The Hindu Business Line : SEBI-FMC convergence move to wait for 3 yrs

ANY decision on convergence between the Securities and Exchange Board of India (SEBI) and the Forward Markets Commission (FMC) for regulating derivatives (both commodities and equities together) would have to wait for another three years.

Currently, SEBI is overseeing equity derivatives in recognised stock exchanges and the FMC is separately regulating the commodity futures market.

While SEBI is functioning as the capital market regulator under the SEBI Act 1992, the FMC is currently part of the Ministry of Consumer Affairs and functioning under the Forward Contracts (Regulation) Act 1952.

Briefing presspersons after a meeting of the Union Cabinet here on Thursday, the Finance Minister, Mr P. Chidambaram, said the matter of bringing about convergence between SEBI and the FMC would be reviewed after three years.

He said the Securities Appellate Tribunal (SAT), which currently hears appeals against SEBI's orders, would also be the Appellate Tribunal for orders passed by the FMC.

Informed sources said the Government might in the coming days not go ahead with its earlier plan of establishing a Forward Markets Appellate Tribunal under FCRA 1952 to hear appeals against FMC orders.

It may instead, through the proposed amendments to FCRA, prefer to designate an existing tribunal established under any other legislation to hear the appeals against FMC orders.

FMC to be strengthened: However, the Government plans to strengthen the FMC to effectively regulate the commodity futures market. This would be done through amendments to the FCRA 1952 as well as interim measures. The FMC would be strengthened on the basis of the recommendations of the Prime Minister's Economic Advisory Council, the Finance Minister said.

Bill to amend FCRA: At today's meeting, the Cabinet gave its approval to introduce a Bill in Parliament for amending the FCRA.

The amendments proposed include enhancement of penal provisions in FCRA, enhancement of powers of FMC, changes in provisions relating to composition and functioning of FMC, corporatisation and demutualisation of existing commodities exchanges and permitting options trading of goods.

Amendments in FCRA 1952 may also be brought about to exempt the FMC from payment of tax on wealth, income and profit or gains and also confer powers upon the Central Government to supersede the FMC.

FCRA 1952: The FCRA 1952 provides for the regulation of commodity futures markets in India and the establishment of the FMC.

While the markets have been liberalised with effect from April 2003 and modern institutional structures are in the process of being evolved, the commodity futures market regulator FMC is largely functioning in its traditional format.

Many of the existing provisions of the FCRA have also become outdated in view of the vast expansion of the commodity futures market.

Earlier, under the National Democratic Alliance (NDA) regime, the Rajya Sabha had in December 2003 passed a Bill that sought to amend some of the provisions of FCRA 1952. However, this Bill lapsed due to the dissolution of the 13th Lok Sabha.

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