Tribunal upholds SEBI order cancelling 63 moons from providing STP service

PALAK SHAH Mumbai | Updated on April 26, 2021

Firm to challenge order in apex court

The Securities Appellate Tribunal (SAT) has dismissed the appeal of 63 moons technologies against the order of markets regulator SEBI in the matter involving Straight-Through Processing (STP) gate services.

In December last year, SEBI had disallowed 63 moons from providing STP services on the grounds that it was judged ‘not fit and proper’ by the Forward Markets Commission (FMC) seven years ago.

63 moons said it would be challenging SAT in the Supreme Court.

STP is a software service used for trade settlement, mainly by institutional players. In 2018, SEBI had amended a clause that said only a 'fit and proper' person can provide STP service. 63 moons and NSDL are the only two large players in the STP segment.

The SAT said that it will allow 63 moons to provide STP services till May 15 and asked it to inform the same to the market participants.

New amendment

63 moons had argued that in 2018, SEBI had prospectively inserted the clause of requirement of ‘fit and proper’ in the guidelines that allow it to regulate STP service providers, whereas it had applied for SEBI approval in 2016.

63 moons, earlier Financial Technologies, was judged as ‘not fit and proper’ by FMC in 2013 in the wake of NSEL commodity market fiasco.

SAT observed that the SEBI guidelines are “procedural in nature and not substantive”. The insertion of the clause was also procedural, and therefore, such procedure which has been amended would equally apply to the application of the appellant (63 moons), the tribunal said. However, the contention of the appellant that the amendment is prospective is wholly erroneous and cannot be accepted, SAT added.

63 moons had told the court that the provision of ‘fit and proper’ cannot be applied to anybody for a lifetime. In this regard, the SAT observed that the said decision was still in force and not set aside by any superior forum. Hence, SAT believed that it was not necessary to go into any other aspect as argued by the appellant.

Seeks more time to appeal

In its reply, 63 moons said, “After the order of SEBI was kept in abeyance since December 2020, on April 15, SAT pronounced its order and directed certain instructions to be followed within a period of 7 days from that day. For 6 days out of the 7 days given to 63 moons, the order was not provided to 63 moons despite more than usual follow up. Effectively, 63 moons believing that it was being deprived of its right to appeal to SC, applied to SAT for extension of the timelines.”

63 moons further said it also agitated that given the situation in Delhi and the functioning of the SC arising from the Covid-19 pandemic, SAT should favourably consider extending the timelines stated in the order, otherwise, it would lead to the killing of a business in which 63 moons has more than 90 per cent market share and benefit its competitors.

“SAT, however, refused to even consider the application of 63 moons. The company is obviously challenging the order of SAT before SC as it believes that it cannot be deprived of its legal and statutory rights in this manner and has full faith in the judiciary,” the firm said.

The firm had started STP services in 2004.

Published on April 26, 2021

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