An investor who had earlier requested the Economic Offences Wing (EOW) of Mumbai police to examine the roles of SV Ghatalia & Associates and Deloittee Haskins & Sells, the statutory auditor of NSEL and FTIL, has now also filed a complaint against Ernst & Young.
The investor alleges that a report prepared by the global consultancy firm in September 2012 at the behest of Geojit Comtrade did not highlight risk factors adequately and favoured investments with NSEL.
“....the investors, believing the report of a reputed global management consultancy firm, continued to invest in the commodities dealt in the exchange..” said the complaint. It further argued that if the report had highlighted the risk factors involved in these trades, investors would not have lost such huge amounts.
A spokesperson of E&Y LLP, however, said: “We categorically state that the allegations are incorrect and out of context. We are confident of the quality of our work and confirm that the report prepared by E&Y on commodities financing in India articulates the regulatory environment and clearly explains the key risks associated with the commodities financing business in India,”
The complaint mentions that in its report, E&Y noted that NSEL's warehouses were accredited as per WRDA Act (Warehouse development Regulatory Authority) and that NSEL followed a system of collection of daily mark-to-market margins on open positions.The claims need to examined, says the complaint. It adds that while E&Y notes that NSEL had a robust risk management system, no such systems seemed to exist. “SV Ghatalia and Associates, which has been the statutory auditors of NSEL for the last three years till March 2012, is an associate firm of E&Y and, accordingly, E&Y is expected to know more about the working of NSEL...” says the complaint.
Renouncing this view, E&Y said E&Y LLP and SVGA LLP are independent firms and that the advisory report on commodities financing has no relationship whatsoever with the statutory audit of NSEL done by SVGA.
Meanwhile, in a hearing of two petitions that challenge the settlement of the e-series bullion contracts of NSEL, the Bombay High Court on Monday asked the Forward Markets Commission (FMC) to appoint a forensic auditor to examine the e-series contracts.
Even as it granted the petitioners’ request for a forensic audit of the e-series products, the high court demanded that the auditor be appointed by FMC and not by the spot exchange or related parties