The Securities Board of Nepal (Sebon) is making preparations to regulate the commodity market through a new act after finding no way to do so by means of a regulation. The stock market regulator, which has been asked by the government to regulate the commodity market too, has formed a taskforce headed by its board member Dilli Raj Ghimire to draft an act. Ghimire is also a joint secretary at the Law Ministry. Earlier, the Law Ministry had rejected two draft regulations proposed by the Ministry of Finance saying that the commodity market needed a separate act. It suggested creating a separate act saying that the commodity market needed a strong supervisory and licensing body and that there should be a provision for punishing offenders. Although it was expected that the annual budget for the current fiscal year would permit Sebon to regulate the sector by creating a provision in the Securities Act, it only stated that “necessary arrangements will be made to regulate the sector through Sebon”. “We want to complete drafting the act as soon as possible and start regulating the sector,” said Sebon Director Niraj Giri. Speculative trading in commodities like precious and industrial metals, petroleum products and agricultural goods, among others, has been the major activity at the commodity exchange. Since the Securities Act does not recognise the commodity market as part of the securities market, Sebon cannot act as a regulator without proper legal provisions. Prompted by reports of gullible investors being deceived in the unregulated market, the government has been working to supervise the sector which currently has no licensing agency for doing transactions and regulating them. In this context, a study carried out by Sebon unearthed many irregularities in the sector resulting in more than 80 percent of the investors losing money while investing in the commodity market. The study found that the commodity market had been conducting transactions in foreign exchange without the central bank’s approval as required by the Foreign Exchange Regulation Act. There is no uniformity in the commodities being traded, the nature of the contracts, margin, commission and fees among the different exchanges. Similarly, there is no timely disclosure of related statistics which has created a lot of confusion and difficulties among investors, according to the Sebon study. The base price and margin amount are different for different exchanges. Therefore, investors are finding it difficult to assess fluctuations in commodity prices and the risks brought by such variations. Also, commodity exchanges have not disclosed where commodity prices are determined, therefore prices differ among various markets. After irregularities in the market were exposed last year, the government asked Sebon to prepare the necessary legal provisions to keep the market on a tighter leash. The hasty actions yielded no results due to confusion over how to regulate the sector and who should do it. The plan to keep a watch over the commodity market through a regulation did not happen as there was no act on which it could be based.
Posted on: Tue, 27 Aug 2013 05:43:41 +0000
Trending Topics
Recently Viewed Topics
© 2015