Wednesday, 21 August 2013

A letter to KV thomas and FMC

Dear Shri Thomas and other FMC officers involved with NSEL settlement

I am a Mumbai based investor and have invested more than half of my life's earning / tax-paid capital in NSEL. This product was offered to me by my brokers (Motilal Oswal and Philip Capital) as a legitimate arbitrage income product (On which I again paid tax). Before investing my money I checked out the website of NSEL which claimed the exchange being jointly promoted by FT and NAFED (an organization under ministry of Agriculture , GOI) which generated enough confidence in me to invest. I am sure your ministry was aware of this claim of NAFED being a co-promoter. I was also told it is a govt. recognized exchange and it offers counter party guarantee, there were also a host of govt. companies shown as using this platform.( http://www.nationalspotexchange.com/%5CNSELuploads%5CResourceCentre%5CNSEL_Presentation.pdf

I now learn that about a year back GOI had problems with products/business model being offered by NSEL. I wonder why it was allowed to function in the first place if the shortcomings were already known to your ministry even back then. Also it is amusing that the issue of regulation and governance of a public commodity exchange of India NSEL was being passed between ministries like a shuttlecock. 

When the shit hit the fan on 31st July we were jolted to learn the suspension of trading and merging of settlement cycles. Mr. Anjani Sinha claimed that there was a Settlement Guarantee Fund of Rs.850 crores plus there was extra 'margin' and there was no problem at all.  The FMC also gave a statement on 2nd August that there is no 'immediate risk of  NSEL default'. http://in.reuters.com/article/2013/08/02/india-nsel-regulator-ftil-idINDEE97102R20130802 .

On 3rd August there was a meeting at Trident Mumbai between NSEL, FMC and borrowers where some borrowers claimed that they had no problem paying (about 40% of borrowers) and rest of them could pay in installments. On 5th August Mr. Jignesh Shah  came on TV and gave commitment that there will be a financial closure and investors will be fully paid in 5 months (claiming a majority of borrowers were even ready to pay upfront) .The delay he promised would be remunerated by 16% interest (incentive to pay early) . A committee of 4 including   Mr Sharad Upasani, Justice Kochar,Mr Bajpai, IPS Mr Sivanandan was announced which would oversee the settlement and strict action would be taken against those who don't pay. You can view these jokes  here http://www.youtube.com/watch?v=xPR3Clw5IFs  http://www.youtube.com/watch?v=PCn3qkv-4oE  http://www.youtube.com/watch?v=OL7BK5J5grg and laugh today.  (Mr. Sivanandan's experience from police will come very strongly ,we will see no one dare not pay!! )

After a long wait and much heartburn on 14th August NSEL finally announced a protracted payout calendar where 39-40% upfront promised payment surprisingly vanished and smaller tranches were assured. They (NSEL) also thanked FMC and GOI for 'support' in their press release. On the promised payout day of 20th August , NSEL shamefully defaulted on the very first tranche cocking a snook at FMC , Investors and also GOI.

On 20th August the board of NSEL was sacked by management as a part of 'disciplinary action' and  Mr. P.R. Ramesh was appointed as 'OSD'. This was another whitewash (like appointing that committee of 4) as Mr. P.R. Ramesh is known to be a Jignesh henchman. On 21st August  the investors got only half the money promised and perhaps first time in the history of free India a government recognized and regulated exchanged defaulted. Some key questions that every investor in NSEL wants to know are:

1) Why was NSEL permitted to function when MCA/FMC were aware of its shortcomings
2) What sort of mickey mouse exchange was being licenced to run with about 15000 investors on one side of the exchange and a twenty odd looters on the other?
3) Why FMC consented to financial closure in early August without ensuring the wherewithal of NSEL /Borrowers to do so  
4) Even after knowing fully well that NSEL management/promoters have been inveterate liars (confirmed by FMC in various circulars) and suspecting that books are being cooked why is the exchange not being taken over by FMC/GOI?
5) What happened to that Settlement Guarantee Fund?
6) Why is this letter game being played by NSEL charlatans and FMC babus ? This is costing us investors dear. please don;t mock us investors with this facetious game as some of us might be driven to suicide in despair.  
7) Why haven't you/FMC frozen/seized assets of borrowers who have not been paying?
8) Why the delay in verifying stocks in warehouses? Why the stock or whatever was lying in exchange warehouse was not auctioned in these 20 days?
9) Above all Why Shankar Guru (after Giving 1000 odd crores to his son-in-law of NK Proteins) and Jignesh Shah (after criminally hoodwinking all of us) are free men?

The action plan I humbly suggest :

a) Immediately take over functioning of NSEL, rather than directing NSEL to do things your way (which they don't listen to) why not you do it your way!
b) Sell present stocks and generate whatever money it can to distribute quickly among investors
c) Go after Jignesh  and his crooked associates hammer and tongs, seize their assets, immediately take over MCX, FT and merge it all with NSEL (from revenues most of the NSEL deficit can be made up)
d) Arrest all the dodgy borrowers along with their facilitators in NSEL for criminal conspiracy to defraud gullible investors of India and falsifying records (Jignesh has himself on record stated now that he doubts quality and quantity of stocks). Lift the corporate veil and seize all the personal assets of promoters under criminal proceedings.
e) Check the money trail, involve finance ministry/ IT /ED /SEBI and find out if the money has gone out of the country.
f) Do not let Jignesh Shah distance himself from NSEL and allow him pin it all on the management. It is an insult to our intelligence (and yours) if we are forced to believe that a paid manager can siphon thousands of crores without the knowledge of promoters/bosses.

Please stop taking this issue lightly and go after the crooks all guns blazing. Enough is enough as not only our lives but the reputation of India and Indian markets/bourses will depend on your actions in coming days.


All the very best.

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