All eyes on Chidambaram for action

A high-level panel, headed by Economic Affairs Secretary Arvind Mayaram, on Monday submitted to Finance Minister P. Chidambaram its report on the alleged irregularities at the National Spot Exchange Ltd (NSEL).

The panel is said to have recommended two sets of measures to deal with the NSEL issue and also the problem of regulatory gaps in oversight of spot exchanges. Enforcement action has been recommended against NSEL and the persons behind the company, it is learnt.

The main issue was whether NSEL violated the Government exemption for one-day forward trading and also the ban on all short sales.

The panel is said to have spelt out the immediate measures to be taken against NSEL in the context of the investigations by various agencies. Several agencies such as the Enforcement Directorate, the Serious Fraud Investigation Office, the Income-Tax Department and the Forward Markets Commission were involved in the NSEL probe.

For the long term, the report has made certain recommendations to strengthen the functioning of the Forward Markets Commission, which regulates commodities markets.

The Commission, which has come under the administration of the Finance Ministry, had no powers to regulate spot exchanges.

It was only a nominated agency till the NSEL crisis broke out. Since then the Consumer Affairs Ministry has armed the FMC with special powers to look at the NSEL payments crisis and take action.

The Mayaram committee report is said to have recommended a regulatory framework for spot exchanges. But closing the regulatory gaps around spot exchanges will be the long-term solution.

NSEL, part of Jignesh Shah-led Financial Technologies group, is facing a crisis in settling dues worth Rs 5,600 crore.

(This article was published on September 23, 2013)
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