NEW DELHI: The parliamentary standing committee on food and consumer affairs has recommended CBI to look into cases of irregularities in the Forward Markets Commission (FMC) exchanges.
“Despite regulatory mechanism in the FMC, there are reported cases of trading irregularities and market manipulations…The Committee recommends that FMC should seriously consider that cases of malpractice noticed in the national and regional commodity exchanges should be handed over to CBI for proper and thorough investigation,” the report on Demands of Grants for 2012-13 states.
The Forward Contract (Regulation) Amendment Bill, which is currently pending in Parliament, provides for the appointment of an investigating authority, which will report to FMC about violations of the Act. The Commission oversees the functioning of five national and 16 regional commodities.
The total turnover of commodity exchanges was 181.26 lakh crore in 2011-12 fiscal, 52% higher than the previous year. The parliamentary panel’s suggestions come in the wake of a Supreme Court order in the case of complaints of irregularity in the National Multi-Commodity Exchange, Ahmedabad, received by the Forward Markets Commission in December 2010.
The complaint was investigated and malpractices by the anchor promoter of the exchange came to the fore, and directions were given to the Board of Exchange to take the requisite steps. The Gujarat High Court set the order of the FMC aside in February 2012. Subsequently, the FMC moved a special leave petition in the Supreme Court. In March, the Supreme Court stayed the order of theGujarathigh court and FMC’s order was restored.
The committee was of the view that powerful traders indulging in malpractices have no fear of the authority conferred on FMC under the Forward Contracts (Regulation) Act, 1952, “nor they are bothered about the fine that can be imposed on them.” In some measure these infirmities are being addressed in the Forward Contract (Regulation) Amendment Bill. It proposes to give FMC additional power to regulate the business of associations and intermediaries, call for information, deal with insider trading and investigate intermediary or person associated with the commodity derivatives market.
The amendment seeks to increase the fine that the commission can levy from the present level of 1,000 to a minimum of 25,000 and a maximum of 25 lakh. The Standing Committee on Food and Consumer Affairs, which has examined the amendments, has strongly recommend that the minimum fine should be 5 lakh going up to 50 lakh in proportion to the gain earned by the offender. The committee would like the amounts of the fine to be reviewed periodically.