Nine brokerages penalised for ignoring guar margins

The National Commodities and Derivatives Exchange of India (NCDEX) has levied penalties on nine brokerages, including Religare and Motilal Oswal, for irregularities in funding margins of clients in futures trade of guar gum and guar seed. The total penalty imposed on these brokerages is Rs 90 lakh, or 0.1 per cent of the amount on which margin money wasn’t collected (Rs 900 crore).

The penalties were levied after a detailed investigation by NCDEX on futures trade between October 2011 and March 27, 2012.

Confirming the move, an NCDEX spokesperson said, “On the basis of inspection by the exchange, it has imposed and collected penalties on some members for short-collection of margins from clients. Inspection of members is a regular feature and wherever such irregularities are detected, appropriate penal action is taken.”
 

UNDER SCANNER

• 9 brokerages penalised include Religare and Motilal Oswal
• Action after NCDEX investigates futures trade between Oct 2011 and Mar 27, 2012 
• Few months ago, 9 other brokerages were penalised for similar offence and were made to pay a penalty of Rs 1.26 cr
• The investigation into that case was conducted by NCDEX and the FMC

Penalties have also been imposed on Anand Rathi Commodities, Emkay Commotrade, Sushil Global, Navjeevan Trade, Inventure Commodities, Sharda Commodities and Sushil Rathi Commodities. Most of these are Mumbai-based firms.

The penalty imposed on Motilal Oswal, about Rs 27 lakh, was the highest. “We do collect sufficient margins, as prescribed by commodity exchanges, in the form of initial, exposure and special margins. However, in a particular case, we had collected initial and exposure margins, while the special margin was collected only partially. The client had an outstanding position before imposition of the special margin in the contract, which he continued to carry forward. This was reduced over time. Hence, the exchange levied a penalty on us,” said Ajay Menon, director and chief operating officer, Motilal Oswal Securities.

A spokesperson for Anand Rathi Commodities said there was no communication between NCDEX and the company regarding the matter. Jayant Manglik, president (retail distribution), Religare Securities, said, “We have paid the amount sought by the exchange and recovered it from the client whose margin was short.”

The consumer affairs ministry has ordered an investigation into the futures trade of guar gum and guar seed during October 2011 to March 2012, following abnormal fluctuations in prices. “Bank details of the nine brokerages are also being sought by NCDEX,” said a senior consumer department official.

A few months earlier, nine other brokerages were also found guilty of a similar offence; they had to pay a penalty of Rs 1.26 crore. The investigation into that case was conducted by NCDEX and the Forward Markets Commission.