Pye had won the 2017 best and fairest award with his former club Royal Park, however the club was unaware of the title which put Pye into the 'premium commodity' points category.
Once the club became aware, they contacted the league and subsequently underwent investigation.
AFL Central Victoria Region General Manager Carol Cathcart says it was a mistake, however they can't be excused.
“Although it was a genuine oversight, clubs are required to complete sufficient due diligence on the history of their new players and inform the Commission if the player achieved a top five finish in club senior best and fairest in the previous year”, Cathcart said.
“The Commission took into account the unintentional nature of the breach and noted Birchip-Watchem’s honesty and co-operation with this matter."
The Bulls now fall to second place, with Wycheproof-Narraport taking over top spot.
The three teams who faced the Bulls in Rounds 1-3 have been awarded wins, meaning Donald climbs to third and Wedderburn comes back into finals contention in sixth.