Demat accounts without PAN to go defunct

Mumbai: The Securities and Exchnage Board of India (Sebi) is going to ban demat accounts, which do not have permanent account numbers (PAN). Non-PAN demat accounts will become inoperative from August 16, said Sebi.

The market regulator had already 'suspended for debit' (selling of shares) the demat accounts for which PAN details have not been verified. From August 16, it plans to make them even 'suspended for credit' (buying of shares).

"It has come to our notice that despite follow up, investors are not furnishing the PAN details," Sebi said.

"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," Sebi said leaving room for certain benefits like bonus issues and stock splits.

However, the regulator clarified that other credits including credits from IPO/FPO/Rights issue, off-market transactions or any secondary market transactions will not be allowed into such accounts. 

Source - http://www.siliconindia.com/shownews/Demat_accounts_without_PAN_to_go_defunct-nid-70225.html?utm_campaign=Newsletter&utm_medium=Email&utm_source=Subscriber

Sebi makes cell ban in dealing rooms official

MUMBAI: Most mutual funds have barred use of mobile phones in their dealing rooms to prevent front-running, though regulations didn’t require them to do so until recently.

Last week, the Securities and Exchange Board of India (Sebi) made this ban official on the heels of its recent order, which pulled up an equities dealer at HDFC Asset Management for leaking information of its planned trades to a few other investors.

In a communication to mutual funds, the market regulator, in addition to the ban on mobile phone usage in dealing rooms, also asked asset management companies (AMCs) to record telephone calls from or into dealing rooms. Also, recorded calls by dealers should be regularly monitored by its compliance department, Sebi said.

Mutual fund officials said the practice of front-running is unlikely to cede, following the new rules by Sebi, as most AMCs already have such systems in place. “It doesn’t say anything more than what we are already doing,” said a top official with a private mutual fund.

Mutual fund officials said more steps are already in place to check front-running than what are mentioned in the circular. These include having restrictions on the rates at which dealers can place the ‘buy’ or ‘sell’ order in a day and checks on any changes in their lifestyles.

“If a dealer suddenly manages to buy a house in a plush locality or even a luxury car, then, we step up our vigilance. Similarly, we look if any particular broker talks more to a particular dealer than the fund manager...These are leads for us,” said the chief investment officer with a private mutual fund.

In a mutual fund, the practice of front-running harms unitholders, as it increases the cost of share purchases or reduces the realisations from share sale, thereby depressing returns.

Some mutual fund officials and brokers said Sebi’s emphasis to tackle front-running only in the dealing rooms is misplaced. “The focus is more on the small fish (dealers), while big sharks (some fund managers and market operators) have been let off the hook,” said a fund manager with a bank-owned mutual fund. “The profits made by the dealer (HDFC AMC) and his associates are paltry compared with what is being made outside the dealing room,” he said.

The three investors, who placed orders in the same set of stocks just before those were traded by dealer Nilesh Kapadia on HDFC AMC’s behalf, made combined profits of about `2 crore in four months, according to the Sebi order on June 17.

Brokers said fund managers, who usually buy or sell shares ahead of their employers, escape the regulatory radar by spreading their trades across various brokers. “Fund managers ensure that there is no pattern in the way any person or broker, who has been assigned to buy shares on their behalf, has done the trade,” said a broker, who is familiar with such trades. “There is no way that the regulator can catch them in the existing regulatory situation,” he said. 

Source - http://economictimes.indiatimes.com/markets/stocks/market-news/SEBI-makes-cell-ban-in-dealing-rooms-official/articleshow/6198615.cms

BSE to launch SME exchange by year-end

The Bombay Stock Exchange will start a separate platform for the small and medium-size enterprises by the year-end, a top bourse official said on Wednesday.
"We are awaiting Sebi approval. I am hopeful that in 3-6 months we will start the SME exchange," BSE Deputy CEO Ashish Chauhan said.

The exchange submitted the preliminary application to capital market regulator Sebi earlier this month seeking permission to launch the SME exchange.
With the exchange going live, the SMEs will be able to raise money from the market. The Asia's oldest bourse is in discussion with various merchant bankers and brokers to get their feedbacks on the endeavour. 

Currently, there are almost 3,000 SMEs trading through the BSE platform. Besides BSE, National Stock Exchange and MCX Stock Exchange have also shown interest in setting up such platforms for the SMEs. Sebi laid the groundwork to allow the SMEs to get enlisted on such exchanges recently.

The regulator has already notified the guidelines for the exchanges and now it is up to them to set up the platform.In November last year, Sebi had issued guidelines for setting up SME exchanges in India and for the SMEs wanting to get enlisted in such exchanges.

The guidelines released by Sebi last year relaxed the listing and disclosure requirements for the SMEs. It removed the need to comply with the eligibility norms for initial public offerings and follow-on public offerings as prescribed by Sebi's (Issue of Capital and Disclosure Requirements) Regulations, 2009.
Further, it also removed the requirement of an SME to have a track record to be listed on the bourse, thereby making it even possible for start-ups to approach the equity market. 

The submission of their financial results will also be done on a half-yearly basis instead of quarterly.Experts say these measures would considerably reduce the expenses associated with public issues and the subsequent listing on exchanges.

Source - http://business.rediff.com/report/2010/jul/21/bse-to-launch-sme-exchange-by-year-end.htm

SEBI wants IPO forms short & simple

MUMBAI: As part of efforts to attract more retail investors to the stock market, regulator SEBI is considering making applications forms simpler and shorter for public offers, including IPOs.

Concerned over the lukewarm and ever-falling retail response to the primary market, SEBI is mulling over ways to win over small investors in this segment and one of the steps under consideration is a simpler investment process.

According to sources, the application forms currently being used for bidding in initial and follow-on public offers are unnecessarily long and ask the investors to fill in some details that can be done away with.

Besides, these forms run into 15-20 pages in most cases, although there are only 2-3 pages where particulars need to be filled in by the investors and the rest of the pages contain instructions, information about the company and the issue and details about bankers, registrars and bidding centres.

The various proposals currently being discussed by SEBI's Primary Market Advisory Committee include removing from these forms the details already available in the investors' demat and bank accounts. These include the name of the investor's father or husband (depending on whether the investor is male or female), addresses, fax number and other contact details.

The move could cut down the columns needed to be filled by almost half, sources said.

Besides regulation and development of the primary market, this committee also advises SEBI on changes required to make the systems and procedures simpler and transparent.

To make the forms shorter and simpler, the committee is also considering dividing them into two parts -- one comprising the particulars needed to be filled in and the other with the details of the issue.

Sources said that a proposal is also underway to make it mandatory in all public offers to give the investors the option to bid online, possibly through the stock exchanges themselves, where the forms could be much simpler and shorter.

SEBI has already asked the bourses to make a simpler form available online for IPO bidding through the ASBA (Applications Supported by Blocked Amount) process. Under ASBA, bid money remains in the investor's bank account during the bidding process and get released after share allotment.

However, not all investors are required to bid through ASBA. Besides, this facility is not available for all issues and with all banks. Some changes can be expected on this front also, as SEBI is looking to expand the ASBA service further.

The primary market used to be retail investors' favourite investment avenue and an entry point for many of them till a few years ago, but their interest has been dwindling of late. 

This was reflected even in the recent offers from some public-sector firms, which have traditionally enjoyed a sound and safe investment image among public investors.

Sources said the government has also been asking SEBI to revive public investors' interest in primary market. 

Source - http://economictimes.indiatimes.com/markets/ipos/SEBI-wants-IPO-forms-short--simple/articleshow/6183471.cms

SEBI directs MFs to have uniform exit load

 

MUMBAI: The Securities and Exchange Board of India (SEBI) has directed mutual funds (MFs) to have a uniform exit load — a fee charged for early redemptions — for investments through the lumpsum route as well as systematic investment plans (SIPs). The securities market regulator communicated this to mutual funds in a briefly-worded letter without providing any reason, according to two officials at two different fund houses.

“We usually waive off the exit load for large investors, who invest a lumpsum, as the situation demands. In the case of SIP, we charge an exit load as per the period mentioned in the prospectus,” said a top official at a private mutual fund.

Prospectus of asset management companies (AMCs) says an exit load of 1% will be charged in case the investments are redeemed before a year. Most AMCs do not charge exit loads for investments over Rs 3-5 crore.

“It is the retail investors who usually tap the SIP route and a load on early exits is a deterrent against redeeming money before they can start showing returns,” the mutual fund official quoted above said. “Also, it’s a structure that suits the business,” he said.

This directive, among its various recent decisions, is seen as SEBI’s attempts to push mutual funds to shift their business focus on servicing more retail investors, drawing hushed protests from the industry.

“SEBI is getting into micro-management of the industry nowadays. It is getting all the more difficult to run the business,” said a senior official with another private mutual fund.

Last week, the market regulator reiterated its concerns over mutual funds charging higher expense fees in schemes meant for retail investors compared to the same product for institutions. Mutual funds offer two versions or plans — institutional and retail — of the same scheme. Higher expense fees could result in the institutional plan of a scheme fetching slightly higher returns than the retail version of the same scheme. 

SEBI chairman CB Bhave, at a recent industry body forum, criticised the business practices of the mutual fund industry and reiterated the need for them to focus on investors to grow.

Mutual funds have been struggling to attract money into their equity schemes since August 2009, when SEBI banned mutual funds from charging investors to pay fees to distributors. Following this move, distributors are selling fewer mutual fund schemes.  

Source - http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/SEBI-directs-MFs-to-have-uniform-exit-load/articleshow/6157201.cms

Sebi norms on physical delivery settlement soon

Market regulator Securities and Exchange Board of India on Thursday said it expects to frame guidelines on enabling physical delivery- based settlement in the derivative segment by the end of July.

"The issue of enabling physical delivery-based settlement is (being) discussed between Sebi and stock exchanges and we expect to reach a conclusion by end of this month," Sebi chairman C B Bhave told reporters on the sidelines of a function in Mumbai on Thursday.

"We should see something before the end of July," Bhave said.

In March, Sebi had decided to allow physical delivery in the equity derivatives segment to bring down speculation in the stock markets and had said it will hold talks with the stock exchanges and work on the system.

Bhave also said Sebi is considering whether distributors of financial products need to be regulated.

"We are looking at the issue and once we decide on it, we will bring out a consultative paper."

Replying to a query on the slow progress of mutual fund trading platform launched on stock exchanges, Bhave said, the process was new and took time to build up.

"We want to talk to stock exchanges. . .we want to give sufficient time, before arriving at any conclusion as to why there are not sufficient volumes," he said.

Sebi is also looking at launching options in the currency derivative segment fairly soon.

"RBI in its policy has said that currency options would be permitted. The technical group between RBI and Sebi is working on this and we expect a decision soon," Bhave said. Sebi is also considering issue of listing of exchanges.

"We have referred to a committee under the chairmanship of former RBI Governor, Bimal Jalan. There were issues relating to the 'infrastructure institutions in the market' that is stock exchanges, depositories and clearing corporations. The question was that can these institutions being infrastructural in nature be driven purely for profit and what kind of conflicts can arise out of that," Bhave said.

It needs to be ensured that the infrastructure nature of these institutions is protected and no problems are created in that particular role of these institutions, he said.

Source - http://business.rediff.com/report/2010/jul/08/sebi-norms-on-physical-delivery-settlement-soon.htm