FMC will have to wait for police report to take action in NSEL case

MUMBAI: Commodity market regulator Forward Markets Commission (FMC) cannot act against any broker in connection with the Rs 5,600-crore NSEL fiasco unless it receives credible evidence of their complicity in the scam, a senior government official told ET.

FMC does not have the power to regulate intermediaries directly. Draft rules for this purpose were published last year by the economic affairs department — which oversees FMC — but could not be finalised due to FMC’s merger with Sebi, announced in this year’s Budget. Under extant rules, FMC can suspend a member of a recognised commodity exchange for up to three years.

"But for that (suspension) there should be some finding by an agency or forensic audit report or any credible evidence. Allegations cannot be the basis of action. Once the Commission gets some credible information, action will follow," said the official.

The FMC has not yet received a copy of the forensic audit on NSEL brokers from Economic Offences Wing (EOW) of Mumbai police, which undertook the exercise to probe the role of intermediaries in the scam.

EOW and NSEL had passed on certain references to the Commission but aside of that nothing concrete against brokers has been given to FMC.

The police in March this year arrested key officials from Anand Rathi, Geofin Comtrade and India Infoline Commodities, but have not yet filed a charge sheet against any broker, who are out on bail. The brokers’ arrests followed those of NSEL’s directors last year as well as seven defaulters from NK Proteins, Ark Imports, etc.

Unnamed brokers were part of the EOW’s first information report filed in September 2013.Those arrested were charged with luring clients by mis-selling, cheating, forgery, etc.

The NSEL scam broke out in July 2013 after 24 defaulters were unable to make pay-ins when the bourse suspended trading. At the heart of the scam is missing commodity stocks against which the defaulters raised money from thousands of investors who traded on NSEL.