Meeting of the Executive Committee of Inter-Exchange Co-ordination Group - S.O. No.540(E) - SEBI/LE/SE/977/97 - SEBI

SECURITIES AND EXCHANGE BOARD OF INDIA NOTIFICATION Mumbai, the 1st August, 1997 S.O. 540(E).-Whereas; 1) In the meeting of the Executive Committee of Inter-Exchange Co-ordination Group (hereinafter referred to as IECG ) held on August 09,1996, Securities and Exchange Board of India (hereinafter referred to as the Board ) consulted the representatives of the participating stock exchanges, including Uttar Pradesh Stock Exchange (hereinafter referred to as UPSE ) on the issue pertaining to the term and continuity of Public Representative Directors on the Governing Board of Stock Exchanges and Public Representatives on the Statutory Committees appointed by the exchange as contained in the Articles of the exchange; AND 2) After taking into account, the unanimous view of the participants in the IECG meeting on August 09, 1996, that the Public Representative Directors and Public Representatives on the Statutory Committees of the stock exchanges should continue till the time new Public Representatives are appointed in their place, the Board, vide its circular Rer. No. SMD/RCG/3737/96 dated August 13, 1996, had advised all the stock exchanges, including UPSE, to take steps to amend their Rules/Articles of Association relating to the term of Public Representatives in terms of the decisions of the said IECG meeting; AND 3). In response to the said circular dated August 13. 1996, all stock, exchanges in the country, including UPSE, had expressed their willingness to carry out the amendment to their respective Rules and Articles of Association and UPSE had, vide its letter Ref. No. UPSE/96-97/7360 dated October 07, 1996, forwarded to the Board proposed amendments to their Articles of Association; AND 4). The Board had, vide its letter by fax Ref. No. SMD/RCG/ASD/5306/96 dated November 14, 1996 to UPSE, approved the proposed amendment to Article 98(i) of the Articles of Association of UPSE relating to the term of Public Representatives and advised UPSE to take necessary steps for amendment of the Articles by UPSE, as approved by SEBI; AND 5). The Board's approval to the proposed amendment to Article 98(i) relating to the term of Public Representatives was taken up at the Annual General Meeting of UPSE held on December 21, 1496, wherein, the said amendment was not approved by the members and hence dropped, thereby indicating the exchange's refusal to carry out such an amendment; AND 6). The Board had, vide its letter Ref. No. SMD/OPG/RCG/1428/97 dated April 04 1997, issued an Order under Section 8 of the Securities Contracts (Regulation) Act, 1956 directing UPSE to amend Article 98(i) of its Articles of Association relating to the term of Public Representatives. Further, UPSE was informed that on failure by the exchange to comply with the above Order within two months of the date of issue of the Order, SEBI shall, on its own, amend Article 98(i) of the Articles of Association of UPSE, in the form proposed in the Order; AND 7). UPSE had, vide its letter Ref. No. UPSE/97-98/2224 dated May 05, 1997. informed the Board that Board of Directors of the exchange had convened an Extra-Ordinary General Meeting (EGM) on May 24, 1997, for passing and enabling a special resolution for amendment in the Articles of Association of the exchange as contained in the Board's above mentioned Order dated April 04, 1997. However, vide their letter by fax dated May 24, 1997, UPSE informed the Board that the said resolution was put to vote in the above EGM and defeated by secret voting; AND 8). UPSE has failed to comply with the Board's Order dated April 04, 1997. Within the time period specified in the said Order. 9). The Board is of the opinion that in the interests of the investors and the capital markets, as also in public interest, it is necessary and expedient to amend the Article 98(i) of the Articles of Association of UPSE in the manner indicated in this Order, inter alia, for the following reasons, namely :- i. the existing Article 98(i) of the Articles of Association of UPSE provides that the term of Public Representatives expires at the end of one year after nomination or on the day of the next Annual General Meeting, whichever is earlier, The problem faced with this practice is that if the exchange does not submit proposals for the appointment of new Public Representatives, well in time, a situation may arise wherein there may be a gap between the expiry of the term of present Public Representatives and appointment of new Public Representatives for the exchange Hence, the exchange may not have Public Representatives on the Governing Board and the exchange may be administered by a Governing Board comprising of brokers only. Such a situation might result in decisions which adversely affect the investors and other broker-members. For this very reason, the Board had issued a directive in the past to ensure that the constitution of the Governing Board is such that it comprises of adequate public representatives. ii. the absence of Public Representatives on the Governing Boards of exchanges, as well as on the Statutory Committees appointed by the exchanges, is detrimental to the interests of the general investing public, and smooth day to day functioning of the exchange. iii. moreover, the Board finds it desirable to maintain uniformity in the Rules, Regulations and Bye-laws regarding composition of the Governing Board of various stock exchanges in the country. NOW THEREFORE , in exercise of the powers conferred to it by sub-section (2) of Section 8 of the Securities Contracts (Regulation) Act, 1956, read with the powers delegated to the Board by the Central Government under its notification no. SO/573(E) dated July 03, 1992, issued under Section 29A of the said Act, the Board substitutes the existing Article 98(1) of the Articles of Association of UPSE. by the following new Article 98(i) :- 98. (i) The Board of Directors shall, subject to the prior approval of the Securities and Exchange Board of India, nominate on the Board of Directors not more than 3 (three) persons referred to as Public Representatives who are persons of integrity having necessary professional competence and experience in the areas related to securities market and who are of public eminence in the locality. The persons so nominated shall continue to hold office till the time new Public Representatives are appointed in their place. It is clarified that the existing two provisos to Article 98(i) will remain as they are and shall appear after the newly added Article 98(i). [F. NO. SEBI/LE/SE/977/97] D.R. MEHTA, Chairman