The Regulatory Oversight Committee (ROC) of the Multi-Commodity Exchange (MCX) has recommended a forensic audit of various approvals granted by the exchange to traders in Sikkim, sources said. Activity area.
Trading volumes on the Sikkim state MCX came under the scanner for suspected money laundering and tax evasion after Activity area first reported on April 3. Over the past month, the Government of Sikkim and the Directorate of Law Enforcement (ED) have launched a thorough investigation into the case and have requested details from MCX regarding the identity of traders and other data. .
MCX recorded trade volumes worth about $6 billion from Sikkim, or almost 5.5% of MCX’s total revenue in February. But after the Activity area report, the share of Sikkim-based traders on the MCX fell to just 0.75% in April. Now, MCX’s ROC is investigating whether the exchange has followed all standards in approving and allowing traders from Sikkim to transact on the exchange, the sources said.
The exchange has already been subject to forensic audits, including for unauthorized data sharing and issuing questionable tech contracts. Serious shortcomings were found in both audits and as a result the ROC was unwilling to take any chances this time around, the sources said.
The MCX ROC meeting was held May 11-13. The main members who made a recommendation for the forensic audit are Shankar Aggarwal, Saurabh Chandra, CS Verma and Suresh Gupta.
Sikkim’s trading volumes on the MCX only increased during Covid, mainly after the exchange issued a notice regarding stamp duty exemption for Sikkim-based traders.
All securities and commodities exchanges must follow rigorous know-your-client (KYC) procedures before allowing clients to trade, and must also file suspicious transaction reports (STRs) in the event of suspicious activity. But in the case of Sikkim, the required procedures were lax as the state was granted exemptions from vital KYC standards such as the PAN requirement. Traders in Sikkim on MCX have also benefited from a stamp duty exemption which, according to the tax authorities, does not imply any urgency for maintaining a state transaction register. Additionally, Indian income tax law is not applicable in Sikkim, making it a favorite of hawala speculators and traders.
Use state as base
Sikkim CM Prem Singh Tamang said traders from other states are using Sikkim as a base to trade on the MCX. Sources said Activity area that Sikkim also learned that brokers and traders from other states were presented as residents of Sikkim. An FIR has been registered by Sikkim on this subject.
MCX management defended their position saying that all standards were met and that the volumes from Sikkim were genuine.
Sources say that so far the investigation has revealed that two clients – Valley Distributors LLP and JMVD Market Solutions, registered with brokers based in Delhi and Kolkata – emerged as the main suspects who were generating the majority of Sikkim’s volumes. on MCX. So far, investigation has shown that JMVD is a client of Pace Stock Broking and Valley Distributors’ account is at East India Securities.
MCX has yet to respond to email inquiries from Activity area.
May 22, 2022