Commodities market: Panel asks Sebon to lower capital requirement
KATHMANDU, OCT 07 -
The High Level Financial Sector Reforms Coordination Committee has asked the Securities Board of Nepal (Sebon) to lower the proposed minimum paid-up requirement for commodities exchanges.
A Sebon study had recommended that the paid-up capital requirement be fixed at Rs 500.
A meeting of the committee led by Finance Minister on Friday asked Sebon to revise certain portions of the draft regulation on the commodities market, including the proposed paid-up capital requirement, and submit it on Sunday. The meeting also decided to send the revised draft to the Law Ministry for its opinion. “Then, the proposed regulation will go the Cabinet,” read a Finance Ministry statement.
A Sebon official involved in drafting the regulation said the capital requirement of Rs 500 million was proposed as a commodities exchange requires at least Rs 250 million just for procuring software. “We are now holding discussions on to what extent the paid-up capital requirement could be lowered,” said the Sebon official. Sebon has assigned its lawyers’ committee to revise the draft.
According to the Sebon study, the combined investment from the six exchanges that are currently under operation and their agents stand at Rs 250 million.
As the current Securities Act has no provision regarding the commodities market, there is confusion on how Sebon could regulate the commodities market. The regulation cannot supersede the Act.
To address the situation, Sebon had proposed that the government allow it to regulate the commodities market through an executive order. “Some members of the high level committee supported the proposal, while some sought alternative,” said the committee member.
The Public Enterprise Board, which selects chief executives and board members of public enterprises, was also formed through an executive order.
On Sebon’s proposal that foreign investment be allowed in the domestic commodities market, the committee asked the regulator to provide a detailed assessment of pros and cons of foreign investment. “Based on the spirit of the high level committee’s decision to revise the draft within two days, I can hope that the government will take a final decision very soon,” said Shrestha.
The Sebon study showed that commodities exchanges were involved illegal transactions of foreign exchange without taking approval from Nepal Rastra Bank. As per the Foreign Exchange Regulation Act, the central bank’s approval is a must to do foreign exchange transactions. The study has found a single person/group having ownership of up to 95 percent in the exchange. Such a person/group has also been found taking ownership of more than one exchanges.
The study found promoters of the exchanges themselves involving in investment and trading of commodities, taking advantage of the privileged information which is not available to general investors.
Shrestha said the regulation would bring the existing commodities exchanges under the law and those violating the law would be punished.
Source: The Kathmandu Post
