Ministry asked to halt issuing new permits
KATHMANDU, AUG 26 -
The Ministry of Finance has asked the Ministry of Industry to halt issuing licences to new commodities exchanges.
About half dozen commodities exchanges are currently in operation and 50 have been registered at the Company Registrars’ Office, although there are no regulatory institutions governing the business.
The finance ministry took such a step considering the regulatory void, according to a highly placed source at the ministry. “New licences will not be issued until the finance ministry sets up a regulator,” the source said. “We are planning to authorise the Securities Board of Nepal (Sebon) to regulate the sector, within a month.”
Sebon will be granted the authority in line with some of the sections of the Securities Act. “The finance ministry, in fact, was planning to make some amendment to the Act. But in the absence of a parliament, we decided to give the authority to Seobn,” said the ministry official. “Nevertheless, details regarding the modality of the regulation has not been finalised yet.”
A recent Sebon report has said commodities exchanges in Nepal are profit-oriented, lack good corporate governance and are functioning under low capital. The exchanges are being operated as private limited companies under the principle of self-regulation without proper infrastructure and minimum standard, report said.
According to the report, there is no uniformity in the commodities being traded, nature of contracts, margin, commission and fees within exchanges. Also, there is no timely disclosure of statistics which has created confusion among investors. The study found a single person/group having up to 95 percent ownership in an exchange. Such a person/group was also found having ownership in more than one exchanges.
“In order to address such (the aforementioned) anomalies, we are committed to bringing a regulation as soon as possible,” said another finance ministry official. “A high-level team led by the finance minister has also asked ministry officials to regulate commodities.”
Among other irregularities found by the Sebon study include exchanges themselves involving in investment and trading of commodities; taking advantage of privileged information that is not available to general investors; investors unaware about the operation of the market. “If the regulation is not brought in time, many innocent investors might lose a large sum of money,” said the ministry source.
Commodities like gold and petroleum products —forbidden to trade by the law —are also being traded on the exchanges. Only the Nepal Oil Corporation is allowed to import and sell petroleum products, while commercial banks have the sole authority to import gold.
The Nepal Rastra Bank (NRB), however, expressed ignorance about gold trading on the exchanges. “We do not have official information regarding gold trading on commodities exchange,” said a senior NRB official. “The upcoming regulation will clearly define the trading of such commodities,” the ministry official added.
Source: The Kathmandu Post
