FMC orders special audit for 15 traders

The Forward Markets Commission (FMC) is conducting an audit of 15 identified commodities brokers around the country with five independent auditors. The audit, started early this week, is first of its kind by the commodities markets regulator.

The move is particularly significant against the backdrop of a recent FMC note circulated among all exchanges warning brokers against any kind of association with tainted stock brokers involved in the 2001 stock market scam.

"We have identified 15 broking houses for inspection. There have been allegations such as insider trading against these houses," said an FMC source.

However, he refused to name the broking houses and also did not specify any time frame by which the exercise would be completed. He also did not name the auditors.

Appointed independently by the regulator, these auditors will check books of accounts of brokers. They have been also assigned to check whether all these brokers are preserving clients' interest or not.

The regulator believes that fund management is a big challenge for the brokers and, therefore, the auditors have been assigned to check the inflow and outflow of funds.

Every trader is required to deposit the membership fees to an exchange through the brokers. The auditors will check whether the brokers are depositing the membership fees with the exchanges, sources said.

Analysts believe that the FMC has initiated such a move to stall a few traders' alleged involvement in malpractices. The regulator is yet to decide on the penalty to be imposed if any trader is found guilty.