Tightening corporate governance norms for commodity exchanges following NSEL scam, the Forward Markets Commission (FMC), on Thursday, asked their boards to scrutinise all major business decisions, as also financial powers of CEOs and transactions involving promoters and top management personnel.
The boards of the exchanges would also have to ensure that appropriate checks and balances are in place with regard to costs incurred for donations, publicity, media and public relations, legal and other professional charges, among others.
In a directive issued to six national exchanges, including MCX, the FMC has stipulated the minimum requirement for sharing of information relating to functioning of the exchange with the board of directors.
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It also directed that the decisions relating to certain matters should be taken with the approval of the board of directors or the board committees.
“The board will lay down an appropriate procedure for delegation of financial powers to Managing Director/CEO. The expenditure incurred above a particular level need to be approved by the board or the audit committee,” the FMC said.
The regulator said that prior approval of the board would be required in matter related to expenditure items such as capital expenditure, agreement/contract giving rise to recurring obligation for a period of more than three years, and loan/advances/guarantee/financial commitments.
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Matters related to salaries, bonus, increments and compensation at the level of head of the department/ functional heads of the bourse would need the board approval.
A prior approval of the board is required for “all financial transactions/loan/guarantees/deposits/financial commitment of any kind with parties/entities/individuals related directly or indirectly to the promoters/other shareholders or any party related to the exchange’s directors or management in any manner.” Following the Rs.5,500-crore payment crisis at NSEL, the FMC has been taking several measures to ensure accountability and transparency in the commodity futures market.
New norms As per new norms, the board of the exchanges would lay down a policy for disclosure, conflict of interest and resolution thereof. The board would address all complaints of deviation from such policy.
The exchange will execute, with the approval of the board, the liability insurance for directors to safeguard the professional liability of the board members arising from the performance of their duties for the exchange, the FMC said. The regulator also directed the exchanges to constitute a committee of the board on risk management.