SEBI declares govt-owned firm PEC as ‘not fit & proper’

Subject – Economy

Context – SEBI declares govt-owned firm PEC as ‘not fit & proper’

Concept –

The Securities and Exchange Board of India (SEBI) has declared a government-owned company as ‘not fit & proper’ for the first time.
- PEC Ltd, a 100 per cent government-owned company, has been declared ‘as not fit and proper’ for acting as a broker and carrying out illegal trades on NSEL’s spot exchange platform between 2010 and 2013.
- In the case of PEC, SEBI has said in its order that the company failed in conducting its business in conformity with the standards expected to be maintained by registered securities market intermediaries.
Experts say that this order may become a test case as it could tag the President of India, under whom all government ownership is held, as ‘not fit and proper’ going by the precedent in similar actions against private entities.
In the past, when SEBI declared entities ‘not fit and proper’ in high-profile cases involving Sahara India and Financial Technologies (63Moons Technologies), the regulator studied the role of its management, board and promoters to accord them a similar tag.
In October 2018, the Bombay High Court said, “Perusal of Regulation 7 read with Schedule II would reveal that while making an inquiry to find as to whether the applicant is “fit and proper person”, the board (SEBI) is entitled to conduct an inquiry not only about the applicant intermediary, but also its principal officer, director, promoter and the key management persons.