The regulator has announced a uniform penalty structure for all the commodity exchanges, while raising the penalty amount for various other offences
In order to curb illegal trading in commodity markets, regulator Forward Markets Commission (FMC) has asked exchanges to impose a penalty of Rs1 lakh-Rs5 lakh, with effect from 1st April, on brokers carrying unauthorised trading activities.
Besides introducing a penalty for illegal trading, the Forward Markets Commission (FMC) has announced a uniform penalty structure for all the commodity exchanges, while raising the penalty amount for various other offences.
“Interest of market participants will be served better only if exchanges implement the uniform penalty structure in its true spirit,” a senior official from FMC told PTI.
“As there was no structured penalty for illegal trading, we have asked the commodity exchanges to levy a penalty of a minimum of Rs1 lakh and a maximum of Rs5 lakh on their members (brokers) involved in unauthorised trading,” he added.
The penalty for illegal trading, which is also part of a common penalty structure, will be effective from 1st April.
FMC has come out with the uniform penalty structure after it found during audits that national commodity exchanges were imposing different penalties for the same offence committed by brokers. It was also observed that for a few offences, exchanges were imposing a very low penalty.
Currently, for instance, MCX is levying Rs10,000 per client as penalty on brokers (members) who are issuing more than one identity code to a client, while NCDEX and NMCE do not have any penalty in place for the same offence.
However from 1st April, exchanges have been asked to impose Rs10,000 per client as penalty on members for issuing more than one identity code, the regulator said.
Similarly, the penalty on brokers, who are using one client’s fund for trading in another client’s account, has been kept uniform at Rs25,000, against the current penalty range of Rs10,000 to Rs50,000 by various bourses, it said.
The penalty for 'non-maintenance of client code' and 'know your customer norms' has been kept at Rs10,000 per client, respectively, it added.
“The penalty provisions have been changed keeping in mind that penalties should be adequate to act as a deterrent and should be uniform across exchanges so as to rule out the possibility of regulatory arbitrage,” the FMC official said.
At present, there are four national level and 19 regional level exchanges. The turnover of these exchanges stood at Rs73,50,974 crore till 15th February in 2009-10, up by 50% from the same period last year.
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