Change of status or constitution or control of Credit Rating Agency requires prior approval of SEBI - CRA amendment 2010

CIR/MIRSD/CRA/7/2010 dated 13th May 2010 read with Gazette Notification No. LAD-NRO/GN/2009-2010/30/199044 dated 19th March 2010 and issue of SEBI (CREDIT RATING AGENCIES) (AMENDMENT) REGULATIONS, 2010

In the Securities and Exchange Board of India (Credit Rating Agencies) Regulation, 1999: -
(i) in regulation 2, in sub-regulation (1), after clause (e), the following clauses shall be inserted, namely:-
‘(ei) “change of status or constitution” in relation to a credit rating agency -
(i) means any change in its status or constitution of whatsoever nature; and
(ii) without prejudice to generality of sub-clause (i), includes—
(A) amalgamation, demerger, consolidation or any other kind of corporate
restructuring falling within the scope of section 391 of the Companies Act,
1956 (1 of 1956) or the corresponding provision of any other law for the
time being in force;
(B) change in its managing director or whole-time director; and
(C) any change in control over the body corporate;
(eii)“change in control”, in relation to a credit rating agency being a body
corporate, means:—
(i) if its shares are listed on any recognised stock exchange, change in control
as defined under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997;
(ii) in any other case, change in the controlling interest in the body corporate.
Explanation: For the purpose of sub-clause (ii), the expression “controlling interest” means an interest, whether direct or indirect, to the extent of at least 51% of voting rights in the body corporate;’

In regulation 9, in sub-regulation (1), after clause (b), the following clause shall be inserted, namely:-
“(c) where the credit rating agency proposes to change its status or constitution, it shall obtain prior approval of SEBI for continuing to act as such after the change.”

Declaration & Undertakings regarding PCC, MCV or equivalent structure by FIIs to be submitted within 30th September 2010

Sub: Additional information regarding PCC, MCV or equivalent structure by FIIs.
In order to ascertain the constitution of Foreign Institutional Investors (FII)
and Sub Accounts (SA), it has been decided to gather additional information pertaining to their structure.

In view of the above, all applications submitted for registration w.e.f April
07, 2010 shall be accompanied by the following declarations and undertakings on the letter head of respective FII, duly signed by its authorised signatory on behalf of itself and all its Sub Accounts.
Declarations
The applicants are required to provide the following declarations on its letter
head (Please tick whichever applicable).
(a) The applicant declares that it is not a Protected Cell Company (PCC) or
Segregated Portfolio Company (SPC) and does not have an equivalent
structure by whatever nomenclature.
(b) The applicant declares that it is not a Multi Class Share Vehicle (MCV) by
constitution and does not have an equivalent structure by whatever
nomenclature. It contains only single class of share.
(c) The applicant declares that it is a MCV by constitution and has more than
one class of shares or has an equivalent structure and that a common
portfolio is maintained for all classes of shares and satisfies broad based
criteria.
OR
(c) A segregated portfolio is maintained for separate classes of shares
wherein each such class of shares are in turn broad based.
Undertakings
In case the applicant is/ proposed to be a MCV or an equivalent structure and have more than one class of shares, it shall undertake the following on its letter head:
(a) Common portfolios shall be allocated across various share classes and it
shall be broad based;
OR
(a) If portfolios are segregated for each distinct share class, then each such
share class shall satisfy the broad based criteria;
(b) In case of change in structure/ constitution/ addition of classes of shares,
prior approval of SEBI shall be taken;
(c) In case of any addition of share classes, it shall follow the criteria at (a)
above.

All the existing Foreign Institutional Investors and Sub Accounts who are already registered as on April 07, 2010, shall provide the abovementioned declarations and undertakings on or before September 30, 2010.

The custodians are requested to bring the contents of this circular to the notice of their respective FII clients for compliance with the timelines indicated herein.

Source: CIR/IMD/FIIC/1/ 2010 dated 15th April 2010

Three principles for identification of deprived persons, amount and the method of reallocation in SEBI's disgorgement process - Justice Wadhwa Committee

SEBI’s Disbursement Process of Disgorged Amount in IPO

It is with regard to the disbursement of reallocation amount to investors from the amount disgorged in the matter of IPO irregularities. 

Justice Wadhwa committee submitted its report to SEBI while concluding that reallocation in terms of shares will not be practical it enunciated three principles for identification of deprived persons, amount and the method of reallocation, as under: (Source: PR No.93/2010)

I. Quantification of the amount of unjust enrichment: The gains associated with the number of shares allotted to applicants who had illegally cornered shares in the IPOs shall be treated as unjust allotments / enrichment.

II. Identification of “deprived” applicants: The totally unsuccessful applicants shall have a call on the reallocation. These applicants will be considered for the amount which is the difference of closing price of shares on the first day of listing / trading at NSE and the IPO issue price.

III. Basis for re-allocation amongst deprived applicants: The totally unsuccessful applicants shall be reallocated money value as computed above from recovered unjust gains, till they each receive the gains associated with minimum shares allotted to the lowest category in the IPO.

 

Disgorgement

It is well established worldwide that the power to disgorge is an equitable remedy and is not a penal or even a quasi-penal action. Thus it differs from actions like forfeiture and impounding of assets or money. Unlike damages, it is a method of forcing a defendant to give up the amount by which he or she was unjustly enriched. Disgorgement is intended not to impose on defendants any demand not already imposed by law, but only to deprive them of the fruit of their illegal behavior. It is designed to undo what could have been prevented had the defendants not outdistanced the investors in their unlawful project. In short, disgorgement merely discontinues an illegal arrangement and restores the status quo ante (See 1986 (160) ITR 969). Disgorgement is a useful equitable remedy because it strips the perpetrator of the fruits of his unlawful activity and returns him to the position he was in before he broke the law. The order of disgorgement would not prejudice the right of the regulator to take such further administrative, civil and criminal action as the facts of the case may warrant.

Disgorgement amount = No. of shares allotted to specified persons X (closing price on the date of listing – allotment price in IPO)

SEBI’s Power to Issue directions for disgorgement of ill-gotten gains

In the matter of construction of enabling statutes, the principle applicable is that if the Legislature enables something to be done, it gives power at the same time, by necessary implication, to do everything which is indispensable for the purpose of carrying out the purpose in view (see Craies on Statutes, 7th edn., p. 258). It has been held that the power to make a law with respect to any subject carries with it all the ancillary and incidental powers to make the law effective and workable and to prevent evasion (see Sodhi Transport Co. v. State of UP 1986 (1) SCR 939 at pp. 947-48 : AIR 1986 SC 1099)

In the case of ITO v. Mohammed Kunhi AIR 1969 SC 430, it has been observed as under:

".... It is a firmly established rule that an express grant of statutory power carried with it by necessary implication the authority to use all reasonable means to make such grant effective.

***

Therefore, in our view, the express grant of statutory power conferred by section 11B carries the authority to use of reasonable means to make such power effective."

Closing/shifting your Demat account, get refund of AMC collected upfront on annual/half yearly basis by Depository Partcipant (DP) now

Account Maintenance Charges collected upfront on annual/ half
yearly basis on demat accounts
The Depository Participants (DPs) have a system of collecting account maintenance charge (AMC) from beneficial owners (BOs) towards maintenance of demat accounts for varied periodicity of collection (viz. monthly, quarterly, half yearly and annually). It has been noticed that in cases where AMC is collected on an annual upfront basis, on closure/shifting of demat account, the AMC for the balance period for which no service has been provided by the DP, is not refunded to the BO.

In view of the above, it has been decided that in the event of closing of the demat account or shifting of the demat account from one DP to another, the AMC collected upfront on annual/half yearly basis by the DP, shall be refunded by the DP to the BO for the balance of the quarter/s. For instance, in case annual AMC has been paid by the BO and if the BO closes/shifts his account in the first quarter, he shall be refunded the amount of the balance 3 quarters i.e. 3/4th of the AMC. Likewise, if a BO closes/shifts his account in the third quarter, he shall be refunded the amount for the balance one quarter i.e. 1/4th of the AMC.

For the purpose of the above requirement the year shall begin from the date
of opening of the account in quarterly rests.

The above requirements shall be applicable to all existing and new accounts held with DPs which collect annual/half yearly upfront AMC. It is hereby clarified that the above requirements shall not be applicable to those DPs who collect quarterly/ monthly AMC.

Source: CIR/MRD/DP/ 20 /2010 dated 1st July 2010

Weekly reporting by FII (lending) on every friday, to be made available to public every tuesday - Website link & email id

Reporting of Lending of securities bought in the Indian Market
1. Please refer to Circular No. IMD/FII&C/32/2008 dated October 16, 2008 read with Circular No. IMD/FII&C/34/2008 dated October 20, 2008 related to reporting of information pertaining to securities lent by the FIIs to entities abroad.

Based on these reports, FIIs have been submitting daily reports based on which disclosures have been made available for public dissemination at http://203.199.12.51/SecuritiesLentMain.html twice in a week, one on Tuesday and another on Friday.

On a review it has been decided to modify the periodicity of these reports from daily submissions to weekly submissions. In accordance with this change in periodicity of reports, the FIIs shall now be required to submit the reports every Friday.

The public dissemination has also accordingly been changed to once a week – i.e. every Tuesday.

In view of the change in the periodicity of the reporting, PN issuing FIIs would be required to submit the following undertaking along with the weekly report: “Any fresh short position shall be immediately reported to SEBI”.

This information is required to be submitted by the FIIs to SEBI only to the dedicated e-mail idodireporting@sebi.gov.in.

Source: Cir No.IMD/FII&C/ 4 /2010 dated 29th June 2010

What exam for approved users & sales personnel of trading members in currency derivatives segment and trading in interest rate derivatives, register for NISM now

Notification No. LAD-NRO/GN/2010-11/12/10230 dated 29th June 2010 under regulation 3 of the Securities and Exchange Board of India (Certification of Associated Persons in the Securities Markets) Regulations, 2007
WHEREAS the National Institute of Securities Markets (hereinafter referred to as NISM) has issued a communiqué no. NISM/Certification/Series-IV:IRD/2010/1 dated May 18, 2010, on “NISM-Series-IV: Interest Rate Derivatives Certification Examination” (hereinafter referred to as ‘the Series-IV: IRD’) for approved users and sales personnel of the trading members who are registered as such in the currency derivatives segment of a recognized stock exchange and trading in interest rate derivatives.

NOW THEREFORE the Securities and Exchange Board of India approves the Series-IV: IRD, as issued by NISM vide aforesaid communiqué, as the required certification for approved users and sales personnel of the abovementioned trading member for the purpose of sub-regulation (2) of regulation 16L of the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992 read with Circular No. SEBI/DNPD/Cir-46/2009 dated August 28, 2009.

NOW THEREFORE such trading member shall ensure that all its existing approved users and sales personnel obtain Series-IV: IRD certification within 2 years from the date of this notification.

FURTHER such trading member shall ensure that every approved user and sales personnel employed by it after the date of this notification, obtains Series-IV: IRD certification within 1 year from the date of employment.

Registration:

• Register through NSE
• Register through BSE
• Register through MCX-SX

NSE website link of QIP offer documents with shareholding pattern as filed under Clause 35 format

Sub: Disclosure of details of the allottees in the Qualified Institutional Placements (QIP) made by issuer company

SEBI has decided that the details of allottees and the corresponding pre and post QIP issue shareholding in the issuer company may be disclosed on the website of the stock exchanges. Accordingly, this circular is issued in exercise of powers conferred by sub-section (1) of Section 11 of the Securities and Exchange Board of India Act, 1992, to protect the interest of investors in securities and to promote the development of, and to regulate the securities market.   Ensure that the details of those allottes in QIP who have been allotted more than 5% of the securities offered in the QIP, viz names of the allottees and number of securities allotted to each of them, pre and post issue shareholding pattern of the issuer in the format specified in clause 35 of the Equity Listing Agreement shall be made available on the website of stock exchanges along with the final placement document.

Source: SEBI/CFD/DIL/LA/1/2010/05/03 dated 5th March 2010

Hence, the new disclosures can be found at

http://www.nseindia.com/content/equities/jp_qipfinal_new.htm

Demat Account Suspension for Debit & Credit without PAN - SEBI mandates & enforces strictly now for all electronic shareholdings

Sub: Mandatory requirement of Permanent Account Number (PAN)

1. Please refer to SEBI circular No.MRD/DoP/Cir-05/2007 dated April 27, 2007 making PAN mandatory for all transactions in the securities market.

2. As you are aware, the demat accounts for which PAN details have not been verified are “suspended for debit” until the same is verified with the Depository Participant (DP). However, it has come to our notice that despite follow up, investors are not furnishing the PAN details.

3. In order to ensure better compliance with the Know Your Client (KYC) norms it has been decided that with effect from August 16, 2010 such PAN non-compliant demat accounts shall also be "suspended for credit" other than the credits arising out of automatic corporate actions. It is clarified that other credits including credits from IPO/FPO/Rights issue, off-market transactions or any secondary market transactions shall not be allowed into such accounts.

Source: CIR/MRD/DP/ 22 /2010 dated 29th July 2010

Mutual Fund (MF) ASBA mandatory from 1st October 2010 and not from 1st July

Sub: Additional mode of payment through Applications Supported by Blocked Amount (hereinafter referred to as “ASBA”) in Mutual Funds

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.

Please refer to circular SEBI / IMD / Cir / No 18 / 198647 / 2010 dated March 15, 2010 regarding additional mode of payments through ASBA in Mutual Funds. The circular indicated that the Mutual Funds/AMCs have to compulsorily provide ASBA facility to the investors for all NFOs launched on or after July 01, 2010.

In partial modification of the above circular, it has been decided that Mutual Funds / AMCs shall provide ASBA facility to investors for all NFOs launched on or after October 1, 2010.

 

Source: Cir / IMD / DF / 6 / 2010 dated 28th July 2010

Website link thru BSE/NSE to download ASBA forms online with UIN for making public issue applications - SEBI

SEBI is taking steps forward to make a public issue process completely online.

1. It has been decided to make ASBA bid-cum application forms available for download and printing, from websites of the Stock Exchanges which provide electronic interface for ASBA facility i.e. Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). The ASBA forms so downloaded shall have a unique application number and can be used for making ASBA applications in public issues. A sample of the form is enclosed at Annexure A. 

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

2. In order that the Stock Exchanges fill up essential details of an issue, the Merchant Banker to the issue shall ensure that the following details are provided to the Stock Exchanges at least 2 days before opening of the public issue:
a. Company Name
b. Type of issue
c. Issue opening date
d. Issue closing date
e. Price/ price band
f. Bid lot
g. Other relevant details
h. Soft copy of prospectus/abridged prospectus
3. The Stock Exchanges shall ensure the following :
a. The details furnished by the Merchant Banker to the issue are duly filled in the ASBA form for a specific public issue, before making the same available on websites.
b. The ASBA form for a specific public issue is made available on the websites of the Stock Exchanges at least one day before opening of the public issue.
c. A unique application number for an issue is generated for every ASBA form downloaded and printed from the websites.  Therefore application made using photocopy of the downloaded form shall not be accepted.
d. Investors have online access to soft copy of the abridged prospectus/prospectus of the public issue.
e. For revisions of bids, investors can take print of a bid revision form.
4. Merchant Bankers and SCSBs are directed to provide a hyperlink to BSE or NSE websites for this facility on their websites.  Links are expected in http://www.nseindia.com/content/ipo/ipo_asba_procedures.htm & http://www.bseindia.com/bookbuilding/asba.asp
5. All intermediaries are directed to comply with the instructions contained in this circular.
6. This circular shall be applicable to all public issues opening on or after July 19, 2010.

New Rule 19(2)(b) & 19A for initial & continuous listing requirement of 25% of capital with public as per SCRR amendment 2010 [for all companies]: 10% for 4000 crores to be increased@5% every year

The Securities Contracts (Regulation) Rules 1957 provide for the requirements which have to be satisfied by companies for the purpose of getting their securities listed on any stock exchange in India. A dispersed shareholding structure is essential for the sustenance of a continuous market for listed securities to provide liquidity to the investors and to discover fair prices. Further, the larger the number of shareholders, the less is the scope for price manipulation. Accordingly, the Finance Minister in his Budget speech for 2009-10, inter- alia, proposed to raise the threshold for non- promoter, public shareholding for all listed companies. To implement the Budget announcement the Securities Contracts(Regulation) (Amendment) Rules, 2010 has been notified vide Press Release F.No.5/35/2006-CM dated 4th June 2010 through

this Notification. [download now]

a) The minimum threshold level of public holding will be 25% for all listed companies.

b) Existing listed companies having less than 25% public holding have to reach the minimum 25% level by an annual addition of not less than 5% to public holding.

c) For new listing, if the post issue capital of the company calculated at offer price is more than Rs. 4000 crore, the company may be allowed to go public with 10% public shareholding and comply with the 25% public shareholding requirement by increasing its public shareholding by at least 5% per annum.

d) For companies whose draft offer document is pending with Securities and Exchange Board of India on or before these amendments are required to comply with 25% public shareholding requirement by increasing its public shareholding by at least 5% per annum, irrespective of the amount of post issue capital of the company calculated at offer price.

e) A company may increase its public shareholding by less than 5% in a year if such increase brings its public shareholding to the level of 25% in that year.

f) The requirement for continuous listing will be the same as the conditions for initial listing.

g) Every listed company shall maintain public shareholding of at least 25%. If the public shareholding in a listed company falls below 25% at any time, such company shall bring the public shareholding to 25% within a maximum period of 12 months from the date of such fall.

New definitions in Rule 2 of SCRR:

(d) “public” means persons other than – (i) the promoter and promoter group; (ii) subsidiaries and associates of the company. Explanation: For the purpose of this clause the words “promoter‟ and “promoter group‟ shall have the same meaning as assigned to them under the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements-ICDR) Regulations, 2009.

(e) “public shareholding” means equity shares of the company held by public and shall exclude shares which are held by custodian against depository receipts issued overseas”.

New Rule 19(2)(b) of SCRR:

(i) At least 25% of each class or kind of equity shares or debentures convertible into equity shares issued by the company was offered and allotted to public in terms of an offer document; or
(ii) At least 10% of each class or kind of equity shares or debentures convertible into equity shares issued by the company was offered and allotted to public in terms of an offer document if the post issue capital of the company calculated at offer price is more than Rs. 4000 crores;

Provided that the requirement of post issue capital being more than Rs. 4000 crores shall not apply to a company whose draft offer document is pending with SEBI on or before the commencement of the Securities Contracts (Regulation) (Amendment) Rules, 2010, if it satisfies the conditions prescribed in clause (b) of sub-rule 2 of rule 19 of the Securities Contracts (Regulation) Rules, 1956 as existed prior to the date of such commencement (which is: offering atleast 10% if there are 20 lakh in number of securities, Rs.100 crores of offer size is given to public and follows bookbuilding by offering 60% to QIB)
Provided further that the company, referred in sub-clause (ii), shall bring the public shareholding to the level of at least 25% by increasing its public shareholding to the extent of at least 5% per annum beginning from the date of listing of the securities, in the manner specified by the Securities and Exchange Board of India .
Provided further that the company may increase its public shareholding by less than 5% in a year if such increase brings its public shareholding to the level of 25% in that year.

 

New Rule 19(4) of SCRR – fresh application in all cases now!!!

An application for listing shall be necessary in respect of the following: (a) all new issues of any class or kind of securities of a company to be offered to the public; (b) all further issues of any class or kind of securities of a company if such class or kind of securities of the company are already listed on a recognised stock exchange.

 

New Rule 19(6A) – taking away the power from Clause 40A of Listing Agreement of stock exchanges as there is no more Provisio!!!

All the requirements with respect to listing or continuous listing requirement prescribed by these rules, shall, so far as they may be, also apply to a body corporate constituted by an Act of Parliament or any State Legislature. [Old Provisio deleted]

Note: SEBI’s power to relax listing requirements under SCRR is withdrawn.  Also note, there is no more Clause 40A continuous listing requirement of 10% if the company has 2 crores of listed shares with a market capitalisation of Rs.1000 crore or more.

Clause 40A is now Rule 19A mandating 25% as CONTINUOUS LISTING REQUIREMENT for all Companies:

Every listed company shall maintain public shareholding of at least 25%

Provided that any listed company which has public shareholding below 25% on the commencement of the Securities Contracts (Regulation) (Amendment) Rules, 2010, shall bring the public shareholding to the level of at least 25% by increasing its public shareholding to the extent of at least 5% per annum beginning from the date of such commencement, in the manner specified by SEBI.

Provided further that the company may increase its public sharholding by less than 5% in a year if such increase brings its public shareholding to the level of 25% in that year.

(2) Where the public shareholding in a listed company falls below 25% at any time, such company shall bring the public shareholding to 25%within a maximum period of 12 months from the date of such fall in the manner specified by the Securities and Exchange Board of India.”

Old SEBI circular on revised Trading hours in Stock Exchanges

Sub: Trading Hours on Stock Exchanges
In consultation with the Stock Exchanges and other market participants, it has been decided to permit the Stock Exchanges to set their trading hours (in the cash and derivatives segments) subject to the condition that

a. The trading hours are between 9 AM and 5 PM, and
b. The Exchange has in place risk management system and infrastructure
commensurate to the trading hours.

Source: SEBI/DNPD/Cir-47/2009 dated 23rd October 2009

SEBI master ciruclar on Stock Exchange, Depository, etc...updated as on 31st March 2010

SEBI Master Circulars on Stock Exchange/Depositories

Annexure 1 – Master Circular for Stock Exchange/ Cash Market – Trading Part- I. It contains the following,

SECTION – 1: BULK DEALS AND BLOCK DEALS ............................................... 5
1.1 Bulk Deal ............................................................................................................. 5
1.2 Block Deal ........................................................................................................... 5
SECTION – 2: CIRCUIT FILTER / PRICE BANDS ................................................. 7
2.1 Index based Market wide circuit filter ................................................................. 7
2.2 Scrip wise price bands ......................................................................................... 7
SECTION – 3 : IMPLEMENTATION OF UNIFORM SECURITY SPECIFIC
ACTION IN STOCK EXCHANGES........................................................................... 8
3.1 Uniform security specific measure ...................................................................... 8
SECTION – 4 : MARGIN TRADING.......................................................................... 9
4.1 Margin trading ..................................................................................................... 9
4.2 Securities eligible for margin trading .................................................................. 9
4.3 Eligibility requirements for brokers to provide margin trading facility to clients9
4.4 No-objection certificate .................................................................................. 10
4.5 Agreement.......................................................................................................... 10
4.6 Source of Funds for the broker for providing margin trading facility to his
clients and maximum permissible borrowing by any broker............................. 10
4.7 Margin requirements.......................................................................................... 11
4.8 Liquidation of securities by the broker in case of default by the client............. 11
4.9 Maintenance of Records .................................................................................... 12
4.10 Disclosure of exposure to the Margin Trading Facility ..................................... 12
4.11 Arbitration.......................................................................................................... 13
4.12 Usage of Investor Protection Fund and Trade/Settlement Guarantee Fund ...... 13
4.13 General provisions ............................................................................................. 13
SECTION – 5 : MARKET MAKER............................................................................ 15
5.1 Guidelines for Market Maker............................................................................. 15
5.1.1 Criterion for selection of scrips for Market Making.......................................... 16
5.1.2 Exclusivity of Market Makers ........................................................................... 16
5.1.3 Number of Market Makers for each share ......................................................... 17
5.1.4 Qualifications for a registered Market Maker.................................................... 17
5.1.5 The obligations and responsibilities of Market Makers..................................... 17
5.1.6 Rights of the Market Maker............................................................................... 18
5.1.7 Voluntary De-registration .................................................................................. 18
5.1.8 Compulsory De-registration............................................................................... 18
5.1.9 Dissemination of Information ............................................................................ 18
5.1.10 Number of Shares per Market Maker ................................................................ 18
5.1.11 Risk Containment Measures and monitoring for Market Makers ..................... 18
SECTION – 6: NEGOTIATED DEALS..................................................................... 20
6.1 Negotiated Deals................................................................................................ 20
SECTION – 7 : ODD LOT .......................................................................................... 21
7.1 Trading and Settlement of trades in dematerialised securities ................ 21
SECTION – 8: PERMANENT ACCOUNT NUMBER ........................................... 22
8.1 Mandatory PAN requirement for transaction in Cash Market........................... 22
8.2 PAN as a sole identification number for all transactions in the securities market
………………………………………………………………………………….22
8.3 Incase of Central and State Govt., and officials appointed by courts ................ 22
8.4. Exemptions for Investors in Sikkim .................................................................. 23
8.5 Incase of FIIs/Institutional Clients..................................................................... 23
8.6 Incase of UN entities and multilateral agencies which are exempted from paying
taxes/ filling tax returns in India ........................................................................ 23
8.7 Incase of HUF, Association of Persons (AoP), Partnership Firm, unregistered
Trust, Registered Trust, Corporate Bodies, minors, etc..................................... 24
8.8 Incase of Slight mismatch in PAN card details as well as difference in maiden
name and current name (predominantly in the case of married women) of the
investors.............................................................................................................24
8.9 Incase of NRI/PIOs ............................................................................................ 24
8.10 PAN requirement for transfer of shares in physical form.................................. 24
SECTION – 9: PROPRIETARY TRADING.............................................................. 26
9.1 Disclosure of Proprietary Trading by Broker to Client ..................................... 26

9.2 Pro-account Trading Terminal........................................................................... 26
SECTION – 10 : SHORT SELLING AND SECURITIES LENDING AND
BORROWING SCHEME............................................................................................ 28
10.1 Broad Framework for Short Selling and Securities Lending and Borrowing.... 28
10.2 Annexure 1 – Broad framework for short selling .............................................. 28
10.3 Annexure 2 - Broad framework for securities lending and borrowing .. 29
SECTION – 11: SPOT AND OFF-THE-FLOOR TRANSACTIONS..................... 34
SECTION – 12: SECURITIES TRANSACTION TAX............................................. 35
12.1 Implementation of Securities Transaction Tax .................................................. 35
SECTION – 13 : TIME STAMPING OF ORDERS................................................... 35
13.1 Time Stamping of Orders................................................................................... 35
SECTION – 14 : TRADING IN GOVERNMENT SECURITIES............................ 36
14.1 Government Securities....................................................................................... 36
SECTION – 15: UNIQUE CLIENT CODE............................................................... 37
SECTION - 16: TRANSACTION CHARGES BY THE STOCK EXCHANGES.. 38
SECTION 17 - PRESERVATION OF RECORDS .................................................... 39
SECTION 18 - DISCLOSURE OF INVESTOR COMPLAINTS AND
ARBITRATION DETAILS ON STOCK EXCHANGE WEBSITE......................... 40

Annexure 2 – Master Circular for Stock Exchange/ Cash Market – Trading Part- II

Annexure 3 – Master Circular for Stock Exchange/ Cash Market – Settlement

Annexure 4 – Master Circular for Stock Exchange/ Cash Market – Comprehensive Risk Management

Annexure 5 – Master Circular for Stock Exchange - Companies shifted from Trade for trade to Rolling Settlement

Annexure 6 – Master Circular on allotment of codes to Stock Exchanges, Subsidiary management by Stock Exchanges, Governance of recognised Stock Exchanges and Arbitration in recognised Stock Exchanges.

Annexure 7 - Master Circular for Depositories:

It contains the following,

Section-1 - Beneficial Owner (BO) Accounts
1.1 Opening of BO Account by non-body corporates
1.1.1 Proof of Identity (PoI)
1.1.2 Proof of Address (PoA)
1.2 Exemptions from and clarifications relating to mandatory requirement
of PAN
1.3 Fees/Charges to be paid by BO
1.4 Transfer of funds and securities from Clearing Member pool account to
BO Account
1.5 Printing of Grievances Redressal Mechanism on Delivery Instruction
Form Book
1.6 Exemption to Depository Participants (DPs) from providing hard
copies of transaction statements to BOs
1.7 Safeguards on transfer of securities in dematerialized mode
Section-2 - Issuer related
2.1 Charges to be paid by Issuers
2.2 Activation of International Securities Identification Number (ISIN) in
case of IPO
2.3 Registrar and Transfer Agents
2.4 Mandatory admission of debt instruments on both the Depositories
2.5 American Depository Receipts (ADRs)/Global Depository Receipts
(GDRs)
2.6 Electronic Clearing System (ECS) facility
2.6.1 Dividend Distribution
2.6.2 Refund in public/rights issues
Section-3 – Depositories/ Depository Participant (DP) Related
3.1 Designated e-mail ID for redressal of investor complaints
3.2 Approval of amendments to Bye Laws / Rules of Stock Exchanges and
Depositories
3.3 Preservation of Records
3.4 Foreign investments in infrastructure companies in securities markets
3.5 Activity schedule for depositories for T+2 rolling Settlement
3.6 Settlement of transactions in case of holidays
3.7 Supervision of branches of depository participants
3.8 Designated e-mail ID for regulatory communication with SEBI
3.9 Disclosure of investor complaints and arbitration details on Depository
website

SEBI Credit Rating Guidelines/Regulations with provisions for unsolicited credit ratings & structured finance products provisions

SEBI Credit Rating Guidelines

Effective use of credit ratings by the users is crucially dependent upon quality and quantity of disclosures made by the Credit Rating Agencies (CRAs).

CRA should publish information about the historical default rates of CRA rating categories and whether the default rates of these categories have changed over time, so that the public can understand the historical performance of each category and if and how rating categories have changed, and be able to draw quality comparisons among ratings given by different CRAs.

The default rates shall be calculated in the following manner:

• One Year Default Rate is the weighted average of default rates of all possible 1 year static pools in the 5-year period.
• Cumulative Default Rate: The cumulative default rate (CDR) represents the likelihood of an entity that was rated at the beginning of any multi-year period defaulting at any time during the multi-year period.
• 3 year cumulative default rate shall be computed as:
  3 year CDR for rating category X = No. of issuers which defaulted over the 3 year period / No. of issuers outstanding at the beginning of the 3 year period.

In case of unsolicited credit ratings, i.e. the credit ratings not arising out of the agreement between a CRA and the issuer, credit rating symbol shall be accompanied by the word “UNSOLICITED” in the same font size.

Obligations in respect of Rating of Structured Finance Products
A CRA may undertake rating of structured finance products, namely, instruments / pay-outs resulting from securitization transactions (under SARFAESI Act, 2002 read with SEBI (POLSDI) Regulations, 2008). In such cases, apart from following all the applicable requirements in case of non-structured ratings, few other additional requirements shall also be complied with.  The rating symbols shall clearly indicate that the ratings are for structured finance products.  A CRA shall also disclose at least once in every six months, the performance of the rated pool, i.e., collection efficiency, delinquencies of the Structured Finance Products.

Source: SEBI CIR/MIRSD/CRA/6/2010 dated 3rd May 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 www.corpfiling.co.in.  No 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
maker.
(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.
Monitoring
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 http://www.sebi.gov.in/boardmeetings/129/corpgovern.html) 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:
1. bhartendrakg@sebi.gov.in
2. divyav@sebi.gov.in
3. vishakham@sebi.gov.in

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
following:
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