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Wednesday, April 28, 2010

What is Corpfiling for Listed Company & how investors can get information online now (excel based filing), SEBI/Stock exchange website

SEBI had, vide circular no SEBI/CFD/DIL/LA/4/2007/27/12 dated December 27, 2007 informed that Electronic Data Information Filing And Retrieval (EDIFAR) will be phased out gradually in view of new portal viz. Corporate Filing and Dissemination System (CFDS) put in place jointly by BSE and NSE at the URL more EDIFAR...File it thru corpfiling SEBI says


SEBI has since discontinued the EDIFAR system w.e.f from April 1, 2010. In view of this, Stock Exchanges are advised to carry out the consequential amendments in Equity Listing Agreement i.e. removal of words, “and also through the EDIFAR website” from Clause 32 and omission of Clause 51 from Equity Listing Agreement. The Stock Exchanges are also advised to inform about discontinuation of EDIFAR to all the listed companies.


Now on, all the Stock Exchange/SEBI related filing such as

  • Company Results
  • Corporate Announcements
  • Company Factsheet
  • Quarterly Compliance Report
  • Share Holding Pattern
  • SAST (Takeover Code)
  • Insider Trading

can be done online through Microsoft Excel sheet as downloaded from the said website.  The portal aims at providing a single interface to the investors/shareholders/stakeholders to keep track of the latest filings of all the listed companies in India online irrespective of the Stock Exchange.

Download Pre-requisite softwares for corpfiling.

Source: SEBI CIR/CFD/DCR/3/2010 dated 16th April 2010

SEBI Timelines for 12 day listing of IPO/FPO/Public issue of securities w.e.f 3rd May 2010 - The Public offer schedule to commence trading

In consultation with market intermediaries, SEBI has issued a press release for Listing with Stock Exchanges to be made within 12 days of closure of public issue wef 1st May 2010.

In the new process, the syndicate members shall capture all data relevant for
purposes of finalizing basis of allotment while uploading bid data in the electronic bidding system of the stock exchanges. In order that the data so captured is accurate, syndicate members may be permitted an additional day to amend some of the data fields entered by them in the electronic bidding system.

It is to be noted that syndicate members shall be responsible for any error in the bid details uploaded by them. In case of apparent data entry error by either syndicate member or collecting bank in entering the application number in their respective schedules other things remaining unchanged, the application may be considered as valid and such exceptions may be recorded in minutes of the meeting submitted to stock exchange(s). In the event of mistake in capturing the application number by either the syndicate member or collecting bank leading to rejection of application, the registrar may identify based on the bid form, the entity responsible for the error. Valid records in electronic file will be those for which money is received.

This circular contains indicative timelines for the various activities in the issue process. The non-ASBA process in this regard is given in Annexure I of the circular. Since the ASBA process also needs to be revised pursuant to the
reduced timelines, the revised ASBA process is indicated in Annexure II of the circular.

Details of the mandatory data fields which are required to be captured into the electronic bidding system by the syndicate members including the fields which are modifiable/non-modifiable is given in Annexure III of the circular.

In order to facilitate quicker processing of applications for the purpose of allotment, instead of the name of the applicant, it is proposed to use PAN which is a unique identification number of the applicant. In this regard, the merchant bankers are directed to ensure that the following is clearly disclosed in the prospectus/abridged prospectus, application form and the pre-issue advertisements: “The applicants may note that in case the DP ID & Client ID and PAN mentioned in the application form and entered into the electronic bidding system of the stock exchanges by the syndicate members do not match with the DP ID & Client ID and PAN available in the depository database, the application is liable to be rejected.”

Stock Exchanges are directed to ensure that in case of revision of bids, there shall be appropriate provisions to capture the details of the payment instrument for difference of amount, if any.  It is given to understand that there is no uniformity in the documents required to be submitted to the stock exchanges along with the listing application which results in delay in the process. In this regard, stock exchanges are directed to clearly indicate the list of documents which they require for giving listing approval, at the time of grant of in-principle approval.

Stock Exchanges, Merchant Bankers, Registrar to an Issue, Bankers to an issue including those acting as Self Certified Syndicate Banks and depositories are directed to ensure that the instructions contained in this circular are complied with. This revised procedure shall be applicable to all public issues opening on or after May 3, 2010.

Download the IPO Timeline or Public Issue Schedule issued by SEBI from T+0 till T + 12 days, where “T” is the issue closing date and “T+12” is the date of commencement of trading vide SEBI CIR/CFD/DIL/3/2010 dated 22nd April 2010.

Optional & Limited power of attorney execution by client in favour of stock exchange/depository participant - SEBI guidelines

Execution of Power of Attorney (PoA) by the Client in favour of the Stock Broker and Depository Participant
1. A Power of Attorney is executed by the client in favour of the stock broker /stock broker and depository participant to authorize the broker to operate the client’s demat account and bank account to facilitate the delivery of shares and pay – in/ pay – out of funds.  The cleint shall not be forced to execute Irrevocable Power of Attorney.
2. Generally, the PoA is taken from the clients who want to avail internet based trading services. For offering internet based trading services, a Stock Broker requires necessary authorizations for seamless trading, collection of margins as well as settlement of funds and securities. Further, some of the Stock Brokers also obtain authorizations from their clients to offer non-internet based services.
3. Standardizing the norms for PoA must not be construed as making the PoA a condition precedent or mandatory for availing broking or depository participant services. PoA is merely an option available to the client for instructing his broker or depository participant to facilitate the delivery of shares and pay-in/pay-out of funds etc. No stock broker or depository participant shall deny services to the client if the client refuses to execute a PoA in their favour.
4. The Stock Brokers shall take necessary steps to implement this circular latest by May 31, 2010 for the new clients and ensure to take necessary steps latest by September 01, 2010 to revoke those authorizations given by the existing clients to the stock brokers/ stock broker and depository participants through PoA that are inconsistent with the present guidelines.

5. The POA should be limited & shall not facilitate the stock broker to do the following:
a. Transfer of securities for off market trades.
b. Transfer of funds from the bank account(s) of the Clients for trades executed by the clients through another stock broker.
c. Open a broking / trading facility with any stock broker or for opening a Beneficial Owner account with any Depository Participant.
d. Execute trades in the name of the client(s) without the client(s) consent.
e. Prohibit issue of Delivery Instruction Slips (DIS) to beneficial owner (client).
f. Prohibit client(s) from operating the account.
g. Merging of balances (dues) under various accounts to nullify debit in any other account.
h. Open an email ID/ email account on behalf of the client(s) for receiving statement of transactions, bills, contract notes etc. from stock broker / Depository Participant.
i. Renounce liability for any loss or claim that may arise due to any blocking of funds that may be erroneously instructed by the Stock Broker to the designated bank.

Source: SEBI CIR/MRD/DMS/13/2010 dated 23rd April 2010

Market makers in SME exchange for Rs.10 lakh & max bid ask spread may be prescribed later, SEBI guidelines

Sub: Guidelines for market makers on Small and Medium Enterprise (SME) exchange/separate platform of existing exchange having nation wide terminal
SEBI has put in a framework for setting up of new exchange or separate platform of existing stock exchange having nationwide terminals for SME (hereinafter referred to as the ‘Exchange/ SME Exchange’). In order to operationalise the said framework, necessary changes have been made to applicable Regulations, circulars etc. As per the framework, market making has been made mandatory in respect of all scrips listed and traded on SME exchange. The following guidelines shall be applicable to the Market Makers on this exchange.
1. Applicability
These guidelines are applicable to all the registered Market makers for making market in all scrips listed and traded on SME exchange.
2. Registration of the Market Maker
Any member of the Exchange would be eligible to act as Market Maker provided the criteria laid down by the exchange are met. The member brokers desirous of acting as Market Maker in this exchange shall apply to the concerned stock exchange for registration as Market Makers unless already registered as a Market Maker.
3. The obligations and responsibilities of Market Makers
The Market Maker shall fulfil the following conditions to provide depth and
continuity on this exchange:
(a) The Market Maker shall be required to provide a 2-way quote for 75% of
the time in a day. The same shall be monitored by the stock exchange. Further, the Market Maker shall inform the exchange in advance for each and every black out period when the quotes are not being offered by the Market Maker.
(b) The minimum depth of the quote shall be Rs.1,00,000/- . However, the
investors with holdings of value less than Rs 1,00,000 shall be allowed to offer their holding to the Market Maker in that scrip provided that he sells his entire holding in that scrip in one lot along with a declaration to the effect to the selling broker.
(c) Execution of the order at the quoted price and quantity must be guaranteed by the Market Maker, for the quotes given by him.
(d) There would not be more than five Market Makers for a scrip. These would be selected on the basis of objective criteria to be evolved by the Exchange which would include capital adequacy, networth, infrastructure, minimum volume of business etc.
(e) The Market Maker may compete with other Market Makers for better
quotes to the investors;
(f) Once registered as a Market Maker, he has to start providing quotes from
the day of the listing / the day when designated as the Market Maker for the respective scrip and shall be subject to the guidelines laid down for market making by the exchange;
(g) Once registered as a Market Maker, he has to act in that capacity for a
period as mutually decided between the Merchant Banker and the market
(h) Further, the Market Maker shall be allowed to deregister by giving one
month notice to the exchange, subject to (g) above.
4. Dissemination of Information
The exchange should disseminate the list of Market Makers for the respective scrip to the public.
5. Number of Shares per Market Maker
The number of companies in whose shares a Market Maker would make market should be linked to his capital adequacy as decided by the exchange.
6. Risk Containment Measures and monitoring for Market Makers
All applicable margins should be levied and collected without any waiver/exemption.
Capital Adequacy
The exchanges would prescribe the capital adequacy requirement for its members to commensurate with the number of companies which Market Maker proposes to make market. Further, the stock exchange may lay down
additional criteria also for Market Makers as risk containment measures. The
same shall be monitored by the stock exchange.
All the requirements with regard to market making shall be monitored by the stock exchange and any violation of these requirements would be liable for punitive action to be taken by the Disciplinary Action Committee (DAC) of the Exchange, which may also include monitory penalty apart from the trade restriction as decided by the DAC under intimation to the Merchant Banker.
7. Price Band and Spreads
The exchanges shall prescribe the maximum spread between bid and ask price. The exchange, may at its discretion also prescribe the price bands for
the same. Further, in case of new issue the spread shall also be specified in
the offer document with the prior approval of the exchange.

Source: SEBI CIR/MRD/DP/ 14 /2010 dated 26th April 2010

Whether BSE/NSE is a regulator or a profit making entity, answer sebi now

Corporatisation & Demutualisation of Stock Exchanges has brought to the fore a new conflict between the ‘profit maximization goal’ of an Exchange vis-à-vis its ‘regulatory role’. Exchanges have traditionally been the first line of regulators in the securities market. With growing commercialisation of the exchanges and the resultant competition between exchanges, it would be necessary for the market regulator to recognize the possibility that exchanges may compromise on its regulatory role in its urge to canvass larger volumes of business from intermediaries and investors.


Internationally, the practice prevalent among regulators has been to allow Exchanges to pursue their commercial operations, while exercising regulatory oversight.

The SEBI Board, in its meeting held on December 22, 2009, (the detailed agenda note is available at decided to set up a Committee to look into the above issues and give suitable recommendations. Accordingly, a Committee under the Chairmanship of Dr. Bimal Jalan has been constituted. The Committee has decided to adopt a consultative process. Accordingly, a questionnaire has been devised to seek
the views of market infrastructure institutions, market participants, users and public on the concerns related to Ownership and Governance of Market Infrastructure Institutions, as elaborated above. You are requested to forward your responses for the questionnaire to any of the following email ids latest by May 10, 2010:

Download & fill the Questionnaire now.

SEBI guidelines for derivative contracts on Volatility Index, like NSE has

Sub: Introduction of derivative contracts on Volatility Index
Further to SEBI circular no. SEBI/DNPD/Cir-35/2007 dated January 15, 2008 with regard to introduction of Volatility Index, it has now been decided to permit Stock Exchanges to introduce derivative contracts on Volatility Index, subject to the condition that;
a. The underlying Volatility Index has a track record of at least 1 year.
b. The Exchange has in place the appropriate risk management framework
for such derivative contracts.
2. Before introduction of such contracts, the Stock Exchanges shall submit the
i. Contract specifications
ii. Position and Exercise Limits
iii. Margins
iv. The economic purpose it is intended to serve
v. Likely contribution to market development
vi. The safeguards and the risk protection mechanism adopted by the exchange to ensure market integrity, protection of investors and smooth and orderly trading
vii. The infrastructure of the exchange and the surveillance system to effectively monitor trading in such contracts, and
viii. Details of settlement procedures & systems
ix. Details of back testing of the margin calculation for a period of one year considering a call and a put option on the underlying with a delta of 0.25 & -0.25 respectively and actual value of the underlying.

Source: SEBI CIR/DNPD/ 1 /2010 dated 27th April 2010

Thursday, April 22, 2010

Understand all about ASBA - in public issues, rights issues, by Mutual Funds, by QIB's - an alternate way of investing, SEBI

Understand what is Application Supported by Blocked Amounts (ASBA)?

Whether ASBA is applicable for Rights Issues?

Can QIB’s apply in a public issue under ASBA mechanism?

Till now only Indian Retail Individual Investors bidding at cut-off Price were entitle to use ASBA facility.

In this regard, Stock Exchanges, Merchant Bankers, Registrar to an Issue and Bankers to an issue acting as Self Certified Syndicate Banks are advised to ensure that appropriate arrangements are made to accept ASBA forms from Qualified Institutional Buyers (QIBs) also in addition to the existing categories of investors on or after 1st May 2010.

Source: SEBI CIR/CFD/DIL/2/2010 dated 6th April 2010

Total period of realisation is 8 years for Securitisation Company, loss assets, date of acquisition defined, surplus investment in NABARD/SIDBI & more disclosures in Balance sheet - SARFAESI provisions amended

The Securitisation Companies and Reconstruction Companies (Reserve Bank) Guidelines and Directions, 2003 – Amendments (under SARFAESI provisions)

RBI clarification on certain issues as regards acquisition of financial assets by trusts floated by Securitisation Companies or Reconstruction Companies, extension in time frame allowed for realization of financial assets, deployment of surplus funds, acquisition of land and buildings by Securitisation Company or Reconstruction Company; asset classification, additional disclosures in the balance sheet etc. as detailed hereunder:-

(Directions here means Securitisation Companies and Reconstruction Companies (Reserve Bank) Guidelines and Directions, 2003)

(a) Amendment of paragraph 3(1)(iii) of the Directions - Date of acquisition
Date of acquisition means the date on which the ownership of financial assets is acquired by Securitisation Company or Reconstruction Company either in its own books or directly in the books of the trust.

(b) Amendment of paragraph 7(1) of the Directions - Financial Assets Acquisition Policy
Framing of ‘Financial Assets Acquisition Policy’ by the Securitisation Company or Reconstruction Company shall cover acquisition of financial assets either in its own books or directly in the books of the trust.

(c) Amendment of paragraph 7(6)(ii) of the Directions - Plan of realisation
In terms of clause 7(6)(i) of the Directions, every Securitisation Company or Reconstruction Company is required to formulate a plan for realisation of financial assets acquired by providing for one or more measures listed therein. Further, in terms of clause 7(6)(ii) of the Directions, the plan of realisation shall clearly spell out the steps proposed to reconstruct the assets and realize the same within a specified timeframe of (within) 5 years from the date of acquisition.
On a review, it has been decided that on expiry of 5years from the date of acquisition of financial assets, the Board of Directors of the Securitisation Company or Reconstruction Company may increase the period for realisation of financial assets so that the total period for realisation shall not exceed 8years from the date of acquisition of financial assets concerned. The Board of Directors of the Securitisation Company or Reconstruction Company shall specify the steps that will be taken by the Securitisation Company or Reconstruction Company to realise the financial assets within the time frame as above.
Qualified Institutional Buyers (QIB) shall be entitled to invoke the provisions of Section 7(3) of the SARFAESI Act only at the end of such extended period (post 5 years) as explained above. If the period for realisation is not extended, the Qualified Institutional Buyers shall be entitled to invoke the provisions of Section 7(3) of the Act at the end of period of realisation (within) 5 years from the date of acquisition of the financial asset concerned.

(d) Amendment of paragraph 8(1) of the Directions- Issue of Security Receipts
Paragraph 8(1) of the Directions prescribes that a Securitisation Company or Reconstruction Company shall give effect to the provisions of Sections 7(1) and (2) of the Act through one or more trusts set up exclusively for the purpose. The Securitisation Company or Reconstruction Company is required to transfer the assets to the said trusts at the price at which those assets were acquired from the originator. It is clarified that Securitisation Company or Reconstruction Company can acquire the assets from banks/FIs either in its own books and then transfer the assets to trusts or directly acquire the assets in the books of the trusts. In case such financial assets are first acquired in its own books by the Securitisation Company or Reconstruction Company, such financial assets shall be transferred to trust at the price at which those assets were acquired by Securitisation Company or Reconstruction Company from the originator.

(e) Amendment of paragraph 10(ii) of the Directions - Deployment of surplus funds
A Securitisation Company or Reconstruction Company may deploy any surplus available with it only in Government Securities and deposits with scheduled commercial banks in terms of policy framed in this regard by its Board of Directors.
To provide additional avenues to the Securitisation Company or Reconstruction Company for deployment of surplus funds, Securitisation Company or Reconstruction Company, subject to policy framed by its Board of Directors, may also deploy surplus funds as deposits with Small Industries Development Bank of India (SIDBI), National Bank for Agriculture and Rural Development (NABARD) or such other entity as may be specified by the Reserve Bank of India from time to time.

(f) Amendment of paragraph 10(iii) of the Directions- Acquisition of land and buildings by Securitisation Company or Reconstruction Company.
Presently, no Securitisation Company or Reconstruction Company is allowed to invest out of its owned fund in land and building, provided that this restriction will not apply to funds borrowed as also to owned fund in excess of the minimum prescribed.
On a review, it has been decided that no Securitisation Company or Reconstruction Company shall, invest in land and building;-
provided that this restriction shall not apply to investment in land and/or building by Securitisation Company or Reconstruction Company for its own use upto 10% of its owned fund,
provided further that any land and/or building acquired by Securitisation Company or Reconstruction Company in the ordinary course of its business of reconstruction of assets while enforcing its security interest, shall be disposed of within a period of 5 years from the date of such acquisition or such extended period as may be permitted by the Bank in the interest of realization of the dues of the Securitisation Company or Reconstruction Company.

(g) Amendment of paragraph 12 of the Directions - Asset classification
It is clarified that provisions relating to asset classification are applicable only in respect of assets held in the books of Securitisation Company or Reconstruction Company. Further, the meaning of the term “Loss asset” has been expanded to include the financial assets including Security Receipts continued to be held by the Securitisation Company or Reconstruction Company which has not been realized within the total time frame specified in the plan for realization formulated by the Securitisation Company or Reconstruction Company under Paragraph 7 (6)(ii) or 7(6)(iii).

(h) Amendment of paragraph 15 of the Directions- Disclosures in the Balance Sheet
It has been decided that every Securitisation Company or Reconstruction Company shall make additional disclosures on following issues in the balance sheet:-
(i) Value of financial assets acquired during the financial year either in its own books or in the books of the trust;
(ii) Value of financial assets realized during the financial year;
(iii) Value of financial assets outstanding for realization as at the end of the financial year;
(iv) Value of Security Receipts redeemed partly and the Security Receipts redeemed fully during the financial year;
(v)Value of Security Receipts pending for redemption as at the end of the financial year;
(vi) Value of Security Receipts which could not be redeemed as a result of non-realization of the financial asset as per the policy formulated by the Securitization company or Reconstruction company under Paragraph 7(6)(ii) or 7(6)(iii).
(vii)Value of land and/or building acquired in ordinary course of business of reconstruction of assets (year wise)

Source: Notification No. DNBS.PD(SC/RC). 8 /CGM (ASR) - 2010 dated April 21, 2010 is enclosed vide RBI/2009-2010/413 DNBS (PD) CC. No. 18 / SCRC / 26.03.001/ 2009-2010

Securitisation Company u/ SARFAESI Act shall hold atleast 5% of Security Receipts issued by it on ongoing basis till the redemption of scheme, RBI

RBI amendment in SARFAESI provisions

Securitisation Companies/ Reconstruction Companies(SC/RCs) registered with the Bank are required to invest in the Security Receipts (SRs) issued by the trust set up for the purpose of securitisation, an amount not less than 5% under each scheme.

In Paragraph 5 of the The Securitisation Companies and Reconstruction Companies (Reserve Bank) Guidelines and Directions, 2003, after subparagraph (v), the following subparagraph (vi) shall be inserted.
" (vi) the Securitisation Company or Reconstruction Company shall continue to hold a minimum of 5% of the Security Receipts of each class issued by the SC/RC under each scheme on an ongoing basis till the redemption of all the Security Receipts issued under such scheme.


Source: RBI/2009-2010/414 DNBS (PD) CC. No. 19 / SCRC / 26.03.001/ 2009-2010 dated 21st April 2010

RBI approval is mandatory for Public (IPO), Preferential issue, QIP by Private bank; Understand what is required for Public issue of securities (SEBI)

Approvals required for various Corporate Actions, Issues by Private Sector Banks

1. Initial Public Offers (lPOs) – Public Issues:
(i) All banks should obtain RBI approval for IPOs. After listing on the stock exchanges, banks are free to price their subsequent issues.
(ii) Issue price should be based on merchant banker's recommendation. There need be no reference to the CCI formula for deciding on the pricing of such issues.
2. Rights issues:
RBI approval would not be required for rights issues by both listed and unlisted banks. However, banks need to comply with the requirements that have been laid down in the circular DBOD.No.PSBD.BC.99/16.13.100/2004-05 dated June 25, 2005 on Rights Issue.
3. Bonus issues:
Private sector banks, both listed and unlisted, need not seek RBI's approval for bonus issues. The issues would, however, be subject to SEBI's requirements on issue of bonus shares, viz. bonus issues (a) should be made from free reserves built out of genuine profits or share premium, (b) should not dilute the value or rights of partly or fully convertible debentures, (c) should not be in lieu of dividend and (d) should not be made unless all partly paid-up shares are fully paid-up. Further, bonus issues may be issued without linkage to rights issues.
4. Preferential issue:
All preferential issues would require prior approval of RBI. Pricing of preferential issues by listed banks may be as per SEBI formula, while for unlisted banks the fair value may be determined by a chartered accountant or a merchant banker.
5. Qualified Institutional Placement (QIP):
Private Sector Banks need to approach RBI for prior 'in principle' approval in case of Qualified Institutional Placements. Banks need to approach RBI along with details of the issue once the bank’s Board approves the proposal of raising capital through this route. Further, allotment to the investors would be subject to compliance with SEBI guidelines on QIPs and RBI guidelines dated February 3, 2004 on acknowledgement of allotment / transfer of shares. Once the allotment process is complete, the banks would also be required to furnish complete details of the issue to RBI in the enclosed format for seeking post facto approval. This would be irrespective of whether any acquisition results in shareholding of 5% or more of the paid up capital of the bank.
6. In case of pricing of issues

  • where RBI approval is not required, pricing of issues should be as per SEBI guidelines (ICDR Regulations);
  • in cases where prior approval of RBI is required, pricing should take into account both SEBI and RBI guidelines.

Source: Issue and Pricing of Shares by Private Sector Banks vide RBI/2009-10/411 DBOD.No.PSBD.BC.92 /16.13.100/2009-2010 dated 20th April 2010

Wednesday, April 21, 2010

Download ICSI Admit Card for June 2010 Company Secretary exam - Hall Ticket based on CS Registration or Roll No.

Hope you would have got your Admit Card or Hall tickets for CS Foundation Programme, CS Executive Programme or CS Professional Programme exams by now.

The CS Admit Card issued by ICSI gives you the details of Roll Number, Examination centre and the details of the exams that you are allowed to write along with the Date of the Exams and the exemptions granted.

So, its the time to wish all the best!!! Just be confident of your preparations now, irrespective of how much you have studied.  Just make sure, you spend 3 hours of your time for every exam with 100% concentration and every exam is independant of each other.  The performance of one exam has connection to the performance in the other exam.  So, simply give your best for each & every exam.  Its Only This Much!!!

For those, who have not got the same, not to panic! there is a very easy way to download, which is valid for Exams too from ICSI site itself. Just you have to know your ICSI registration number. (Enter Either Registration number or Roll Number) 17 Digit Registration No (Third character is Zero and not "O") or 9 digit numbers followed by / month (2 digit) / year (4 digit) and you will get your Admit Card Extract.

Now, click here to get your Admit Card Click here to download ICSI Hall Ticket for June 2010 exams.

If you are not able to access the above link, click and then click “Admit Card Extract Link”.

Enjoy passin…Vj

Monday, April 19, 2010

Allocation of limits to FIIs/sub-accounts for investment in Government & Corporate debt through bidding process

Allocation of limits to FIIs/sub-accounts for investment in Government and Corporate debt through first come first served process

1. As per SEBI Circular No. IMD/FII&C/42/2009 dated April 09, 2010 the remaining limit for investment in Government and Corporate debt were to be allocated to the FIIs/ sub-accounts on a ‘first come first served’ basis in terms of our Circular dated January 31, 2008.

2. The list of entities got allocation of investment in Government and Corporate debt category are placed in Annexure A and Annexure B respectively.

In terms of SEBI circular dated November 06, 2008, time period for utilization of these allocated limits shall be 11 working days i.e. by May 04, 2010.


Allocation of limits to FIIs/sub-accounts for investment in Government & Corporate debt through bidding process

1. As per SEBI circular No. IMD/FII&C/42/2010 dated April 09, 2010, unutilised investment limits for Government & Corporate debt was available for allocation to the FIIs/ sub-accounts in the open bidding platform. The bidding for these limits took place today on the NSE offered platform.

2. Pursuant to the bidding, 11 successful bidders (list enclosed as annexure A) got allocation of investment in government debt category. In corporate debt category 18 successful bidders (list enclosed as annexure B) got allocation of investment.

3. These limits shall be utilized by the allocated entities within 45 days of the allocation.


Monday, April 12, 2010

NSE bidding process for FII on April 16, 2010 on first come first serve basis, sebi notification

All Foreign Institutional Investors
through their designated Custodians of Securities
Sub: Allocation of debt investment limits to FIIs
Based on the assessment of the allocation and the utilization of the limits to FIIs for investments in Government and Corporate Debt, it has been decided to allocate the unutilized limits in the following manner:-
I Allocation through bidding process
Please refer to SEBI circular IMD/FII & C/ 37/2009 dated February 06, 2009, providing the modalities for the allocation methodology through the bidding process. The bidding process shall be on April 16, 2010 on the National Stock Exchange (NSE) for both the government as well as the corporate debt limits subject to the following conditions: -
1. Government Debt:
a. In partial amendment to clause 3 (h) of the aforesaid circular IMD/FII & C/37/2009, no single entity shall be allocated more than Rs.200 cr. of the government debt investment limit.
b. In partial amendment to clause 3 (c) and 3(d) of the aforesaid circular IMD/FII & C/ 37/2009, the minimum amount which can be bid for shall be Rs.50 cr. and the minimum tick size shall be Rs.50 cr.
2. Corporate Debt:
a. In partial amendment to clause 3 (h) of the aforesaid circular IMD/FII & C/37/2009, no single entity shall be allocated more than Rs.2000 cr. of the corporate debt investment limit.
b. In partial amendment to clause 3 (c) and 3(d) of the aforesaid circular IMD/FII & C/ 37/2009, the minimum amount which can be bid for shall be Rs.200 cr. and the minimum tick size shall be Rs.200 cr.
II. Allocation through first come first serve process (FCFS)
In terms of SEBI circular dated January 31, 2008, the government and corporate debt limits shall be allocated in the first come fist served basis subject to the following conditions:-

3. Government Debt:
a. An investment limit of Rs.200 cr. in Government debt shall be allocated among the FIIs/sub-accounts on a first come first served basis, subject to a ceiling of Rs.49 cr. per registered entity.
4. Corporate Debt:
a. The remaining amount in corporate debt after bidding process shall be allocated among the FIIs/sub-accounts on a first come first served basis, subject to a ceiling of Rs.199 cr. per registered entity.

The debt requests in this regard shall be forwarded to the dedicated email id The window for first come first served process shall open at 08:30 AM IST, April 19, 2010. Time period for utilization of the allocated debt limit through first come first served basis shall be 11 working days from the date of the allocation.

The format for applying for debt limit for FCFS process is as per the source.

Source: Cir No. IMD/FII & C/42/2010 dated 9th April 2010

Wednesday, April 7, 2010

Listing with Stock Exchanges to be made within 12 days of closure of public issue wef 1st May 2010

Reduction in timelines between issue closure and listing

SEBI, in its continuing endeavour to make the existing public issue process more efficient, proposes to reduce the time between public issue closure and listing to 12 days from existing of up to 22 days. This will be applicable to public issues opening on or after May 1, 2010.

Source: PR No.88/2010 dated 6th April 2010

SEBI's guide to Understand Prospectus, its concepts, structure, etc... [read offer documents in public issues now]

Guide to understand an Offer Document

This sub‐section attempts to inform the structure of presentation of the content in an offer document. The basic objective is to help the reader to navigate through the content of an offer document.

(a) Cover Page

Under this head full contact details of the Issuer Company, lead managers and registrars, the nature, number, price and amount of instruments offered and issue size, and the particulars regarding listing. Other details such as Credit Rating, IPO Grading, risks in relation to the first issue, etc are also disclosed if applicable.

(b) Risk Factors

Under this head the management of the issuer company gives its view on the Internal and external risks envisaged by the company and the proposals, if any, to address such risks. The company also makes a note on the forward looking statements. This information is disclosed in the initial pages of the document and also in the abridged prospectus. It is generally advised that the investors should go through all the risk factors of the company before making an investment decision.

(c) Introduction

Under this head a summary of the industry in which the issuer company operates, the business of the Issuer Company, offering details in brief, summary of consolidated financial statements and other data relating to general information about the company, the merchant bankers and their responsibilities, the details of brokers/syndicate members to the Issue, credit rating (in case of debt issue), debenture trustees (in case of debt issue), monitoring agency, book building process in brief, IPO Grading in case of First Issue of Equity capital and details of underwriting Agreements are given. Important details of capital structure, objects of the offering, funds requirement, funding plan, schedule of implementation, funds deployed, sources of financing of funds already deployed, sources of financing for the balance fund requirement, interim use of funds, basic terms of issue, basis for issue price, tax benefits are also covered.

(d) About us

Under this head a review of the details of business of the company, business strategy, competitive strengths, insurance, industry‐regulation (if applicable), history and corporate structure, main objects, subsidiary details, management and board of directors, compensation, corporate governance, related party transactions, exchange rates, currency of presentation and dividend policy are given.

(e) Financial Statements

Under this head financial statement and restatement as per the requirement of the Guidelines and differences between any other accounting policies and the Indian Accounting Policies (if the Company has presented its Financial Statements also as per either US GAAP/IFRS) are presented.

(f) Legal and other information

Under this head outstanding litigations and material developments, litigations involving the company, the promoters of the company, its subsidiaries, and group companies are disclosed. Also material developments since the last balance sheet date, government approvals/licensing arrangements, investment approvals (FIPB/RBI etc.), technical approvals, and indebtedness, etc. are disclosed.

(g) Other regulatory and statutory disclosures

Under this head, authority for the Issue, prohibition by SEBI, eligibility of the company to enter the capital market, disclaimer statement by the issuer and the lead manager, disclaimer in respect of jurisdiction, distribution of information to investors, disclaimer clause of the stock exchanges, listing, impersonation, minimum subscription, letters of allotment or refund orders, consents, expert opinion, changes in the auditors in the last 3 years, expenses of the issue, fees payable to the intermediaries involved in the issue process, details of all the previous issues, all outstanding instruments, commission and brokerage on, previous issues, capitalization of reserves or profits, option to subscribe in the issue, purchase of property, revaluation of assets, classes of shares, stock market data for equity shares of the company, promise vis‐à‐vis performance in the past issues and mechanism for redressal of investor grievances is disclosed.

(h) Offering information

Under this head Terms of the Issue, ranking of equity shares, mode of payment of dividend, face value and issue price, rights of the equity shareholder, market lot, nomination facility to investor, issue procedure, book building procedure in details along with the process of making an application, signing of underwriting agreement and filing of prospectus with SEBI/ROC, announcement of statutory advertisement, issuance of confirmation of allocation note("can") and allotment in the issue, designated date, general instructions, instructions for completing the bid form, payment instructions, submission of bid form, other instructions, disposal of application and application moneys, , interest on refund of excess bid amount, basis of allotment or allocation, method of proportionate allotment, dispatch of refund orders, communications, undertaking by the company, utilization of issue proceeds, restrictions on foreign ownership of Indian securities, are disclosed.

(i) Other Information

This covers description of equity shares and terms of the Articles of Association, material contracts and documents for inspection, declaration, definitions and abbreviations, etc.

Investment in public Issues/ rights issues

(a) Where can I get application forms for applying/ bidding for the shares?

Application forms for applying/bidding for shares are available with all syndicate members, collection centers, the brokers to the issue and the bankers to the issue. In case you intend to apply through new process introduced by SEBI i.e. APPLICATIONS SUPPORTED BY BLOCKED AMOOUNT (ASBA), you may get the ASBA application forms form the Self Certified Syndicate Banks. For more details on “ASBA process” please refer to the “FAQs on ASBA”

(b) Whom should I approach if the information disclosed in the offer document appears to be factually incorrect?

The document is prepared by Merchant Banker(s), registered with SEBI. They are required to do the due diligence while preparing an offer document. The draft offer document submitted to SEBI is put on website for public comments. In case, you find any instance of misinformation/ lack of information, you may send your complaint to Lead Manager to the issue and/ or to SEBI, at this address: Securities & Exchange Board of India, C4 A, G Block, Bandra KurlaComplex, Bandra (E), Mumbai‐ 400051.

(c) Is it compulsory for me to have a Demat Account?

As per the requirement, all the public issues of size in excess of Rs.10 crore, are to made compulsorily in demat mode. Thus, if you intend to apply for an issue that is being made in a compulsory demat mode, you are required to have a demat account and also have the responsibility to put the correct DP ID and Client ID details in the bid/application forms. You can also refer to FAQs relating to demat available in the URL in the Investor Education section of the SEBI website.

(d) Is it compulsory to have PAN?

Yes, it is compulsory to have PAN. Any investor who wants to invest in an issue should have a PAN which is required to be mentioned in the application form. It is to be distinctly understood that the photocopy of the PAN is not required to be attached along with the application form at the time of making an application.

(e) For how many days an issue is required to be kept open?

The period for which an issue is required to be kept open is:

For Fixed price public issues: 3‐10 working days

For Book built public issues: 3‐7 working days extendable by 3 days in case of a revision in the price band

For Rights issues: 15‐30 days.

(f) When do I get the allotment/ refund of shares?

For Fixed price public issues: 30 days of the closure of the issue

For Book built public issues: 15 days of the closure of the issue

For Rights issues: 15 days of the closure of the issue

(g) How can I know about the demand for an issue at any point of time?

The status of bidding in a book built issue is available on the website of BSE/NSE on a consolidated basis. The data regarding bids is also available investor category wise. After the price has been determined on the basis of bidding, the public advertisement containing, inter alia, the price as well as a table showing the number of securities and the amount payable by an investor, based on the price determined, is issued. However, in case of a fixed price issue, information is available only after the closure of the issue through a public advertisement, issued within 10 days of dispatch of the certificates of allotment/ refund orders.

(h) How will I get my refund in an issue?

You can get refunds in an issue through various modes viz. registered/ordinary post, Direct Credit, RTGS (Real Time Gross Settlement), ECS (Electronic Clearing Service) and NEFT (National Electronic Funds Transfer). As stated above, if you are residing in one of the 68 centers as specified by Reserve Bank of India, then you will get refunds through ECS only except where you are otherwise disclosed eligible under Direct Credit and RTGS. If you are residing at any other center, then you will continue to get refunds through registered/ordinary post. You are therefore advised to read the instructions given in the prospectus/ abridged prospectus/ application form about centers. For more details, you may read subsection on “Electronic Clearing Scheme for Refunds”.

(i) When will the shares allotted to me get listed?

In book built public issue the listing of shares will be done within 3 weeks after the closure of the issue. In case of fixed price public issue, it will be done within 37 days after closure of the issue.

(j) How will I know which issues are coming to the market?

The information about the forthcoming issues may be obtained from the websites of Stock Exchanges. Further the issuer coming with an issue is required to give issue advertisements in an English national Daily with wide circulation, one Hindi national newspaper and a regional language newspaper with wide circulation at the place where the registered office of the issuer is situated.

(k) Where to I get the copies of the offer document?

The soft copies of the offer documents are put up on the website of Merchant banker and on the website of SEBI under Reports/Documents section [ Section&sec_id=5 ]. Copies of the offer documents in hard form may be obtained from the merchant banker or office of SEBI, SEBI Bhawan, Plot No. C4‐A “G” Block, BKC, Bandra (E), Mumbai ‐ 400051 on a payment of Rs 100 through Demand Draft.

(l) How do I find the status of offer documents filed by issuers with SEBI?

SEBI updates the processing status of offer documents on its website every week under the section in SEBI website. The draft offer documents are put up on the website under Reports/Documents section. The final offer documents that are filed with SEBI/ROC are also put up for information under the same section.

(m) Whom do I approach if I have grievances in respect of non receipt of shares, delay in refund etc.?

You can approach the compliance officer of the issue, whose name and contact number is mentioned on the cover page of the Offer Document. You can also address your complaints to SEBI at the following address: Office of Investor Assistance & Education, Securities & Exchange Board of India, C4A, G Block,Bandra Kurla Complex, Bandra (E), Mumbai‐ 400051.

Understanding Book Building

(a) What is book Building?

Book building is a process of price discovery. The issuer discloses a price band or floor price before opening of the issue of the securities offered. On the basis of the demands received at various price levels within the price band specified by the issuer, Book Running Lead Manager (BRLM) in close consultation with the issuer arrives at a price at which the security offered by the issuer, can be issued.

(b) What is a price band?

The price band is a band of price within which investors can bid. The spread between the floor and the cap of the price band shall not be more than 20%. The price band can be revised. If revised, the bidding period shall be extended for a further period of three days, subject to the total bidding period not exceeding thirteen days.

(c) How does Book Building work?

Book building is a process of price discovery. A floor price or price band within which the bids can move is disclosed at least two working days before opening of the issue in case of an IPO and atleast one day before opening of the issue in case of an FPO. The applicants bid for the shares quoting the price and the quantity that they would like to bid at. After the bidding process is complete, the ‘cut‐off’ price is arrived at based on the demand of securities. The basis of Allotment is then finalized and allotment/refund is undertaken. The final prospectus with all the details including the final issue price and the issue size is filed with ROC, thus completing the issue process. Only the retail investors have the option of bidding at ‘cut‐off’.

(d) How does “cut‐off” option works for investors?

“Cut‐off” option is available for only retail individual investors i.e investors who are applying for securities worth up to Rs 1,00,000/‐ only. Such investors are required to tick the cut‐off option which indicates their willingness to subscribe to shares at any price discovered within the price band. Unlike price bids (where a specific price is indicated) which can be invalid, if price indicated by applicant is lower than the price discovered, the cut‐off bids always remain valid for the purpose of allotment

(e) Can I change/revise my bid?

Yes, you can change or revise the quantity or price in the bid using the form for changing/revising the bid that is available along with the application form. However, the entire process of changing or revising the bids shall be completed within the date of closure of the issue.

(f) Can I cancel my Bid?

Yes, you can cancel your bid anytime before the finalization of the basis of allotment by approaching/ writing/ making an application to the registrar to the issue.

(g) What proof can I request from a trading member or a syndicate member for entering bids?

The syndicate member returns the counterfoil with the signature, date and stamp of the syndicate member. You can retain this as a sufficient proof that the bids have been accepted by the trading / syndicate member for uploading on the terminal.

Tamil new year becomes public holiday because of Ambedkar birthday! Can an AGM be held on subsequently declared holiday?

Subject: Declaration of Holiday on 14th April, 2010 & Birthday of Dr. B.R. Ambedkar.
It has been decided to declare Wednesday, the 14th April 2010, as a Closed Holiday on account of the birthday of Dr. B.R. Ambedkar, for all Central Government Offices including industrial establishments throughout India.

The above holiday is also being notified in exercise of the powers conferred by Section 25 of the Negotiable Instruments Act, 1881 (26 of 1881).

Source: Notification NO. 12/3/2010-JCA-2 dated 29th March 2010

Interesting Issue: Could you find out what will happen if an Annual General Meeting (AGM) is scheduled on 14th April 2010 by sending 21 clear days advance notice?  The issue is, at the time of issue of notice (which will be definitely before 29th March), the Company is unaware that AGM date may be a Public Holiday!!! Enjoy crackin…

Tuesday, April 6, 2010

Debentures/Bonds by Indian Infrastructure companies to Non Resident Entities following ECB (structured obligations/novated loans)

External Commercial Borrowings (ECB) Policy – Structured Obligations
Borrowing and lending of Indian Rupees between two persons resident in India does not attract the provisions of the Foreign Exchange Management Act, 1999. In case where a Rupee loan is granted against the guarantee provided by a person resident outside India, there is no transaction involving foreign exchange until the guarantee is invoked and the non-resident guarantor is required to meet the liability under the guarantee. The Reserve Bank vide Notification No. FEMA 29/2000-RB dated September 26, 2000 has granted general permission to a person resident in India, being a principal debtor, to make payment to a person resident outside India, who has met the liability under a guarantee.

As per the extant policy, domestic Rupee denominated structured obligations have been permitted to be credit enhanced by non-resident entities under the approval route. In view of the growing needs of funds in the infrastructure sector, the existing norms have been reviewed and it has been decided to put in place a comprehensive policy framework on credit enhancement to domestic debt as indicated below.

It has since been decided that the facility of credit enhancement by eligible non-resident entities may be extended to domestic debt raised through issue of capital market instruments, such as debentures and bonds, by Indian companies engaged exclusively in the development of infrastructure and by the Infrastructure Finance Companies (IFCs), which have been classified as such by the Reserve Bank in terms of the guidelines contained in the circular DNBS.PD. CC No. 168 / 03.02.089 / 2009-10 dated February 12, 2010, subject to the following conditions:
i) credit enhancement will be permitted to be provided by multilateral / regional financial institutions and Government owned development financial institutions;
ii) the underlying debt instrument should have a minimum average maturity of 7 years;
iii) prepayment and call / put options would not be permissible for such capital market instruments up to an average maturity period of 7 years;
iv) guarantee fee and other costs in connection with credit enhancement will be restricted to a maximum 2% of the principal amount involved;
v) on invocation of the credit enhancement, if the guarantor meets the liability and if the same is permissible to be repaid in foreign currency to the eligible non-resident entity, the all-in-cost ceilings, as applicable to the relevant maturity period of the Trade Credit / ECBs, would apply to the novated loan. Presently, the all-in-cost ceilings, depending on the average maturity period, are applicable as follows:


vi) In case of default and if the loan is serviced in Indian Rupees, the applicable rate of interest would be the coupon of the bonds or 250 bps over the prevailing secondary market yield of 5 years Government of India security, as on the date of novation, whichever is higher;
vii) IFCs proposing to avail of the credit enhancement facility should comply with the eligibility criteria and prudential norms laid down in the circular DNBS.PD.CC No.168 / 03.02.089 / 2009-10 dated February 12, 2010 and in case the novated loan is designated in foreign currency, the IFC should hedge the entire foreign currency exposure; and
viii) The reporting arrangements as applicable to the ECBs would be applicable to the novated loans.

Source: RBI A.P. (DIR Series) Circular No. 40 dated 2nd March 2010

Download RBI Notification & Guidelines on Stripping/Reconstitution of Government Securities, a good read

RBI Guidelines on Stripping/Reconstitution of Government Securities
Please refer to paragraph No.101 of the Annual Policy Statement for the year 2009-10. As indicated therein, it has been decided to introduce Separate Trading of Registered Interest and Principal of Securities (STRIPS) in Government Securities as part of the efforts to develop the Government Securities market.
STRIPS in Government Securities will ensure availability of sovereign zero coupon bonds, which will lead to the development of a market determined zero coupon yield curve (ZCYC).

STRIPS will also provide institutional investors with an additional instrument for their assetliability management. Further, as STRIPS have zero reinvestment risk (discounted instruments with no periodic interest payment thereby obviating the need for reinvestment of intermediate cash flows arising out of the investment), they can be attractive to retail/non-institutional investors.

The terms and conditions governing the stripping/reconstitution of Government of India securities are set out in the RBI Notification IDMD.1762/2009-10 dated October 16, 2009.

Detailed guidelines outlining the process of stripping/reconstitution and other operational procedures regarding transactions in STRIPS are enclosed and shall come into effect from April 01, 2010.

Download RBI Notification & Guidelines on Stripping/Reconstitution of Government Securities

Date of deposit of cheque & opening PPF account by Minor, RBI clarification

Public Provident Fund Scheme, 1968:
1) Clarification regarding reckoning of the date of deposit
2) Reiteration of instructions on opening of an account for a minor

1. Reckoning the date of deposit in case of cheque payment:
As you are aware, Ministry of Finance letter No. F. 3(9)-PD/72 dated September 4, 1972, has issued notification for Public Provident Fund Scheme, 1968 (PPF). In order to bring uniformity in the reckoning of the date of deposit in the PPF vis-à-vis Post Office Savings Schemes (POSS) and Senior Citizens Savings Scheme, 2004 (SCSS), the Government of India (GoI), vide their letter F. No.7/7/2008/NS-II dated February 10, 2010, have decided that hereafter in modification of Ministry of Finance letter No.F.3(9)-PD/72 dated September 4, 1972 "when a deposit is made in the PPF account by means of a local cheque or demand draft by the subscriber, the date of realization of the amount will be the date of deposit."

2. Opening of an account for a minor:
In view of complaints being received about non-opening of accounts for minor by some Agency banks, it is reiterated that as per Rule 3 (1) of PPF Scheme, 1968, an individual may, on his own behalf or on behalf of a minor, of whom he is the guardian, subscribe to the Public Provident Fund. Further it is reiterated that as clarified, vide Ministry of Finance letter F.7/34/88/-NS II dated November 17, 1989, either father or mother can open a PPF account on behalf of his/her minor child but not both.

Source: DGBA.CDD. H- 7530/15.02.001/2009-10 dated 29th March 2010

Again an option to Buyback / Prepayment of FCCB under RBI Approval Route till June 2010

Buyback / Prepayment of Foreign Currency Convertible Bonds (FCCBs)
Attention of Authorised Dealer Category – I (AD Category – I) banks is invited to the A.P. (DIR Series) Circular No. 39 dated December 08, 2008 and A.P. (DIR Series) Circular No. 65 dated April 28, 2009 on the captioned subject. In terms of A.P. (DIR Series) Circular No. 58 dated March 13, 2009, Indian companies were allowed to buyback their Foreign Currency Convertible Bonds (FCCBs) both under the automatic route and approval route until December 31, 2009. The Scheme was discontinued with effect from January 1, 2010.

In view of the representations made by the issuers of FCCBs, it has been decided to consider applications, under the approval route, for buyback of FCCBs until June 30, 2010, subject to issuers complying with all the terms and conditions of buyback/prepayment of FCCBs, as mentioned in abovementioned circulars.

Accordingly, applications complying with the conditions may be submitted, together with the supporting documents, through the designated AD Category - I bank to the Chief General Manager-in-Charge, Reserve Bank of India, Foreign Exchange Department, External Commercial Borrowings Division, Central Office, 11th Floor, Central Office Building, Shahid Bhagat Singh Road, Mumbai-400 001.

Source: A.P. (DIR Series) Circular No. 44 dated 29th March 2010

Practising CS CA CWA to give COP & list of documents for KYC regarding Bank Account for Sole Proprietorship Concerns

Know your Customer (KYC) guidelines - accounts of proprietary concerns
A reference is invited to Para 2.4(a) of the Master Circular on KYC/AML/CFT/Obligation of banks under Prevention of Money laundering Act (PMLA), 2002 issued to banks vide DBOD.AML.BC. No.2/14.01.001/2009-10 dated July 1, 2009. It has been advised to banks that internal guidelines for customer identification procedure of legal entities may be framed by them based on their experience of dealing with such entities, normal bankers’ prudence and the legal requirements as per established practices. If the bank decides to accept such accounts in terms of the Customer Acceptance Policy, the bank should take reasonable measures to identify the beneficial owner(s) and verify his/her/their identity in a manner so that it is satisfied that it knows who the beneficial owner(s) is/are.

For sake of clarity, in case of accounts of proprietorship concerns, it has been decided to lay down criteria for the customer identification procedure for account opening by proprietary concerns. Accordingly, apart from following the extant guidelines on customer identification procedure as applicable to the proprietor, banks / financial institutions should call for and verify the following documents before opening of accounts in the name of a proprietary concern:

  • Proof of the name, address and activity of the concern, like registration certificate (in the case of a registered concern), certificate/licence issued by the Municipal authorities under Shop & Establishment Act, sales and income tax returns, CST/VAT certificate, certificate/registration document issued by Sales Tax/Service Tax/Professional Tax authorities, Licence issued by the Registering authority like Certificate of Practice issued by ICAI, ICWAI, ICSI, Indian Medical Council, Food and Drug Control Authorities, etc.
  • Any two of the above documents would suffice. These documents should be in the name of the proprietary concern.

These guidelines will apply to all new customers, while in case of accounts of existing customers, the above formalities should be completed in a time bound manner and should be completed before December 31, 2010.

Source: RBI DBOD.AML.BC.No.80 /14.01.001/2009-10 dated 26th March 2010

ASBA for Mutual Funds, NFO 15 days, Corporate Governance norms, No revenue sharing arangement & No dividend from Unit Premium Reserve

To All Mutual Funds (MFs)/Asset Management Companies (AMCs)

1. Brokerage and commission paid to associates
i. Regulation 25 (8) of SEBI (Mutual Funds) Regulations, 1996 mandates that the payment of brokerage or commission, if any, to the sponsor or any of its associates, employees or their relatives, has to be disclosed in the half–yearly annual accounts of the mutual fund.  Now, in the bridged scheme wise
annual report and the SAI, these disclosures shall henceforth be made in the
format as prescribed in Annexure A.
2. Additional mode of payment through Applications Supported by Blocked Amount (ASBA) in Mutual Funds and Reduction in New Fund offer (NFO) period

  1. ASBA is already available for subscription to public  issue & rights issue of equity and now it is extended to the investors subscribing to New Fund Offers (NFOs) of mutual fund schemes. It shall co-exist with the current process, wherein cheques/ demand drafts are used as a mode of payment. The banks which are in SEBI’s list shall extend the same facility in case of NFOs of mutual fund schemes to all eligible investors in Mutual Fund units. Mutual Funds shall ensure that adequate arrangements are made by Registrar and Transfer Agents (RTA) for the implementation of ASBA. Mutual Funds/AMCs shall make all relevant disclosures in this regard in the SAI. Also read [SEBI-ASBA] Lets Learn the Concept.
  2. Reduction of NFO Periods to 15 days: It has been decided that the present limit of maximum period of 30 days in case of Open ended schemes and 45 days of close ended scheme shall be reduced to 15 days (except ELSS schemes). Mutual Funds/ AMCs shall use the NFO proceeds only on or after
    the closure of the NFO period. The mutual fund should allot units/refund of money and dispatch statements of accounts within 5 business days from the closure of the NFO and all the schemes (except ELSS) shall be available for ongoing repurchase/sale/trading within five business days of allotment”.
  3. Applicability: For all NFOs launched on or after July 01, 2010.

3. Non availability of Unit Premium Reserve for dividend distribution

The IX and XI Schedule of SEBI (Mutual Funds) Regulations provide the accounting policies to be followed for determining distributable surplus and accounting the sale and repurchase of units in the books of the Mutual Fund. The Unit Premium Reserve, which is part of the sales price of units that is not attributable to realized gains, cannot be used to pay dividend.  It is therefore reiterated that:

  • When units of an open-ended scheme are sold, and sale price is higher than face value of the unit, part of sale proceeds that represents unrealised gains shall be credited to a separate account (Unit Premium Reserve) and shall be treated at par with unit capital and the same shall
    not be utilized for the determination of distributable surplus.
  • When units of an open-ended scheme are sold, and sale price is less than face value of the unit, the difference between the sale price and face value shall be debited to distributable reserves and the dividend can be declared only when distributable reserves become positive after
    adjusting the amount debited to reserves as per XI Schedule of SEBI (Mutual Funds) Regulations.

4. Role of Mutual Funds in Corporate Governance of Public Listed Companies

It has been decided that henceforth, AMCs shall disclose their general policies
and procedures for exercising the voting rights in respect of shares held by them on the website of the respective AMC as well as in the annual report distributed to the unit holders from the financial year 2010-11.

Further, the AMCs are also required to disclose on the website of the respective AMC as well as in the annual report distributed to the unit holders from the financial year 2010-11, the actual exercise of their proxy votes in the AGMs/EGMs of the investee companies in respect of the following matters

  • Corporate governance matters, including changes in the state of
    incorporation, merger and other corporate restructuring, and anti
    takeover provisions.
  • Changes to capital structure, including increases and decreases of
    capital and preferred stock issuances.
  • Stock option plans and other management compensation issues.
  • Social and corporate responsibility issues.
  • Appointment and Removal of Directors.
  • Any other issue that may affect the interest of the shareholders in
    general and interest of the unit-holders in particular.

The format for disclosure of voting by mutual funds in general meetings of listed companies is placed in Annexure B.
5. Provision of charging of additional management fees by the AMC’s in case of schemes launched on no load basis
Consequent to SEBI Circular Empowering investors through transparency in payment of commission and load structure” which stipulated that No entry load for all Mutual Fund (MF) scheme,all expenses out of 1% Exit load & disclosure of all commissions to distributors from 1st August 2009, it is clarified that AMC shall not collect any additional management fees referred to in Regulation 52(3) of SEBI Mutual Funds Regulation, 1996.  This is applicable to MF schemes which are not launched (including those for which observation letter have been issued).

6. Fund of Funds Scheme
i. It has been observed from the disclosures in the scheme information documents (SID) that Asset Management Companies (AMCs) have been entering into revenue sharing arrangements with offshore funds in respect of investments made on behalf of Fund of Fund schemes. These arrangements create conflict of interest.
ii. It has been decided that henceforth AMCs shall not enter into any revenue sharing arrangement with the underlying funds in any manner and shall not receive any revenue by whatever means/head from the underlying fund. Any commission or brokerage received from the underlying fund shall be credited into concerned scheme’s account.

Source: SEBI/IMD/CIR No 18 / 198647 /2010 dated 15th March 2010

New definition of PIO includes Mother & Grandmother for FEMA, RBI notification as per Immovable Property Second Amendment 2009

Purchase of Immovable Property in India by Persons of Indian Origin (PIOs) – Amendment of the definition

The term PIO is defined under Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India), Regulations, 2000.

The definition is partially amended by Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) (Second Amendment) Regulations, 2009 to include Mother & Grandmother.

Now, PIO means:

  • an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan),
  • (i) who at any time, held an Indian Passport or
  • (ii) who or either of whose father or mother or whose grandfather or grandmother was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955.

Source: A.P. (DIR Series) Circular No.25 dated 10th January 2o1o

FIU-IND transaction reporting under Money Laundering for Rs.10 lakh or Rs.50,000 as per Amendment Rules, 2009

Prevention of Money-laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Amendment Rules, 2009 - Obligation of banks/Financial institutions

As you are aware, Prevention of Money-laundering Act (PMLA), 2002 read with Rules is amended by Prevention of Money-laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries)  Amendment Rules, 2009 vide Records to be maintained from transaction, Non profit organisation included, Suspicious transaction defined in amendment of Money Laundering Rules 2009.

Accordingly, in view of amendments to the above Rules, banks / financial institutions are required to :
i) Maintain proper record of all transactions involving receipts by non- profit organizations of value more than Rs.10 lakh or its equivalent in foreign currency and to forward a report to FIU-IND of all such transactions in the prescribed format every month by the 15th of the succeeding month.
ii) In case of transactions carried out by a non-account based customer, that is a walk-in customer, where the amount of transaction is equal to or exceeds Rs.50,000/-, whether conducted as a single transaction or several transactions that appear to be connected, the customer's identity and address should be verified. Further, if a bank has reason to believe that a customer is intentionally structuring a transaction into a series of transactions below the threshold of Rs.50,000/- the bank should verify identity and address of the customer and also consider filing a suspicious transaction report (STR) to FIU-IND.

Source: DBOD. AML.BC. No. 68 /14.01.001/2009-10 dated 12th January 2010

Money deposit schemes are illegal, RBI cautions public about Unincorporated bodies

RBI cautions public : Not to deposit money in unincorporated bodies

It has come to the notice of the Reserve Bank of India that some individuals/firms/unincorporated association of individuals (unincorporated bodies) have been collecting deposits from the public by making tall promises of high returns. Some of them are stated to have vanished without repaying deposits. Under Section 45-S(1) of the Reserve Bank of India Act, 1934, unincorporated bodies that are carrying on the business of a financial institution or NBFC or whose principal business is that of receiving deposits are prohibited from accepting deposits from the public. Members of public are hereby cautioned not to deposit money with such unincorporated bodies. Persons depositing money with such unincorporated bodies would be doing so at their own risk.

Press Release: 2009-2010/1315

Understand listing agreement amendments with new sub-clauses in 41 & 49 (position before & after 5th April 2010)

As part of a review of the extant policies of disclosure requirements for listed entities and  also  to  bring  more  transparency  and  efficiency  in  the  governance  of  listed entities  it  has  been  decided  to  specify  certain  listing  conditions  so  to  amend  the Equity Listing Agreement.  This post has list of new clauses inserted and ends with a summary table to understand position before and after amendment along with the effective date.

Voluntary  adoption  of  International  Financial Reporting Standards  (IFRS)  by listed entities having subsidiaries - Insertion of Clause 41(I) (g)
Various  regulatory  authorities  are  working  on  arriving  at  a  roadmap  for implementation of IFRS in India and on the steps to be taken for convergence of the Indian Accounting Standards with IFRS by April 01, 2011.

Requirement of a valid peer review certificate for statutory auditors- Insertion of Clause 41(1) (h)

It  has  been  decided  that  in  respect  of  all  listed  entities,  limited review/statutory audit reports submitted to the concerned stock exchanges shall be given only by those auditors who have subjected themselves to the peer review process of ICAI and  who  hold  a  valid  certificate  issued  by  the  ‘Peer  Review  Board’  of  Institute of Chartered Accountants of India.

Interim disclosure of Balance Sheet items by listed entities- Insertion of clause 41(V) (h) and Annexure IX

With  a  view  to  have more  frequent  disclosure  of  the  asset-liability position  of entities, it has been decided that listed entities shall disclose within forty-five days from  the  end  of  the  half-year,  as  a  note  to  their  half-yearly  financial  results,  a statement of assets and liabilities in the specified format.

Approval of appointment of ‘CFO’ by the Audit Committee- Insertion of Clause 49(II)(D)(12A)



Credits to Mr. CS Sriram Sharma for the wonderful presentation in table format:





Clause 24 (i)

Company while filing for approval with the Stock Exchange any draft scheme of amalgamation / merger / reconstruction, etc under Clause 24(f) is required to file with the Stock Exchange an Auditors’ Certificate that the accounting treatment contained in the scheme of amalgamation is in compliance with the Accounting Standards specified by ICAI.

Effective Date: 5th April 2010.


Clause 41 (I)(c)

Companies have an option to submit audited or un-audited quarterly and year to date financial results within 45 days of the end of each quarter instead of 1 month of the end of each quarter. [The above clause is for results to be submitted for other than last quarter]


Clause 41 (I) (c)

For Companies which opt to submit un-audited financial results, the copy of the Limited Review report should be furnished to Stock Exchange within 45 days from the end of the quarter instead of 2 months earlier. [The above clause is for results to be submitted for other than last quarter]


Clause 41 I (d)

In respect of the last quarter, Companies have an option to submit un-audited financial results for the quarter within 45 days of the end of the Financial Year OR if the Company decides to submit audited financial results for the entire Financial Year it should do so within 60 days of the end of the Financial Year


Clause 41 I (d)

The Limited Review Report in respect of the last quarter should be furnished to the Stock Exchange within 45 days of the end of the Financial Year


Clause 41 I (e) (i)

In case of a Company having subsidiaries, it may in addition to submitting quarterly and y-t-d stand alone financial results to the Stock Exchange within 45 days from the end of the quarter, also submit quarterly and year to date consolidated financial results within 45 days from the end of the quarter


Clause 41 I (e) (ii)

For a Company having subsidiaries, it should submit the annual audited consolidated financial results along with the annual audited stand alone financial results within 60 days from the end of the Financial Year to the Stock Exchange


Clause 41 I (ea) & (eaa)

A Statement of Assets & Liabilities as at the end of the half-year should be disclosed within 45 days from the end of the half-year to the Stock Exchange. The said information should be disclosed as a part of the audited or un-audited financial results for the half-year to the Stock Exchange so as to keep the shareholders informed about the solvency position of the Company


Clause 41 I (g)

If the Company has subsidiaries, it may opt to submit consolidated financial results as per IFRS


Clause 41 I (h)

Company to ensure that the Limited Review / Audit Reports is given by an Auditor who has subjected himself to the peer review process of the ICAI and holds a valid certificate issued by the Peer Review Board of the ICAI.

Effective Date: For appointment of Auditors after 1st April 2010.


Clause 41 V (g)

Disclosure of Balance Sheet items as per Cl 41 I (eaa) to be in the format specified in Annexure IX drawn from the Schedule VI of the Companies Act, 1956


Clause 41 VI (b)

Disclosure of Consolidated financial results along with the following items on a stand alone basis as a foot note (a) Turnover (b) Profit before Tax (c) Profit after tax instead of only consolidated financial results


Clause 41 VI (b) (iv)

Companies that are required to prepare consolidated financial results for the first time at the end of the Financial Year should exercise the option mentioned in Cl. 41 VI (b) in respect of the quarter during the Financial Year in which they first acquire the subsidiary


Annexure V to Clause 41 – Limited Review Report for Companies other than Banks

Disclosures regarding “Public Shareholding” and “Promoter & Promoter Group Shareholding” which have been traced from the disclosures made by the management and have not been audited by us inserted


Annexure VI to Clause 41 – Limited Review Report for Banks

Same as point 14 above.


Annexure VII & VIII  (both parts)

Except for the disclosures regarding ‘Public Shareholding’ and ‘Promoter & Promoter Group Shareholding’ which have been traced from the disclosures made by the management and have not been audited by us inserted after the words pursuant to the requirement of Clause 41 of the Listing Agreement


Annexure IX

Statement of Assets & Liabilities introduced


Clause 49 II D (12A)

Audit Committee to approve the appointment of CFO - Approval of the appointment of CFO after assessing the qualifications, experience and background of the candidate.


Unless effective date is mentioned above, all other provisions shall be effective from the date of circular as mentioned below..

Source: SEBI CIR/CFD/DIL/1/2010 dated 5th April 2010

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