Budget 2018 empowers SEBI to act tough against non-compliers in Capital Market

Image source: The Hindu

 

SEBI (Securities Exchange Board of India) has been empowered to deal with key market intermediaries such as clearing corporations along with newer entities in the sector such as research analysts and investment advisers as per the changes proposed in the Finance Bill, 2018. Named as Securities Contracts (Regulation) Act 2018, the legislation allows the capital markets regulator to impose fines up to Rs 25 crore or thrice the amount of profit made on the account of non-compliance of rules. The least amount of fine has been fixed at Rs 5 crore. This legislation marks a stark difference from the earlier policies where SEBI was empowered just to warn for non-compliance to erring parties.Additionally, the permanent Board members of SEBI have also been given powers to oversee such non-conforming parties. The new bill also states that for the period of non-compliance the market participants will have to pay a hefty fine of Rs 1 lakh one day.

The move was welcomed by ex-SEBI Officials who stated that in the light of exposure of Indian Capital Markets to newer varieties of hybrid funds like ATF, REIT’S etc. it was important to have a legal deterrent for the process. The twins fold penalty powers with the presence of adjudicating officer for each case is expected to increase the overall quality of disclosure instead of a routine check approach.

SEBI was merged with Forward Markets Commission in 2015-16 in the light of National spot Exchange Scam.

Source: Business Standard, The Hindu

SEBI bars Price Waterhouse from auditing listed companies in India for two years

Ramalinga Raju, founder and former chairperson, Satyam, astonished Indian markets and investors in January 2009, when he acknowledged that the firm had exaggerated earnings and assets for several years, in a scam of more than $1 billion also known as “India’s Enron”.

Price Waterhouse(PW) was Satyam’s auditor during the time in which the scam was committed.

The SEBI, on 10th January, 2018, said any entities or firms practicing as chartered accountants in India under the brand and banner of PW, shall not directly or indirectly issue any certificate of audit of listed companies, or their intermediaries that are listed with the regulator for a period of two years.

SEBI in its 108-page order stated that the network structure of operations adopted by the international accounting firm, Price Waterhouse, should not be used as a defence to avoid legal consequences arising out of the certifications allotted under the brand name of the network.

In India, all audits within the group are directed under the PW brand, with a network of local firms functioning under the banner. The wider PwC entity handles consulting, tax advisory and other businesses.

Price Waterhouse in its defence said, the SEBI order relates to a fraud that took place nearly ten years ago, in which we played no part and had no knowledge of.

Price Waterhouse, further clarified that it was confident of getting a stay order before SEBI’s order becomes effective. They said that there was no intentional wrong doing by PW firms in the unprecedented management done scam at Satyam, nor have we seen any material evidence to the conflicting.

To avoid operational problems, SEBI said its order will not impact audit projects relating to the ongoing 2017-18 financial year, already accepted by firm’s part of the PW network.

 

Sources: Reuters, Hindustan Times

SEBI: Government to decide on 25% holdings of PSUs

The government needs to take a stand on the fate of public sector companies be from the 25% minimum public shareholding rule, market regulator SEBI (Securities and Exchanges Board of India) chairman Ajay Tyagi said.

Also, stricter norms for credit rating agencies will be considered, mainly because in the past they have failed to take timely action in the case of stressed companies, and that the National Stock Exchange (NSE) should ideally file revised offer documents for its initial public officer.
“Department of investment and public asset management, under the finance ministry, has represented to us on 25% minimum shareholding, but the government has to decide on this,” Tyagi said on Monday on the sidelines of an event organised by Standing Conference of Public Enterprises (SCOPE), an organisation representing central public sector companies. DIPAM oversees stake sale of state-run companies.
Governance Issues 
  • 20% of cos still do not have a woman director
  • Scope for improvement in the functioning and appointment of independent directors and audit panels
  • Role of nominee directors needs to be looked into
All listed PSUs must ensure that their public holding is minimum 25% by August 21, 2017. But a number of such firms are not likely to be able to meet the deadline.

The government is now contemplating extending the deadline to allow time to these PSUs, some officials said. The proposal to bring listed PSUs on par with private sector entities was announced in 2014. The final government decision will have implications on its divestment plan.

Tyagi made these remarks at a recent session with CEOs and senior executives of PSUs organised by SCOPE (Standing Conference of Public Enterprises). SCOPE is an apex professional organisation representing central government public enterprises.

Sources: Economic Times, The Hindu Business Line

New Sebi measures a relief for lenders buying stakes in stressed firms

Announced on Wednesday, June 21, the new measures of the Securities and Exchange Board of India (SEBI) offer relaxation to new investors while buying their shares in distressed firms. The new norms will mean that buyers are now exempted from the need to make open offers to shareholders.

As per a report in The Times of India, under usual circumstances, it was mandatory for an investor buying more than 25% of stake to make such an offer to other shareholders. This is in aftermath to the list of 12 companies that the RBI had sent a week ago. “This exemption would serve as a relief to such lenders once these firms see a changes in management”, opines Manoj Kumar, head of a Delhi-based advisory firm. However, this relaxation will depend on certain conditions.

Sebi has tightened norms for issue of participatory notes (P-Notes). A fee of $1000 has been levied for the use of such notes.

Sebi also plans to amend the FPI (Foreign Portfolio Investors) regulations to ease the entry of such investors. They would be exempted under the strategic debt restructuring scheme (SDR), according to the Financial Express. “The National Stock Exchange (NSE) and 14 key personnel have been given show-cause notices for giving certain brokers a favoured treatment and immediate access to the data feed of the exchange” mentions Sebi chairman Ajay Tyagi.

After the introduction of these measures the Sensex hit an all-time high of 31,494, reported The Hindu.

Sources: The Hindu, The Times of India, Financial Express

ICICI Prudential Life IPO to raise Rs 1,635 crore from anchor investors

ICICI Prudential Life Insurance Co, which is due to launch India’s biggest Initial Public Offer (IPO) on Monday, has decided to raise Rs 1,635 crore ($243.7 million) by selling shares to 38 anchor investors as part of the IPO, reported Reuters.

The IPO aims to raise as much as Rs 6057 crore. The insurer’s parent ICICI Bank will be seen selling about 12.63% stake. The sale, which is opening for public subscription on Monday, will continue until Wednesday, as reported by Business Today.

According to a regulatory filing late on Friday, the anchor investors, led by the Monetary Authority of Singapore and the government of Nomura India and Singapore Investment Mother Fund are buying close to 48.96 million shares priced at Rs 334 per share. By setting a price range of Rs 300 to 334 for the sale, ICICI Bank is selling a total of 181.34 million shares in the insurance arm’s IPO.

To make the listed entity compliant with the Security Exchange Board of India’s (SEBI) minimum public shareholding norms, both ICICI Bank Ltd and Prudential have agreed to shed their stake in the insurer with a floor of 54% and 20%, respectively.

On Friday, the stock of ICICI Bank closed down 1.15% at Rs 267.55 on the Bombay Stock Exchange.

 

Companies can appoint qualified female relatives on their board, says SBI Chief

In 2013, the business world saw a great reshuffle as many of the firms got their female family members on the company’s board after India revamped its laws and made it mandatory for listed companies to have at least one woman as a board member.

Taking a cue from this, Arundhati Bhattacharya, Chief of State Bank of India on Wednesday said that it is totally acceptable as long as they are eligible to hold the post and understand the nitty-gritty of their businesses. After Securities and Exchange Board of India started imposing fines on firms failing to abide by this policy from 2015, many companies jumped into appointing female board members thereby improving the skewed ratio of women in the workplace.

Bhattacharya is the first woman chairperson of SBI, India’s oldest and biggest public sector banking giant. According to the Forbes, she is one of the 5 powerful women in the world of finance. She rebuffed the common myth that there is a dearth of talented women for the board’s post. The International Labour Organization ranked India 121 out of 130 in terms of female participation in the workforce.

The main reason for women to fall off the corporate ladder is after embracing motherhood. Hence, she enforced a law that allows women to take a sabbatical of two years post their deliveries. She is also known to be vocal about her views on bad debts and the inability of Vijay Mallya to repay his loans. Investors are speculating whether she would continue as the head for the next term. Albeit, she has debunked a myth that a corporation’s responsibility cannot be in a woman’s hand.

Sources: Scroll.inEconomic Times

 

Sahara finds new suitor for prized overseas hotels

The Sahara Group has found a new suitor who bid $1.3 billion for its prized overseas hotels .

A consortium of family investors comprising of UK’s Jasdev Sagger led 3 Associates and others from UAE and Saudi Arabia, has offered $1.3 billion for Sahara’s hotel assets– Grosvernor House in London, the Park Plaza and Dream Downtown in New York. 

Sagger told the PTI that they’ve made a “very compelling offer.” He added that they would aim at long term investment if the offer is accepted by the Sahara group and the Supreme Court. As reported by the Economic Times, if the consortium acquires the deal, it plans to dispose the Dreams and focus on the development of the Grosvernor House and the Plaza.  

The Indian group on the other hand have not hinted upon any confirmation yet. The offer may lead to a new bidding war, as it had initiated talks with a Qatar based group for the deal of these hotels. 

Sahara group’s chief Subrata Roy was in jail for over two years in connection with a long-running dispute with market regulator SEBI and is currently out on parole and trying to raise funds.If the deal is cracked, a major chunk shall go to India-born billionaire brothers David and Simon Reuben who had signed a USD 850 million deal with Sahara to prevent the Grosvernor from undergoing a ‘default-triggered sale’. 

The developments in this deal shall largely determine Sahara’ position in the market.

Sources: The HinduThe Economic Times,