FMC may get more teeth soon
Empowerment of commodity market regulator sought after Satyam fiasco.
By NIDHI SHARMA, |
MUMBAI: Commodity market regulator Forward Markets Commission (FMC) is hoping that the Forward Contracts (Regulation) Amendment Bill 2006 that expands the regulator���s audit and infrastructure capacities will be passed in the forthcoming session of Parliament to be held next month.
The need has become more relevant after the Satyam episode where the promoters inflated the balance sheet and the role of auditors is under the scanner.
The bill enhances the status of FMC from a government-controlled to an independent regulator and thereby paves the way for the entry of institutional entities into the commodity futures market, apart from enabling the introduction of new trading instruments such as options and indices.
By strengthening and reformulating the FMC���s role, the bill seeks to empower the regulator, which can then function on similar lines of capital market regulator Securities Exchange Board of India (Sebi).
It will also enable the regulator to raise funds by levying registration fees on members and increasing the penalties charged to offenders. The funds can be deployed for various expansion activities, that includes enhancing the scope of member audits.
���We currently have a capacity to conduct and process audit of approximately 100 members. We need more manpower to carry out more audit and thereafter process those audit reports ,��� FMC chairman BC Khatua told ET.
FMC initiated the process of performance audit of the members of the three national exchanges through independent auditors in 2006. The focus of these audits was related to compliance issues with reference to the requirements of market regulator and the exchanges.
The Commission had also set up a panel of auditors at places where member audits can be conveniently undertaken. However, since FY07 the number of members covered under these audits remains approximately 100. This is despite an increase in the number of members of three national commodity exchanges from around 2,000 in 2006 to approximately 3,000 at present.
Even the Sebi had enhanced its efforts for inspection and recently came out with a training programme for professionals like chartered accountants involved in audits.
The need has become more relevant after the Satyam episode where the promoters inflated the balance sheet and the role of auditors is under the scanner.
The bill enhances the status of FMC from a government-controlled to an independent regulator and thereby paves the way for the entry of institutional entities into the commodity futures market, apart from enabling the introduction of new trading instruments such as options and indices.
By strengthening and reformulating the FMC���s role, the bill seeks to empower the regulator, which can then function on similar lines of capital market regulator Securities Exchange Board of India (Sebi).
It will also enable the regulator to raise funds by levying registration fees on members and increasing the penalties charged to offenders. The funds can be deployed for various expansion activities, that includes enhancing the scope of member audits.
���We currently have a capacity to conduct and process audit of approximately 100 members. We need more manpower to carry out more audit and thereafter process those audit reports ,��� FMC chairman BC Khatua told ET.
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FMC initiated the process of performance audit of the members of the three national exchanges through independent auditors in 2006. The focus of these audits was related to compliance issues with reference to the requirements of market regulator and the exchanges.
The Commission had also set up a panel of auditors at places where member audits can be conveniently undertaken. However, since FY07 the number of members covered under these audits remains approximately 100. This is despite an increase in the number of members of three national commodity exchanges from around 2,000 in 2006 to approximately 3,000 at present.
Even the Sebi had enhanced its efforts for inspection and recently came out with a training programme for professionals like chartered accountants involved in audits.
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