In the Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995 through SEBI (FII) (Amendment) Regulations, 2010 vide Notification No. LAD-NRO/GN/2010-11/02/1107 dated 13th April 2010, the following updates were included:
(i) in regulation 15, in sub-regulation (3),-
(a) in clause (a), after second proviso, the following proviso shall be inserted, namely:-
“Provided further that nothing contained in this clause shall apply to any transaction in securities by the Foreign Institutional Investor pursuant to an agreement entered into with the merchant banker in the process of market making or subscribing to unsubscribed portion of the issue in accordance with Chapter XA of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.”
(b) in clause (c), after sixth proviso, the following proviso shall be inserted, namely:-
“Provided further that nothing contained in this clause shall apply to any transaction in securities by the Foreign Institutional Investor pursuant to an
agreement entered into with merchant banker in the process of market making or subscribing to unsubscribed portion of the issue in accordance with Chapter XA of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.”
Friday, August 6, 2010
FII Amendment 2010: exemption extended to market making through SME platform under Chapter XA ICDR
Merchant Bankers Regulation Amendment 2010 for SME segment & obligation extended thereof for Chapter XA of ICDR
In the Securities and Exchange Board of India (Merchant Bankers ) Regulations, 1992, through SEBI (Merchant Bankers) (Amendment) Regulations, 2010 vide Notification No. LAD-NRO/GN/2010-11/04/1109 dated 13th April 2010, the following updates were inserted:
(i) in regulation 13A, after the proviso and before the Explanation, the following proviso shall be inserted, namely:-,
“Provided further that a merchant banker, who has been granted certificate of registration under these regulations, may ensure market making in accordance with Chapter XA of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.”
(ii) in regulation 22, after the proviso, the following proviso shall be inserted, namely:-
“Provided further that in any issue made in accordance with Chapter XA of
the Securities and Exchange Board of India (Issue of Capital and Disclosure
Requirements) Regulations, 2009 the merchant banker shall, itself or jointly
with other merchant bankers associated with the issue, underwrite at least
fifteen per cent of the issue size.”
(iii) in regulation 27, the following proviso shall be inserted, namely:-
“Provided that complete particulars of any transaction for acquisition of securities made in pursuance of underwriting or market making obligations in accordance with Chapter XA of the Securities and Exchange Board of India
(Issue of Capital and Disclosure Requirements) Regulations, 2009 shall be
submitted to SEBI on quarterly basis.”
No separate certificate of registration for stock & sub brokers to trade in SME platform under Chapter XA of ICDR: Amendment 2010
In the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992, through SEBI (Stock Brokers and Sub- Brokers) (Amendment) Regulations, 2010 vide notification No. LAD-NRO/GN/2010-11/06/1097 dated 13th April 2010, the following updates were inserted:
(i) in regulation 6, the following proviso and Explanation shall be inserted, namely:-
“Provided that, subject to the conditions of regulation 6A, a stock broker holding a certificate of registration with respect to membership of a recognised stock exchange having nationwide trading terminals shall be eligible for trading on SME platform established by such stock exchange without obtaining a separate certificate of registration for trading on the SME platform.
Explanation: For the purpose of this regulation, SME platform means a trading platform of a recognised stock exchange having nationwide trading terminals and permitted by SEBI to list the securities issued in accordance with Chapter XA of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.”
(ii) in regulation 11, the following sub-regulation and Explanation shall be inserted, namely:-
“(3) Subject to the provisions of regulation 12A, no fresh certificate need to be obtained under sub-regulation (1) where a registered sub-broker is affiliated to stock broker who is eligible to trade on SME platform.
Explanation: For the purpose of this regulation, SME platform means a trading platform of a recognised stock exchange having nationwide trading terminals and permitted by the Board to list the securities issued in accordance with Chapter XA of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.”
Regulation 3(1)(f)(vii): Automatic exemption from Reg 10, 11 & 12 for taking up shares in market making extended to Chapter XA of ICDR - Takeover Code Amendment 2010
In the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 through SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2010 vide Notification No. LAD-NRO/GN/2010-11/05/1110 dated 13th April 2010, the following updates were made.
In regulation 3, in sub-regulation (1), in clause (f), after sub-clause (vi), the
following sub-clause shall be inserted, namely: -
“(vii) a merchant banker or nominated investor in the process of market making and subscription by the nominated investor to the unsubscribed portion of issue, in terms of Chapter XA of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009:
Provided that benefit of exception provided in sub-clause (vii) shall not be
available if the acquisition of securities in the process of market making or
subscription to the unsubscribed portion of issue results in change in control
over the target company, directly or indirectly.”
Market Making arrangement by Venture Capital Fund for securities listed on SME exchange: Regulation 12A insertion: VCF Amendment 2010
In the Securities and Exchange Board of India (Venture Capital Funds) Regulations, 1996, through SEBI (Venture Capital Funds) (Amendment) Regulations, 2010 vide Notification No. LAD-NRO/GN/2010-11/07/1100 dated 13th April 2010, the following updates are inserted:
(i) after regulation 12, the following regulation shall be inserted, namely:-
“Investment in securities listed on SME exchange.
12A. The venture capital fund may enter into an agreement with merchant banker to subscribe to the unsubscribed portion of the issue or to receive or deliver securities in the process of market making under Chapter XA of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 and the provisions of regulation 12 shall not apply in case of acquisition or sale of securities pursuant to such subscription or market making.”
Understand Mutual Fund amendments 2010: offer period 15 days, refund & MF unit certificate 5 w.days & limits on fees/expenses on schemes
In the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, the following amendments were made through SEBI (Mutual Funds) (Amendment) Regulations, 2010 vide Notification No. LAD-NRO/GN/2010-11/13/13945 dated 29th July 2010 with immediate effect.
Regulation 34: Offering Period
No scheme of a mutual fund other than the [initial] offering period of any equity linked savings schemes shall be open for subscription for more than 15 days 45 days.
Regulation 35: Allotment of units & refund of moneys
(3) Any amount refundable under sub-regulation (2) shall be refunded within a period of 5 working days six weeks from the date of closure of subscription list, by Registered post with acknowledgement due and by cheque or demand draft marked “A/c payee” to the applicants.
(4) In the event of failure to refund the amounts within the period specified in subregulation (3), the asset management company shall be liable to pay interest to the applicants at a rate of fifteen per cent per annum from the expiry of 5 working days six weeks from the date of closure of the subscription list.
Regulation 36: Statement of accounts or unit certificates
(1) The asset management company shall issue to the applicant whose application has been accepted, a statement of accounts specifying the number of units allotted to the applicant as soon as possible but not later than 5 working days thirty days from the date of closure of the initial subscription list and/or from the date of receipt of the request from the unitholders in any open ended scheme:
Provided that if an applicant so desires, the asset management company shall issue the unit certificates to the applicant within 5 working days thirty days of the receipt of request for the certificate.
(2) An applicant in a close ended scheme whose application has been accepted shall have the option either to receive the statement of accounts or to hold units in dematerialised form and the asset management company shall issue to such applicant, a statement of accounts specifying the number of units allotted to the applicant or issue units in dematerialized form as soon as possible but not later than 5 working days thirty days from the date of closure of the initial subscription list.
Regulation 52: Limitation on fees and expenses on issue of schemes
(3) For schemes launched on a no load basis, the asset management company shall be entitled to collect an additional management fee not exceeding 1% of the weekly average net assets outstanding in each financial year. [Omitted]
(6) The total expenses of the scheme excluding issue or redemption expenses, whether initially borne by the mutual fund or by the asset management company, but including the investment management and advisory fee shall be subject to the following limits :— .
(i) On the first Rs.100 crores of the average weekly net assets 2.5%;
(ii) On the next Rs.300 crores of the average weekly net assets 2.25%;
(iii) On the next Rs.300 crores of the average weekly net assets 2.0%;
(iv) On the balance of the assets 1.75% :
Provided that such recurring expenses shall be lesser by at least 0.25% of the weekly average net assets outstanding in each financial year in respect of a scheme investing in bonds :
Provided further that in case of a fund of funds scheme, the total expenses of the scheme including the management fees shall not exceed 0.75% of the daily or weekly average net assets, depending upon whether the NAV of the scheme is calculated on daily or weekly basis.
Provided further that in case of an index fund scheme, the total expenses of the scheme including the investment and advisory fees shall not exceed one and one half percent (1.5%) of the weekly average net assets
[The total expenses of the scheme excluding issue or redemption expenses, whether initially borne by the mutual fund or by the asset management company, but including the investment management and advisory fee shall be subject to the following limits:—
(a) in case of a fund of funds scheme, the total expenses of the scheme including the management fees shall be either:-
(i) not exceeding 0.75% of the daily or weekly average net assets, depending upon whether the NAV of the scheme is calculated on daily or weekly basis; or
(ii) it may consist of -
(A)management fees for the scheme not exceeding 0.75% of the daily or weekly average net assets depending upon whether the NAV of the scheme is calculated on daily or weekly basis;
(B) other expenses relating to administration of the scheme;
and
(C) charges levied by the underlying schemes:
Provided that the sum total of (A), (B) and the weighted average of the total expense ratio of the underlying schemes shall not exceed 2.50% of the daily
or weekly average net assets (depending upon whether the NAV of the scheme is calculated on daily or weekly basis) of the scheme.
(b) in case of an index fund scheme or exchange traded fund, the total expenses of the scheme including the investment and advisory fees shall not exceed one and one half percent (1.5%) of the weekly average net assets;
(c) in case of any other scheme-
(i) on the first Rs.100 crores of the daily or average weekly net assets 2.5%;
(ii) on the next Rs.300 crores of the daily or average weekly net assets 2.25%;
(iii) on the next Rs.300 crores of the daily or average weekly net assets 2.0%;
(iv) on the balance of the assets 1.75%:
Provided that in respect of a scheme investing in bonds such recurring expenses shall be lesser by at least 0.25% of the daily or weekly average net assets outstanding in each financial year.”]
Tenth Schedule (X): Amortisation of Initial Issue Expenses for close ended schemes
(e) For schemes floated on a ‘no-load’ basis, the asset management company may levy an additional management fee not exceeding 1% of the NAV. The asset management company may be entitled to levy a contingent deferred sales charge for redemption during the first four years after purchase, not exceeding 4% of the redemption proceeds in the first year, 3% in the second year, 2% in the third year and 1% in the fourth year. [Omitted]
Equity Research Report on listed companies available for download: BSE/NSE website links for investors
Independent Equity Research Reports on listed companies made available on Stock Exchange websites
In a meeting of SEBI recognized Investors’ Associations held on February 11, 2010, it was decided that independent equity research coverage on 20 listed companies each, for which research reports were not available hitherto, would be made available by Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) on their websites by July 30, 2010 for the benefit of investors. Accordingly, both the exchanges have since made available on their respective websites, the first set of research reports. Further, exchanges have agreed to jointly frame the criteria for selection of further companies for such research coverage in future.
Website links:
SEBI guidelines on Market Access through Authorised Persons under Stock Brokers regulation as amended on 2010
To expand the reach of the markets for exchange traded products, it has been decided to allow SEBI registered stock brokers (including trading members) of stock exchanges to provide access to clients through authorised
persons.
Regulatory Framework for Market Access through Authorised Persons (MIRSD/ DR-1/ Cir- 16 /09 dated 6th November 2009)
1. Who is an “Authorised Person”?
Any person - individual, partnership firm, LLP or body corporate – who is
appointed as such by a stock broker (including trading member) and who
provides access to trading platform of a stock exchange as an agent of the
stock broker.
2. Appointment of Authorised Person
A stock broker may appoint one or more authorised person(s) after obtaining
specific prior approval from the stock exchange concerned for each such person. The approval as well as the appointment shall be for specific segment of the exchange.
3. Procedure for Appointment
a) Stock broker shall select a person in compliance with the criteria laid down
by the Exchange and this framework for appointment as an authorized
person and forward the application of the person to stock exchange for
approval.
b) On receipt of the aforesaid application, the stock exchange
i. may accord approval on satisfying itself that the person is eligible for
appointment as authorized person, or
ii. may refuse approval on satisfying itself that the person is not eligible for
appointment as authorized person.
4. Eligibility Criteria
4.1 An individual is eligible to be appointed as authorised person if he:
a) is a citizen of India;
b) is not less than 18 years of age;
c) has not been convicted of any offence involving fraud or dishonesty;
d) has good reputation and character;
e) has passed at least 10th standard or equivalent examination from an
institution recognized by the Government; and f) has the certification, as applicable to approved user / sales personnel of [vide SEBI/Cir/MIRSD/AP/8/2010 dated 23rd July 2010]
the respective segment, and undertakes to continue to have valid
certification thereafter.
(Stock Exchange shall prescribe appropriate certification if no such
certification is prescribed under SEBI Regulations and monitor
compliance.)
4.2 A partnership firm, LLP or a body corporate is eligible to be appointed as
authorized person
a) if all the partners or directors, as the case may be, comply with the
requirements contained in clause 4.1 above.
b) the object clause of the partnership deed or of the Memorandum of
Association contains a clause permitting the person to deal in securities
business.
4.3 The person shall have the necessary infrastructure like adequate office
space, equipment and manpower to effectively discharge the activities on
behalf of the stock broker.
4.4 The approved users and/or sales personnel of Authorised Persons shall have the necessary certification of the respective segments at all points of time. [vide SEBI/Cir/MIRSD/AP/8/2010 dated 23rd July 2010]
5. Conditions of Appointment
The following are the conditions of appointment of an authorised person:
a) The stock broker shall be responsible for all acts of omission and
commission of the authorized person.
b) All acts of omission and commission of the authorized person shall be
deemed to be those of the stock broker.
c) The authorized person shall not receive or pay any money or securities
in its own name or account. All receipts and payments of securities and
funds shall be in the name or account of stock broker.
d) The authorised person shall receive his remuneration - fees, charges,
commission, salary, etc. - for his services only from the stock broker and
he shall not charge any amount from the clients.
e) A person shall not be appointed as authorized person by more than one
stock broker on the same stock exchange.
f) A partner or director of an authorised person shall not be appointed as
an authorised person on the same stock exchange.
g) The stock broker and authorised person shall enter into written
agreement(s) in the form(s) specified by Exchange. The agreement shall
inter-alia cover scope of the activities, responsibilities, confidentiality of
information, commission sharing, termination clause, etc.
6. Withdrawal of Approval
Approval given to an authorised person may be withdrawn by the stock
exchange:
a) on receipt of a request to that effect from the stock broker concerned or
the authorised person, subject to compliance with the requirements
prescribed by the stock exchange, or
b) on being satisfied that the continuation of authorised person is
detrimental to the interest of investors or securities market or the
authorised person at a subsequent date becomes ineligible under clause
4 above.
7. Obligations of Stock Broker
a) The stock broker shall be responsible for all acts of omission and
commission of his authorised person(s) and/or their employees,
including liabilities arising there from.
b) If any trading terminal is provided by the stock broker to an authorised
person, the place where such trading terminal is located shall be treated
as branch office of the stock broker.
c) Stock broker shall display at each branch office additional information
such as particulars of authorised person in charge of that branch, time
lines for dealing through authorised person, etc., as may be specified by
the stock exchange.
d) Stock broker shall notify changes, if any, in the authorised person to all
registered clients of that branch at least thirty days before the change.
e) Stock broker shall conduct periodic inspection of branches assigned to
authorised persons and records of the operations carried out by them.
f) The client shall be registered with stock broker only. The funds and
securities of the clients shall be settled directly between stock broker and
client and all documents like contract note, statement of funds and
securities would be issued to client by stock broker. Authorised person
may provide administrative assistance in procurement of documents and
settlement, but shall not issue any document to client in its own name.
No fund/securities of clients shall go to account of authorized person.
g) On noticing irregularities, if any, in the operations of authorised person,
stock broker shall seek withdrawal of approval, withhold all moneys due
to authorised person till resolution of investor problems, alert investors in
the location where authorised person operates, file a complaint with the
police, and take all measures required to protect the interest of investors
and market.
8. Obligations of Exchange
a) The stock exchange shall maintain a database of all the authorised
persons which shall include the following:
I. PAN Number of authorised person and in case of partnership or body
corporate, PAN Number of all the partners or directors as the case
may be.
II. Details of the broker with whom the authorised person is registered.
III. Locations of branch assigned to authorised person(s).
IV. Number of terminals and their details, given to each authorised person.
V. Withdrawal of approval of authorised person.
VI. Change in status or constitution of authorised person.
VII. Disciplinary action taken by the Exchange against the authorised
person.
All the above details, except I above, shall be made available on web site of
the stock exchange.
b) While conducting the inspection of the stock broker, the stock exchange
shall also conduct inspection of branches where the terminals of
authorised persons are located and records of the operations carried out
by them.
c) Dispute between a client and an authorised person shall be treated as
dispute between the client and the stock broker and the same shall be
redressed by the stock exchange accordingly.
d) In case of withdrawal of approval of authorised person due to
disciplinary action, the stock exchange shall issue a press release and
disseminate the names of such authorised persons on its website citing
the reason for cancellation.
How to find whether your Investors Complaints are received by Mutual Fund - AMFI website link
Disclosure of investor complaints with respect to Mutual Funds
SEBI has received feedback from investors and Investors’ Associations to improve transparency in the ‘grievance redressal mechanism’. Based on the same, transparency in ‘grievance redressal’ is identified as a key area to augment investor protection. It is envisaged that transparency will also improve the general functioning of the market by providing investors the wherewithal to make an informed choice.
Accordingly, it has been decided that Mutual Funds shall henceforth disclose on
- their websites,
- as well as in their Annual Reports,
the details of investor complaints received by them from all sources. The said details should be vetted and signed off by the Trustees of the concerned Mutual Fund.
The format for the aforesaid disclosure is given as Annexure to this Circular Cir / IMD / DF / 2 / 2010 dated 13th May 2010.
AMFI Website Link to view Details of Investors Complaints received by Mutual Fund
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.
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."
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.
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:
What exam for distributors, agents or any persons employed or engaged or to be employed or engaged in the sale and/or distribution of mutual fund products by SEBI NISM?
Cir / IMD / DF / 5 / 2010 June 24 , 2010
All Mutual Funds, Asset Management Companies (AMCs)
Sub: Certification Programme for sale and/ or distribution of mutual fund products
In terms of SEBI Circulars dated September 25, 2001, November 28, 2002, April 03, 2003 and February 04, 2004 about, inter alia, the captioned subject, agents/distributors of mutual fund units were required to obtain certification from the Association of Mutual Funds in India (AMFI) by passing a certification examination, and to obtain registration with AMFI.
In terms of SEBI notification No. LAD-NRO/GN/2010-11/09/6422 dated May 31, 2010, under regulation 3 (1) of the (Certification of Associated Persons in the Securities Markets) Regulations, 2007, (Certification Regulations) it has been decided that from June 01, 2010, the certification examination for distributors, agents or any other persons employed or engaged or to be employed or engaged in the sale and/or distribution of mutual fund products, would be conducted by the National Institute of Securities Markets (NISM). Accordingly, it was notified that with effect from June 01, 2010, the following category of associated persons, i.e., distributors, agents or any persons employed or engaged or to be employed or engaged in the sale and/or distribution of mutual fund products, shall be required to have a valid certification from the National Institute of Securities Markets (NISM) by passing the certification examination as mentioned in the NISM communiqué NISM/Certification/Series-V-A: MFD/2010/01 dated May 05, 2010.
Provided that if the said associated person possesses a valid certificate by passing before June 01, 2010, the AMFI Mutual Fund (Advisors) Module, he shall be exempted from the requirement of the aforementioned NISM certification examination.
Under the existing instructions, the agent/ distributor was exempted from the AMFI certification examination if he had completed 50 years of age and had at least 5 years of experience in distribution of mutual fund units. As per regulation 4 (3) of the Certification Regulations, persons who have attained the age of fifty years or who have at least ten years experience in the securities markets in the sale and/ or distribution of mutual fund products as on May 31, 2010, will be given the option of obtaining the certification either by passing the NISM certification examination or qualifying for Continuing Professional Education (CPE) by obtaining such classroom credits as may be specified by NISM from time to time.
The Certification Regulations require the persons referred to in para 2 above to comply with the requirements for CPE as specified by NISM within the validity period of the certificate obtained by passing the certification examination.
However, to facilitate the transition process from AMFI to NISM, it has been decided that a person holding a valid AMFI certification whose validity expires between June 01, 2010 and December 31, 2010, would be required to comply with the CPE requirements as laid down by NISM under the relevant clauses of the Certification Regulations, by December 31, 2010.
An associated person holding a valid AMFI/NISM certification whose validity
expires anytime after December 31, 2010, would be required to comply with the CPE requirements as laid down by NISM under the relevant clauses of the Certification Regulations, prior to the expiry of the validity of the certification.
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.htmThursday, August 5, 2010
Issue of Debt Securities now has Non-Convertible Debentures (Reserve Bank) Directions, 2010 in addition to compliance under Companies Act & SEBI regulation
Reporting of Issuance of Non Convertible Debentures
The Reserve Bank of India has issued the ‘Issuance of Non-Convertible Debentures (Reserve Bank) Directions, 2010’ vide IDMD.DOD.9/11.01.01(A)/2009-10 dated June 23, 2010 (which is made effective from 2nd August 2010) regarding regulation of non-convertible debentures of maturity up to one year (NCDs). In terms of paragraph 12.7 of the said Directions read with paragraphs 12.4, 12.5 and 12.6 ibid, the Debenture Trustees are required to report the details of issuance of the NCDs, the outstanding amount of NCDs and default in repayment of NCDs to the Financial Markets Department, Reserve Bank of India, Central Office, Mumbai 400 001.
It is advised to submit the required information as per format enclosed in
- Annex 1 (details of issuance of NCDs),
- Annex 2 (outstanding amount of NCDs), and
- The required information may be submitted in hard as well as soft copies.
- While the report on issuance of NCDs may be submitted within 3 days from the date of completion of the issue and
- the report on default in repayment may be submitted immediately,
- the report on outstanding amount of NCDs may be submitted on quarterly basis within five working days from the completion of the calendar quarter to which the report pertains.
Issuance of Non-Convertible Debentures (Reserve Bank) Directions, 2010 – An Understanding:
The Reserve Bank of India, having considered it necessary in public interest and to regulate the financial system of the country to its advantage, in exercise of its powers conferred under sections 45K, 45L and 45W of the Reserve Bank of India Act, 1934 and of all the powers enabling it in this behalf, hereby gives to the agencies dealing in securities and money market instruments, the following directions for issuance of Non-Convertible Debentures (NCDs) of original or initial maturity up to one year.
Definition: Non-Convertible Debenture (NCD) means a debt instrument issued by a corporate (including NBFCs) with original or initial maturity up to one year and issued by way of private placement;
“Corporate” means a company as defined in the Companies Act, 1956 (including NBFCs) and a corporation established by an act of any Legislature.
Eligibility to issue NCDs
A corporate shall be eligible to issue NCDs if it fulfills the following criteria, namely,
- the corporate has a tangible net worth of not less than Rs.4 crore, as per the latest audited balance sheet;
- the corporate has been sanctioned working capital limit or term loan by bank/s or all-India financial institution/s; and
- the borrowal account of the corporate is classified as a Standard Asset by the financing bank/s or institution/s.
Rating Requirement
An eligible corporate intending to issue NCDs shall obtain credit rating for issuance of the NCDs from one of the rating agencies, viz., the Credit Rating Information Services of India Ltd. (CRISIL) or the Investment Information and Credit Rating Agency of India Ltd. (ICRA) or the Credit Analysis and Research Ltd. (CARE) or the FITCH Ratings India Pvt. Ltd or such other agencies registered with Securities and Exchange Board of India (SEBI) or such other credit rating agencies as may be specified by the Reserve Bank of India from time to time, for the purpose.
The minimum credit rating shall be P-2 of CRISIL or such equivalent rating by other agencies.
The Corporate shall ensure at the time of issuance of NCDs that the rating so obtained is current and has not fallen due for review.
Maturity
- NCDs shall be issued for maturities of 90 days or more from the date of issue.
- The exercise date of option (put/call), if any, attached to the NCDs shall fall after the period of 90 days from the date of issue.
- The tenor of the NCDs shall not exceed the validity period of the credit rating of the instrument.
Denomination
NCDs may be issued in denominations with a minimum of Rs.5 lakh (face value) and in multiples of Rs.1 lakh.
Limits and the Amount of Issue of NCDs
- The aggregate amount of NCDs issued by a corporate shall be within such limit as may be approved by the Board of Directors of the corporate or the quantum indicated by the Credit Rating Agency for the rating granted, whichever is lower.
- The total amount of NCDs proposed to be issued shall be completed within a period of 2 weeks from the date on which the corporate opens the issue for subscription.
Procedure for Issuance
- The corporate shall disclose to the prospective investors, its financial position as per the standard market practice.
- The auditors of the corporate shall certify to the investors that all the eligibility conditions set forth in these directions for the issue of NCDs are met by the corporate.
- The requirements of all the provisions of the Companies Act, 1956 and the Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008, or any other law, that may be applicable, shall be complied with by the corporate and shall also comply with Debt Listing Agreement.
- The Debenture Certificate shall be issued within the period prescribed in the Companies Act, 1956 or any other law as in force at the time of issuance.
- NCDs may be issued at face value carrying a coupon rate or at a discount to face value as zero coupon instruments as determined by the corporate.
Debenture Trustee
- Every corporate issuing NCDs shall appoint a Debenture Trustee (DT) for each issuance of the NCDs.
- Any entity that is registered as a DT with the SEBI under SEBI (Debenture Trustees) Regulations, 1993, shall be eligible to act as DT for issue of the NCDs only subject to compliance with the requirement of these Directions.
- The DT shall submit to the Reserve Bank of India such information as required by it from time to time.
Investment in NCD
NCDs may be issued to and held by individuals, banks, Primary Dealers (PDs), other corporate bodies including insurance companies and mutual funds registered or incorporated in India and unincorporated bodies, Non-Resident Indians (NRIs) and Foreign Institutional Investors (FIIs).
- Investments in NCDs by Banks/PDs shall be subject to the approval of the respective regulators.
- Investments by the FIIs shall be within such limits as may be set forth in this regard from time to time by the SEBI.
Preference for Dematerialisation
While option is available to both issuers and subscribers to issue/hold NCDs in dematerialised or physical form, they are encouraged to issue/ hold NCDs in dematerialised form. However, banks, FIs and PDs are required to make fresh investments in NCDs only in dematerialised form.
Roles and Responsibilities
12.1 The role and responsibilities of corporates, DTs and the credit rating agencies (CRAs) are set out below:
(a) Corporates
12.2 Corporates shall ensure that the guidelines and procedures laid down for issuance of NCD are strictly adhered to.
(b) Debenture Trustees
12.3 The roles, responsibilities, duties and functions of the DTs shall be guided by these regulations, the Securities and Exchange Board of India (Debenture Trustees) Regulations,1993, the trust deed and offer document.
12.4 The DTs shall report, within three days from the date of completion of the issue, the issuance details to the Chief General Manager, Financial Markets Department, Reserve Bank of India, Central Office, Fort, Mumbai-400001.
12.5 DTs should submit to the Reserve Bank of India (on a quarterly basis) a report on the outstanding amount of NCDs of maturity up to year.
12.6 In order to monitor defaults in redemption of NCDs, the DTs are advised to report immediately, on occurrence, full particulars of defaults in repayment of NCDs to the Financial Markets Department, Reserve Bank of India, Central Office, Fort, Mumbai-400001, Fax: 022-22630981/22634824.
12.7 The DTs shall report the information called for under para 12.4, 12.5 and 12.6 of these Directions as per the format notified by the Reserve Bank of India, Financial Markets Department, Central Office, Mumbai from time to time.
(c) Credit Rating Agencies (CRAs)
12.8 Code of Conduct prescribed by the SEBI for the CRAs for undertaking rating of capital market instruments shall be applicable to them (CRAs) for rating the NCDs.
12.9 The CRA shall have the discretion to determine the validity period of the rating depending upon its perception about the strength of the issuer. Accordingly, CRA shall, at the time of rating, clearly indicate the date when the rating is due for review.
12.10 While the CRAs may decide the validity period of credit rating, they shall closely monitor the rating assigned to corporates vis-Ã -vis their track record at regular intervals and make their revision in the ratings public through their publications and website.
Documentary Procedure
- Issuers of NCDs of maturity up to one year shall follow the Disclosure Document brought out by the Fixed Income Money Market and Derivatives Association of India (FIMMDA), in consultation with the Reserve Bank of India as amended from time to time.
- Violation of the directions will attract penalties, which would include debarring of the entity from the NCD market.
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.
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.
Tuesday, July 13, 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.
