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A wide-ranging change in constitution of the board of directors of commodity exchanges (comexes) was issued by the Forward Markets Commission (FMC) on Wednesday.
It has aligned the norms relating to independent directors (IDs) and corporate governance in line with those in the new Companies Act. It has also emphasised for the first time on management of the exchange through various committees and specified the formation of at least eight of these, including a standing committee on technology.
FMC has said no trading member or clearing member or their associates and agents, nor even foreign institutional investors, shall be on the board nor be appointed as managing director (MD). The term of IDs will be three years, renewable once. An ID can be on the board of only one comex at a time.
Comexes will have to set up an audit committee, compensation committee, risk management committee, disciplinary action committee, default committee, standing committee on technology, IDs’ committee and ethics committee. Independent experts or technocrats may also be appointed on such committees, said FMC.
A report on the functioning of the committees needs to be given to the regulator every quarter. And, as all the exchanges come under the Companies Act, they will have to follow the rules gazetted under the 2013 law. In case of a resignation by the MD of an exchange, a new one should be appointed in the next 60 days. The first test of this directive will be for MCX; its MD had put in his papers in end-April. It is possible the regulator may allow the exchange to have a new MD in 60 days from Wednesday.
There are several Do’s and Don’ts for an exchange’s MD, including not holding a position in a subsidiary entity. FMC has also listed a code of conduct and code of ethics for directors and management personnel.
