Press Trust of India

March 5.: One of the 23 bourses in the country, the Mangalore Stock Exchange (MgSE) ceased to exist as an exchange due to non-adherence of SEBI guidelines.

The Securities and Appellate Tribunal (SAT) upheld a SEBI order for refusal to grant renewal of recognition to MgSE, recently.

It was in August 2003 that SEBI conducted an inspection of MgSE. According to SEBI, the Exchange had not complied with the conditions, on which the renewal of recognition was granted in 2002.

Major irregularities in the functioning of the Exchange, like inadequate provisioning of software for trading system, failure to appoint Executive Director, drain on the Exchange's resources, non-compliance with the stated investment policy of the Exchange etc, were found, SEBI observed.

In its order, dated August 31, 2004, SEBI had stated "If MgSE is allowed to function in the present manner without any immediate remedial action; it would not only lose its relevance as a public institution but also erode the confidence of the investors which would in turn compromise the orderly development of the market."

SEBI had also observed that mere existence of a stock exchange would not serve any purpose towards protection of investors. Incidentally, there was nil trading on the exchange and no new issues were getting listed.

The SEBI order was challenged before the SAT. SAT further directed SEBI to conduct another inspection. SEBI conducted the inspection in May- June 2006 and the report was submitted to SAT.

SAT observed that "Inspection by the Board confirms the persistence of quite a few of the serious irregularities. It is not possible to ignore this fact and allow the continuation of recognition subject to conditions." Dismissing the appeal, SAT said "We, therefore, find no reason to interfere with the impugned order."