All investor related documents of MF like PAN, KYC, PoA specimen signature shall be updated by AMC/RTA & get it audited - Mandatory for all new schemes also

Updation of investor related documents
SEBI vide circular No. SEBI/IMD/CIR No.12 /186868 /2009 dated December 11, 2009 has inter alia advised mutual funds to confirm whether all the investor related documents are maintained/ available with them. Further in case the investor related documentation was incomplete, the trustees of the mutual funds were advised not to make further payment to such distributors till full compliance/ completion of the steps enumerated in the said circular and to send a status to SEBI as and when process is completed to satisfaction.

SEBI has not received any confirmation from the trustees of the mutual funds on the completion of the process as mandated in the said circular. Thus it appears that all the investor related documentation is not available with the AMCs. It has been observed that due to such incomplete documentation investors’ rights to approach the AMCs directly are restricted and investors are forced to depend on the distributors for executing any financial or non-financial transactions.

In order to ensure that investors have unrestricted access to AMCs and to enable AMCs to provide prompt investor service including execution of investors’ financial or non-financial transactions, all mutual funds/ AMCs are directed that:
All new folios/ accounts shall be opened only after ensuring that all investor related documents including account opening documents, PAN, KYC, PoA (if applicable), specimen signature are available with AMCs/RTAs and not just with the distributor.
For existing folios, AMCs shall be responsible for updation of the investor related documents including account opening documents, PAN, KYC, PoA (if applicable), specimen signature by November 15, 2010.

The trustees shall submit a confirmation after they receive certification from an Independent auditor on completion of the said process latest by November 22, 2010.

Mutual Funds/Asset Management Companies shall comply with the above requirements in letter and spirit.

Source: SEBI Cir / IMD / DF / 9 / 2010 dated 12th August 2010

All amended SEBI circulars on Arbitration mechanism in stock exchange as governed by Arbitration & Conciliation Act, 1996

Revised Arbitration Mechanism in Stock Exchanges
In consultation with the stock exchanges, it has been decided to streamline the arbitration mechanism available at stock exchanges for arbitration of disputes (claims, complaints, differences, etc.) arising between a client and a member (Stock Broker, Trading Member and Clearing Member) across various market segments.

A stock exchange shall provide an arbitration mechanism for settlement of disputes between a client and a member through arbitration proceedings in accordance with the provisions of this Circular read with Section 2(4) of the Arbitration and Conciliation, Act, 1996.

This circular CIR/MRD/DSA/24/2010 dated 11th August 2010 modifies provisions relevant to arbitration, contained in the following SEBI Circulars:-
i. Master Circular as on 31st March 2010
ii. SEBI/MRD/DSA-OIAE/Cir-09/2010 dated April 1, 2010
iii. CIR/MRD/DSA/10/2010 dated April 6, 2010

SEBI Clarification: AMC Addendum:all mutual fund schemes in demat form shall be freely transferable from 1st October, 2010 (except ELSS)

Transferability of Mutual Fund units

Regulation 37(1) of SEBI (Mutual Fund) Regulations, 1996 states that:

“a unit unless otherwise restricted or prohibited under the scheme, shall be freely transferable by act of parties or by operation of law.”

The spirit and intention of this regulation is not to prohibit transferability of units as a general rule or practice. However, it is noticed that mutual fund schemes prohibit transfer on a regular basis instead of on an exceptional basis.

In order to facilitate transferability of units of mutual funds held in one demat account to another demat account, it has been decided that all Asset Management Companies (AMCs) shall clarify by way of an addendum that units of all mutual fund schemes held in demat form shall be freely transferable from the date of the issue of said addendum which shall be not later than October 1, 2010. However, restrictions on transfer of units of Equity Linked Savings Schemes (ELSS) during the lock-in period shall continue to be applicable as per the ELSS Guidelines.

Source: SEBI CIR/IMD/DF/10/2010 dated 18th August 2010

New format of disclosure of derviatives by Mutual Fund & investment/exposure norms amended

Review of norms for investment and disclosure by Mutual Funds in derivatives
Please refer to the circular DNPD/CIR-29/2005 dated September 14 2005, circular MFD/CIR/9/120/2000 dated November 24 2000, and SEBI circular MFD/CIR/18337/2002 dated September 19, 2002 on investment in derivatives by mutual funds and disclosures thereof in half yearly portfolio statement.

In order to have prudential limits for derivative investments by mutual funds and to bring in transparency and clarity in the disclosure of the same to investors, it has been decided to bring in certain modification in the aforesaid circulars.

Disclosure of derivatives in Half Yearly Portfolios
The manner of disclosure of derivatives position in half yearly portfolio disclosure reports has not been specified in the SEBI (Mutual Funds) Regulations, 1996 and the disclosures being currently made are not uniform across the industry. Therefore, the following format for the purpose of uniform disclosure of investments in derivative instruments by Mutual Funds in half yearly portfolio disclosure, annual report or in any other disclosures is prescribed.

Effective date: The provisions shall be applicable for all new schemes launched post the issue of the circular. For all existing schemes, compliance with the circular shall be effective from October 01, 2010.

Source:SEBI Cir/ IMD/ DF/ 11/ 2010 dated 18th August 2010

Fund of Fund MF schemes expense structure in offer document & change amounts to fundamental attribute requiring exit option to unit holders

Fund of funds mutual fund schemes shall adopt either of the total expense structures laid out in Regulation 52(6)(a) of SEBI (Mutual Funds) Regulations 1996, as amended by SEBI (Mutual Funds) (Amendment) Regulations, 2010, which Asset Management Companies shall clearly indicate in the scheme information documents (SID).  Fund of Fund schemes, existing as on July 29, 2010, shall, with the approval of trustees, adopt either of the total expense structures laid out in Regulation 52(6)(a) and change the total expense structure after giving the unitholders an option to exit in accordance with Regulation 18(15A). [In case of change in fundamental attributes in terms of Regulation 18 (15A), SID shall be revised and updated immediately after completion of duration of exit option.]

Regulation 52(6)(a): 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:—

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.

Source: SEBI Cir / IMD / DF / 8 / 2010 dated 6th August 2010

2nd year Event Videos, Photos, Awards, Mafoi Pandiarajan on business, cake cutting & lot more fun with Lawlabz Learnlabz OnlyThisMuch 2010 Celebration

Ever heard of a lab that concocts and churns out, not chemical, but legal solutions! LAWLABZ (Law Labz Consultancy Pvt Ltd), a legal consulting services organisation, has positioned itself in the forefront in offering high end services in corporate compliance practices. It has a training division called Learnlabz and publication initiative called OnlyThisMuch for Company Secretary students.

 

And as you are aware Lawlabz Group 2nd Year Celebrations this July 2010 with Learnlabz & OnlyThisMuch, the video way, hope you will make it, now its the time to share with the happy moments during our event [4 parts of video & photos].  You will find following features throughout the events,

1. Funny (bit of Tamil mixture)
2. Business is like a dance!!! (Wonderful speech by Mr. K. Pandiarajan of Mafoi Randstad)
3. Lawlabz Corporate & Employee Awards, Learnlabz Faculty Awards & OnlyThisMuch Author awards
4. Blast, Cake cutting, celebrations & celebrations.

[Do see all the 4 parts of the Videos & photographs hereunder]

Lawlabz Learnlabz OnlyThisMuch 2nd Year celebrations 2010

Thanks again for making the even the most successful one in all respects.  Thanks will definitely not suffice your well wishes.

Exchange Traded Currency Options RBI Directions for investment by Person Resident in India and SEBI norms 2010

As you are aware of Exchange Traded Currency Futures (ETCF) in Recognised Stock Exchanges for Person Resident in India (PRII) and What exam for approved users & sales personnel of trading members in currency derivatives segment and trading in interest rate derivatives, register for NISM now

Guidelines on trading of Currency Options on
Recognised Stock / New Exchanges

Attention of Authorised Dealers Category – I (AD Category – I) banks is invited to the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 dated May 3, 2000 [Notification No. FEMA/25/RB-2000 dated May 3, 2000], as amended from time to time and A.P. (DIR Series) Circular No. 05 dated August 6, 2008 in terms of which persons resident in India were permitted to participate in the currency futures market in India subject to directions contained in the Currency Futures (Reserve Bank) Directions, 2008.

2. In order to expand the existing menu of exchange traded hedging tools, it was announced in the Monetary Policy Statement 2010-11 (para 62) that recognised stock exchanges would be permitted to introduce plain vanilla currency options on spot US Dollar/ Rupee exchange rate for residents. Accordingly, it has been decided to permit trading of currency options on spot USD-INR rate in the currency derivatives segment of the stock exchanges, recognized by the Securities and Exchange Board of India (SEBI). The currency options market would function subject to the directions, guidelines, instructions, rules, etc issued by the Reserve Bank and the SEBI from time to time.

3. Persons resident in India are permitted to participate in the currency options market, subject to the directions contained in the Exchange Traded Currency Options (Reserve Bank) Directions, 2010, [Notification No.FED.01 / ED (HRK)-2010 dated July 30, 2010] (Directions) issued by the Reserve Bank of India, a copy of which is annexed (Annex-I).

4. Necessary amendments to Foreign Exchange Management (Foreign Exchange Derivatives Contracts) Regulations, 2000 (Notification No. FEMA.25/RB-2000 dated May 3, 2000) (Regulations) have been notified in the Official Gazette vide G.S.R. No. 635(E) dated July 27, 2010, a copy of which is annexed (Annex-II).

Source: A.P. (DIR Series) Circular No. 05 dated 30th July 2010

You can buyback FCCBs now as time limit extended from June 2010 to June 30, 2011

On a review of the policy and in view of the representations received from the issuers of FCCBs, it has been decided to consider applications, under the approval route, for buyback of FCCBs until June 30, 2011, subject to the issuers complying with all the terms and conditions of buyback/ prepayment of FCCBs, as mentioned in Again an option to Buyback / Prepayment of FCCB under RBI Approval Route till June 2010

Source: A.P. (DIR Series) Circular No.07 dated 9th August 2010

ECB beyond USD 100 million under RBI Approval Route for service sector available for permissible end uses, not being acquisition of land

At present, entities in the services sectors viz., Hotels, Hospitals and Software  are allowed to avail of ECB up to USD 100 million per financial year under the  Automatic Route, for foreign currency and/or Rupee capital expenditure for permissible end-uses. On a review, it has now been decided to consider applications  from the corporates in the Hotel, Hospital and Software sectors to avail of ECB beyond USD 100 million under the Approval Route, for foreign currency and / or Rupee capital expenditure for permissible end-uses. The proceeds of the ECB should not be used for acquisition of land.

Source: A.P. (DIR Series) Circular No.08 dated 12th August 2010

Issue or Transfer of shares under FEMA: No more CCI guidelines pricing but Discounted Cash Flow technique for valuation: certification by Merchant banker/Chartered Accountant

Issue of shares

(a) After issue of shares (including bonus and shares issued on rights basis) and shares issued under ESOP)/ convertible debentures / convertible preference shares, the Indian company has to file Form FC-GPR, enclosed in Annex - 8, through it’s AD Category I bank, not later than 30 days from the date of issue of shares. The Form can also be downloaded from the Reserve Bank's website http://www.rbi.org.in/Scripts/BS_ViewFemaForms.aspx. Non-compliance with the above provision would be reckoned as a contravention under FEMA and could attract penal provisions.

Issue Price (for all issues other than Rights Issue)

• Price of shares issued to persons resident outside India under the FDI Scheme, shall be on the basis of SEBI guidelines in case of listed companies.
• In case of unlisted companies, valuation of shares has to be done by a SEBI registered Category I Merchant Banker or a Chartered Accountant as per the Discounted Free Cash Flow Method (DCF) .
• In case of issue of shares on preferential allotment the price shall not be less that the price as applicable to transfer of shares from resident to non-resident.

Issue Price (for Rights Issue)

• Listed = @ the price determined by the Company.
• Unlisted = Minimum price is the Rights Issue price to resident shareholders.

Transfer of Shares

Reporting of transfer of shares between residents and non-residents and vice- versa is to be made in Form FC-TRS (enclosed in Annex - 9). The Form FC-TRS should be submitted to the AD Category – I bank, within 60 days from the date of receipt of the amount of consideration. The onus of submission of the Form FC-TRS within the given timeframe would be on the transferor / transferee, resident in India. The AD Category – I bank, should forward the same to its link office. The link office should consolidate the Form FC-TRS and submit a monthly report to the Reserve Bank.

Transfer Price

1. Transfer by Resident to Non-resident (i.e. to foreign national, NRI, FII and incorporated non-resident entity other than erstwhile OCB)
   • Listed = Minimum price as per Preferential Issue under SEBI ICDR regulation with date of purchase/sale as relevant date.
   • Unlisted = Minimum price as per Fair value under Discounted Cash Flow Method and certified by Merchant Banker or Chartered Accountant.
2. Transfer by Non-resident (i.e. by incorporated non-resident entity, erstwhile OCB, foreign national, NRI and FII) to Resident
   • Should be within Minimum price as said in Transfer by Resident to Non-Resident above (for all issues).

Updated Notifications

1. Foreign Exchange Management (Transfer or Issue of Security by a PersonResident Outside India) (Amendment) Regulations, 2010

2. A. P. (DIR Series) Circular No.49 dated 4th May 2009

3. Foreign Investment Master Circular July2010

New definition of factory, dependant, Appointment of specialist, Medical Benefit council, Social Security Officers, Appeal provisions, 5 year limitation period, Other beneficiaries scheme - ESI Amendment Act, 2010

ESI Act was amended by Employees State Insurance Amendment Act, 2010 by way of Gazette notification dated 25th May 2010 and its effective date is notified as 1st June 2010 with the following updates.

Section 1(5): The appropriate Government may, in consultation with the Corporation and where the appropriate Government is a State Government, with the approval of the Central Government, after giving one month (earlier it was six months') notice of its intention of so doing by notification in the Official Gazette, extend the provision of this Act or any of them, to any other establishment or class of establishments, industrial, commercial, agriculture or otherwise :

Section 2(6A) "dependant" means any of the following relatives of a deceased insured person, namely :-

(i) a widow, a minor legitimate or adopted son who has not attained the age of 25 years, an unmarried legitimate or adopted daughter;

(ii) if wholly dependent on the earnings of the insured person at the time of his death, a legitimate or adopted son or daughter who has attained the age of 25 years (not eighteen years) and is infirm;

Section 2(6A): “Employee” definition also includes only such persons engaged as apprentice whose training period is extended to any length of time.

Section 2(11) "family" means all or any of the following relatives of an insured person, namely :

(v) dependant parent whose income from all sources does not exceed such income as may be prescribed by CG.

(vi) in case the insured person is UNMARRIED & his/her parents is not alive, a minor brother/sister WHOLLY dependant on the earnings of the insured person.

Section 2(12): "factory" means any premises including the precincts thereof -
(a) whereon ten or more persons are employed or were employed for wages on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on with the aid of power or is ordinarily so carried on, or (b) whereon twenty or more persons are employed or were employed for wages on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on without the aid of power or is ordinarily so carried on, but does not include a mine subject to the operation of the Mines Act, 1952 (35 of 1952) or a railway running shed.

Section 10. MEDICAL BENEFIT COUNCIL. - (1) The Central Government shall constitute a Medical Benefit Council consisting of - (a) the Director General, ESIC, ex officio as Chairman;

(b) the Director General, Health Services, ex officio as Chairman.

Section 12(3) A person referred to in clause (i) of section 4 [3 members of Parliament of whom two shall be members of the House of the People (Lok Sabha) and one shall be a member of the Council of States (Rajya Sabha) elected respectively by the members of the House of the people and the members of the Council of States] shall cease to be a member of the Corporation,

• on becoming a Minister or Speaker or Deputy Speaker of the House of the people or the Deputy Chairman of the Council of States.
• when he ceases to be a member of Parliament.

2nd provisio to Section 17(2)(a) dealing with Staff of ESIC allows appointment of Consultants & Specialists in various fields on contract basis.

Section 37. VALUATION OF ASSETS AND LIABILITIES. – The ESI Corporation shall, at intervals of 3 years (not five years), have a valuation of its assets and liabilities made by a valuer appointed with the approval of the Central Government.

Section 45. INSPECTORS, THEIR FUNCTIONS AND DUTIES: ESI Inspectors are now called Social Security Officers (SSO). Further, any authorised ESIC officer may carry out test inspection or re-inspection of the records & returns u/s. 44 for the purpose of verifying correctness & quality of inspection.

Second Proviso  to Section 45A: In case of determination of contribution u/s. 45, the ESI Corporation power is limited to 5 years of contribution becoming due. [limitation period]

Section 45AA: Appeal to Appellate Authority can be preferred by employee for order u/s. 45A within 60 days by depositing 25% of contribution (ordered or as per own calculation - whichever is higher), which is refundable with interest on success of appeal.

Section 51E: An accident occurring to an employee while commuting from his residence to the place of employment for duty or from the place of employment to his residence after performing duty, shall be deemed to have arisen out of and in the course of employment if nexus between the circumstances, time and place in which the accident occurred and the employment is established. [Agnes v. BEST Corpn case is now a law]

Third proviso to Section 56 amended: Medical Benefit:

Provided also that an insured person, who has attained the age of superannuation, a person who retires under Voluntary Retirement Scheme (VRS) or takes premature retirement, and his spouse shall be eligible to receive medical benefit subject to payment of contribution and such other conditions as may be prescribed by the Central Government.

Section 58(5): State Government, with prior approval of Central Government, can also establish organisation to provide for sickness, maternity & employment injury.

Section 59(3): ESIC’s Hospital through Third party participation is now permitted.  So, now even a private hospital can be recognised for medical treatments.

Section 59B: ESIC is given permission to establish medical colleges, nursing colleges & training institutes for its paramedical staff & employees.

Existing Chapter VA is completely revised

• Section 73B gives overriding power to Central Government to frame Scheme by way of Notification, for other beneficiaries (not being insured) for providing medical facility on payment of user charges.
• Scheme shall have the details as per Section 73D and shall be laid in both houses of Parliament for 30 days.

Provisios added to Section 87: Exempted factory or establishment by which,

• it is mandated that exemption will be granted only if employees receive substantially similar or superior benefits.
• Application for renewal shall be made within 3 months before expiry of Exemption period and taken up by Government within 2 months.

Section 91A powers restricted.  Thus now, exemption may be granted only prospectively and not retrospectively.

Section 91AA: Central Government is the appropriate Government if the medical benefits are provided by ESIC.

Source: Notification

Download SME Listing Agreement & understand deviations from Equity; how to set up SME Exchange with networth of 100 crores & requirements under SCRA

Sub: Conditions of listing for issuers seeking listing on SME Exchange - Model SME Equity Listing Agreement In recognition of the need for making finance available to small and medium enterprises, SEBI has decided to encourage promotion of dedicated exchanges and/or dedicated platforms of the exchanges for listing and trading of securities issued by Small and Medium Enterprises (“SME”). Consequently, SEBI amended SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (“SEBI (ICDR) Regulations”) by inserting a Chapter XA on “Issue of specified securities by small and medium enterprises”, through notification dated April 13, 2010. In continuation of the same and to facilitate listing of specified securities in the SME exchange, “Model Equity Listing Agreement” to be executed between the issuer and the Stock Exchange, to list/migrate the specified securities on SME Exchange, is specified through this circular.

SME listing agreement is same as Equity listing agreement.  However, certain relaxations are provided to the issuers whose securities are listed on SME exchange in comparison to the listing requirements in Main Board (= other than SME Exchanges), which inter-alia include the following:

a. Companies listed on the SME exchange may send to their shareholders, a statement containing the salient features of all the documents [in abridged form], as prescribed in proviso to section 219(b)(iv) of the Companies Act, 1956, instead of sending a full Annual Report;
b. Periodical financial results may be submitted on “half yearly basis”, instead of “quarterly basis” under Clause 41 and
c. Every issuer listed under SME Exchange shall have their own website.

d. SMEs need not publish their financial results in newspapers, as required in the Main Board (= other than SME Exchanges)  and can make it available on their website.

Download SME Listing Agreement

Sub: Setting up of a Stock exchange/ a trading platform by a recognized stock exchange

A. A company desirous of being recognized as a SME exchange may apply to Market Regulation Department, SEBI, in accordance with the provisions of the Securities Contracts (Regulation) Act,1956 ( SCRA) read with the provisions of the Securities Contracts (Regulation) Rules, 1957 (the SCRR), subject to the applicant fulfilling the following conditions:
(i) It is a corporatised and demutualised entity and is compliant with requirements of maintaining public shareholding and shareholding restrictions in accordance with Chapters II and III of the Securities Contracts (Regulation) (Manner of Increasing and Maintaining Public Shareholding in Recognised Stock Exchanges) Regulations, 2006;
(ii) It has a balance sheet networth of atleast Rs. 100 crores;
(iii) It shall have nation wide trading terminals and an online screen-based trading system, a suitable Business Continuity Plan including a disaster recovery site;
(iv) It shall have an online surveillance capability which monitors positions, prices and volumes in real time so as to check market manipulation;
(v) It shall have adequate arbitration and investor grievances redressal mechanism operative from all the four regions of the country.
(vi) It shall have adequate inspection capability;
(vii) It shall have the same risk management system and surveillance system as are required for cash market segment of a recognised stock exchange;
(viii) Information about trades, quantities, and quotes shall be disseminated by the recognized stock exchange in real time to at least two information vending networks which are accessible to investors in the country;
(ix) The trading system of the stock exchange may be quote driven or a hybrid of quote driven and order driven. The settlement system in the stock exchange shall be the same as that of the cash market of a recognised stock exchange;
(x) The clearing function of the stock exchange shall be performed by a clearing corporation/ clearing house;
(xi) The minimum lot size for trading on the stock exchange shall be one lakh rupees.
B. The above eligibility criteria shall mutatis mutandis apply to recognised stock exchanges having nation wide trading terminals and which
desires to set up a trading platform for listing of the specified securities issued in terms of Chapter XA of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009. Such recognised stock exchange shall file an application demonstrating its compliance with the conditions mentioned in subpara (i) to (xi) of para 6 above alongwith the proposed Rules, Regulations and Byelaws for the SME platform. Such a platform can be operationalised by the recognised stock exchange only after obtaining prior approval of SEBI.

Source:

1. Setting up of a Stock exchange/ a trading platform by a recognized
   stock exchange having nationwide trading terminals for SME vide CIR/MRD/DSA/17/2010 dated 18th May 2010.
2. Conditions of listing for issuers seeking listing on SME Exchange - Model SME Equity Listing Agreement vide CIR/CFD/DIL/6/2010 dated May 17, 2010.