SAT upholds Sebi order against 63 Moons Technologies in STP case
SAT upholds Sebi order against 63 Moons Technologies in STP case

The Securities Appellate Tribunal (SAT) has dismissed an appeal filed by 63 Moons Technologies challenging a Sebi order that disallowed it from providing Straight Through Processing gate services.

Sebi had in December 2020 rejected 63 Moons' application seeking renewal of approval to provide Straight Through Processing (STP) services on the basis of ''fit and proper'' criteria.

The regulator, in its order, had said 63 Moons has been offering STP services without its approval and allowed the company to provide such services for three more months to clients in order to avoid any possible disruptions for securities market participants.

Generally, financial firms use STP to pass information electronically in order to optimise the speed at which they process transactions. This eliminates the need for a hands-on re-entry of data that has already been completed at the source.

The company challenged the Sebi order, which said 63 Moons Technologies, promoted by Jignesh Shah, is not 'fit and proper' to provide software services to market intermediaries.

Dismissing the appeal, SAT said basic behaviour can be taken into consideration. Thus, the misconduct and fraud that was committed by Jignesh Shah in the FMC (Forward Markets Commission) market is an indicator to the authority (Sebi) to reject the renewal application, it said. Further, Shah continues to be the torch bearer of 63 Moons and holds 45 per cent stake as a shareholder. He is virtually controlling the company and has a significant say in 63 Moons, the order noted.

"We do not find any manifest error in the impugned order. The appeals fail and are dismissed," SAT said in its order passed on April 15 and uploaded on its website on Monday.

"Since we are dismissing the appeal, we permit the appellant company to provide necessary services till 15th May, 2021.

"Within a week from today the appellant company will intimate all the users of such services to make alternate arrangement and intimate them that no further services would be provided by the appellant company from 15th May, 2021 onwards," it added.

It was alleged in the show cause notice (SCN) that 63 Moons and Shah do not satisfy the criteria of being 'fit and proper person' as laid down in the eligibility criteria under the STP Guidelines.

Schedule II of the Sebi Intermediaries Regulation indicates the categories of the applicant and it covers only the company but also the key managerial persons and promoters.

Earlier known as Financial Technologies (India) Ltd, 63 Moons had on April 25, 2016 sought approval to act as a STP service provider for the period from June 30, 2016 to June 29, 2019.

It provides STP services to 300 brokers, 15 custodians and 170 fund houses.

As per the order passed by the regulator in December 2020, Sebi Executive Director Anand R Baiwar rejected the application for renewal of approval relating to the period from April 17, 2018 to June 29, 2019.

The rejection was on the basis of ''fit and proper'' criteria.

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Free Press Journal