send the report as quickly as possible. In few weeks time, (we) will have the report," he told reporters on the sidelines of an event organised by Confederation of Indian Industry (CII) on CSR.


The Ministry of Corporate Affairs (MCA) had previously asked RoC Mumbai to collect details of NSEL and other group entities. Besides, NSEL, FT group has promoted the country's top commodity bourse Multi Commodity Exchange (MCX), stock exchange MCX-SX, and also entities engaged in the business of clearing corporation and exchange technology solutions, among others.


Last week, Finance Minister P Chidambaram had said that NSEL was violating rules from the day one and the matter was being looked into by MCA, CBI and commodity markets regulator FMC, among others. "Whatever the Finance Ministry has asked us to do, we are doing it. We hope that we would be able to pin-point any non-compliance committed.


On 20 August 2013, the Exchange sacked Sinha, accusing him of having hushed up the fact that warehousing receipts (WRs) are not backed by physical stock of commodities.

It may be recalled that Shah and his team borrowed a lot of time by saying that it was imperative for all involved to be on the same side so that recovery of assets would give investors their money back.


NSEL, promoted by Shah-led Financial Technologies group, is already being probed by various other regulators and investigative agencies with regard to a Rs5,600-crore payment default and persistent violations of various regulations.






4 years ago

what will happen to E-series investors whose units are in nsdl / cdsl


4 years ago

Govt machinery is hand in glove with the fraudsters as NSEL was given permission by The Ministry of Consumer Affairs. JS dose not even know what an Exchange is being promoter of NSEL? Exchange is counter party for whatever trade takes place on it's platform. Now he washes his hands by saying in TV interview that Exchange is not liable to return money to investors as it provided only a platform & only borrowers are liable to return money as if lenders knew the borrowers! He(JS) dose not even know that the lenders would not had lent a single paisa had it not been an Exchange approved by our govt. I strongly feel that Financial Technologies as the parent co & it's Directors must be held personally responsible to the investors of NSEL.


4 years ago

This is only an eye wash. Nsel investors are unlikely to get their money back. Govt has already granted more than 2 months to JS to clear the trails

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Protection against credit card frauds: Should we adopt provisions of Regulation E?

With expected increase in card-based transactions and movement towards paperless transactions, we need to adopt a new piece of legislation, similar to the Regulation E of the US

It is a praiseworthy move that the Reserve Bank of India (RBI) has decided not to grant any further extension to banks for complying with security norms with respect to card transactions. RBI has said that banks will have to bear the cost of fraudulent credit card transaction through point of sales (PoS) terminals that do not have prescribed security features. As a customer friendly measure, the RBI has directed banks to follow the course of action, if a fraudulent transaction is reported by a customer on a credit card through any PoS terminal.


As per RBI circular, banks are expected to comply with the following course of action:

  • The issuing bank would ascertain, within three working days from the date of the cardholder approaching the bank, whether the respective PoS terminal/s where the said transaction/s occurred is/are compliant with Terminal Line Encryption (TLE) and Unique Key Per Terminal (UKPT) or Derived Unique Key Per Transaction (DUKPT) as mandated.
  • In the event it is found that the PoS terminals are non-compliant as mandated, the issuing bank shall pay the disputed amount to the customer within seven working days, failing which a compensation of Rs100 per day will be payable to the customer from the 8th working day.
  • The issuing bank shall claim the amount paid by it to the customer from the respective bank/s which have acquired the PoS transaction/s in question.
  • The acquiring banks have to pay the amount paid by the issuing bank without demur within three working days of the issuing bank raising the claim, failing which the RBI would be constrained to compensate the issuing bank by debiting the account of the acquiring bank maintained with the Bank.


While this is one good move by RBI, after it decided to ban zero equated monthly instalments (EMI) scheme, it still does not solve the problem of the credit card and debit card holders. Card- related frauds are very common and customers face several problems with respect to the security of the card and potential threat that arises from misuse of cards. Customers holding credit card or that matter any electronic device need better protection against frauds. In order to provide better protection to the customers, there is a need to carry out comprehensive changes in the card industry. The famous US regulation called “Regulation-E” can act as the guide in implementation of preventative measures against credit card frauds.


What is Regulation E?

Regulation E popularly known as REG-E outlines the rules and procedures for electronic funds transfers (EFTs) and outlines guidelines for those who sell and issue electronic debit cards. Regulation E establishes certain types of protection for consumers that employ electronic transfer systems.


How does Regulation E protects card holders?

Regulation E provides protection to the card holders by defining the maximum liability of a card holder. As per the regulation, “A consumer shall be liable for any unauthorised electronic fund transfer involving the account of such consumer only if the card or other means of access utilised for such transfer was an accepted card or other means of access and if the issuer of such card, code, or other means of access has provided a means whereby the user of such card, code, or other means of access can be identified as the person authorized to use it, such as by signature, photograph, or fingerprint or by electronic or mechanical confirmation.” 


This statement clearly indicates that unless it is established that the card was accepted by the customer, the liability of the customer does not arise. While identifying the consumer’s liability, the act says that in no case the liability of the customer would exceed $50.


In the worst case scenario, when the customer fails to notify the fraudulent transaction to the issuer of the card, the limit of penalty has been defined as $500.


Burden of Proof

Another favourable aspect of the regulation is that the burden of proof in the event of a fraud is with the financial institution. As per the Act, the burden of proof lies with the financial institution, “In any action which involves a consumer's liability for an unauthorized electronic fund transfer, the burden of proof is upon the financial institution to show that the electronic fund transfer was authorized or, if the electronic fund transfer was unauthorized, then the burden of proof is upon the financial institution to establish that the conditions of liability.”


This kind of regulation requires support of insurance on a large scale. Additionally, the technology needs to be advanced for implementation of a regulation at the scale of REG-E. However, with expected increase in card based transaction and movement towards paperless transactions we need to adopt a new piece of legislation, which should be extremely customer friendly that in turn would encourage faster transactions and make transaction system more efficient.


(Vivek Sharma has worked for 17 years in the stock market, debt market and banking. He is a post-graduate in Economics and MBA in Finance. He writes on personal finance and economics and is invited as an expert on personal finance shows.)


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