The Forward Markets Commission (FMC) writes to ICAI for e-series forensic audit
Posted Date : 01-Nov-2013 , 07:58:12 pm
| Posted By CASANSAAR
The Forward Markets Commission (FMC) has written to Institute of Chartered Accountants of India (ICAI) to give a list of auditors who can be assigned the task of conducting a forensic audit of e-seriescontracts of National Spot Exchange (NSEL).
The Accountants body is likely to recommend three names from which the regulator will pick the auditor to go into the e-series contracts. The move comes after a Bombay high Court order directing FMC to take charge of the settlement of e-series contracts.
Unlike the NSEL paired contracts, which are embroiled in a Rs 5,600 crore payment crisis, e-series contracts are backed by dematerialized gold, silver and other metals. “The issue is of rematerializing them and paying the investors. But, given the experience we have had with the group, we did not want to decide anything without fully knowing what we are getting into. That’s why we decided to go for the forensic audit,” said a senior FMC official. Unlike the earlier audit of paired contracts, this time FMC is likely to directly appoint the auditor and give it the terms of reference, according to officials.
The auditor would have to hit the ground running as the court has directed the audit to be completed in two weeks.FMC is said to be not too keen to assign the work to Grant Thornton, which has already been given the job to audit MCX.
About 30,000 investors are awaiting settlements in these contracts. In September, Sharp & Tannan, Mumbai-based chartered accountants, audited the precious metals stocks held by NSEL in the vaults of a private service provider Brinks Arya in Mumbai, New Delhi, Kolkata, Hyderabad, Ahmadabad and Jaipur.
The auditors had said that the verification did not reveal any discrepancy in the quantum of stock. According to them, the demat quantity of 910 kg of gold, 46,167 kg of silver and 19 kg of platinum matched with the physical quantities held in the vault
However, the auditor recorded certain caveats in the verification methodology.
“At Mumbai office, stock quantities were checked with the demat statement of NSDL and CDSL. In the absence of adequate weighing facilities, the weight mentioned on coins bars has been relied upon,” the report by Sharp and Tannan said.
It also said that due to the huge quantity of silver stock involved, only about 36% of the silver bars were checked for purity, refiner’s name etc.
Under e-series, NSEL offered precious metals such as gold silver and platinum and industrial metals such as nickel, zinc and copper in the demat form in small denominations. The clearing and settlement pay-in and payout mechanism is based on T+2 settlement cycle. T+2 settlement cycle means that the final settlement of transactions done on the trade day takes place on the second business day.
E-series products provide opportunity for intra-day trading, coupled with demat delivery in respect of positions outstanding at end of the day.
FMC wrote to ICAI last week
ICAI to recommend three names
FMC will pick one from the list
Auditor to submit report within 2 weeks
Sharp and Tannan had done an audit in August/September.