Govt mulls giving reins to Sebon
KATHMANDU, SEP 09 -
Amid growing concerns about the business modality of commodities exchanges, the Finance Ministry is planning to give the regulatory authority to Securities Board of Nepal (Sebon) to govern the commodities market based on some sections of the existing Securities Act.
However, experts have pointed out that such an attempt would only legitimise the commodities business , but would not eliminate anomalies.
The ministry was earlier planning to bring a separate act or amend the existing Securities Act to regulate the exchanges. “But the absence of a parliament has forced us to bring the regulation based on some sections of the existing Securities Act,” said a senior ministry official.
The ministry has already written to Sebon, asking the latter to make necessary arrangements to regulate the commodities market without going against the spirit of the Securities Act. Sebon officials acknowledged the receipt of the letter. “We are now discussing how the Act could be used to regulate the commodities market, as it does not have any such provision at present,” said Sebon Director Niraj Giri.
However, Sebon officials admit it is virtually impossible to regulate commodities exchanges only based on the existing Securities Act. “Government is citing the absence of parliament for its inability to bring a separate act,” said a Sebon official.
Former Sebon Chairman Surbir Poudyal also said if the government doesn’t bring a separate act or amend the existing one, the regulation will be ineffective. “It will only legitimatise the existing anomalies,” said Poudyal. “How can Sebon, which even struggles to regulate the stock market, take the additional responsibility?”
Poudel added that fines, action and punishment, if not mentioned in the Act, cannot be imposed. “This will further elevate anomalies,” he said.
With more investors complaining about being duped by the exchanges, it high time that the government bring a separate, strong act to govern the commodities market. As there are half dozen exchanges in the country and around a dozen more are in pipeline, stakeholders are pressing for ending the regulatory void.
Experts are of the view that the regulation will further confuse investors. “Once the regulation comes, exchanges can again lure innocent investors,” said Poudyal. “Thinking that there is a regulation, they (investors) will again come and invest, only to lose more.”
The capacity building of Sebon is another task to be done. “The existing organisational structure of Sebon and its human resources are not enough to regulate commodities exchanges,” said Poudyal.
“Either Sebon should be upgraded giving the supreme authority or the Nepal Rastra Bank (NRB) should be given the authority to regulate the exchanges as it is the most efficient regulatory institution at present. Otherwise, the government should set up a separate institution.”
Ministry sources did not rule out the possibility of amending the Securities Act or prepare a new one and pass it through ordinance. “The ministry is reviewing the case very seriously and we will come up a concrete decision within a couple of days,” said the source. “If found necessary, we will think about a separate act or amending the existing one.”
The exchanges, which trade in commodities like gold, silver and crude oil, among others, do not deliver goods and their entire business model is limited to mere speculation. The government is also unaware about the exchanges’ operational details such as statistics and software they are using. Although, a majority of them operate within the country, one has placed its server in Honk Kong. The government cannot extract data from servers outside the country.
Posted on: 2012-09-09 09:02