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SEBI says to block new BSE broker-directors

Securities and Exchange Board of India (SEBI) said on Wednesday it would not allow newly elected members to the governing board of the Bombay Stock Exchange (BSE) to function as directors of the exchange.

The announcement followed the BSE's annual governing board elections which took place earlier in the day in which three broker directors were elected to replace members whose terms were expiring.

Earlier this month, SEBI in an unprecedented step suspended all nine broker member directors of the governing board of the Bombay Stock Exchange, leaving the board with only nine directors who were not also brokers.

The action followed allegations that some broker directors used their position to gain privileged information which figured in subsequent insider trading and caused a sharp market decline.

Chairman D R Mehta said the decision was taken at an emergency board meeting of the market regulator.

"Since we cannot block the BSE board elections we have taken this step," Mehta told Reuters.

The BSE's board has 18 members, of which nine are elected by the members of the exchange. The others are nominated members.

The seven broker directors suspended by SEBI included both Anand Rathi, the president and Deena A Mehta, the vice president of the board who was appointed to serve as interim board president after Rathi resigned on March 8.

Rathi resigned amid allegations that he leaked confidential information about short positions held by several major speculators, leading to a sharp market decline.

Rathi and the other directors have denied the allegations.

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