Bombay HC helpless in MCX case

SEBI argued that merely the compliance of shareholding norms, but also, suitability of the stock exchange that needs to be carefully considered for granting permission for any stock exchange to start new services

Continuing with the MCX-SX versus SEBI case for the third day today, the Bombay High Court is virtually helpless as it cannot direct the Securities and Exchange Board (SEBI) to grant permission to Multi Commodity Exchange (MCX) to commence other services.

SEBI argued that merely the compliance of shareholding norms, but also, suitability of the stock exchange that needs to be carefully considered for granting permission for any stock exchange to start new services.

SEBI on Wednesday alleged that MCX-SX had concealed some facts while diluting its equity stake under the ‘capital reduction-cum-arrangement. Additional solicitor general Darius Khambata, who appeared on behalf of sebi brought on record that MCX-SX promoter Jignesh Shah and his wife were controlling a company called ‘Lafin’, which in turn holds 26% stake in financial technologies, also promoted by Mr Shah.

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SEBI for greater oversight of auditors, analysts

Currently, there are no guidelines for entities providing analytical services in India except for disclosure of holding in a client company and they are not supposed to trade in the securities of the company whose report they are preparing, for 30 days from preparation of such report

New Delhi: With an aim to shielding investors from vested interests and potential corporate scams, the Securities and Exchange Board of India (SEBI) has proposed to frame a strict set of rules for research analysts and wants an independent oversight body for auditors, reports PTI.

At the same time, the market watchdog is planning to prescribe a fresh set of guidelines for dealing with conflict of interest of associated persons in the market. It would also set up a separate unit for monitoring ‘Systemically Important Financial Institutions’ or very-large market entities.

The steps are being taken to comply with fresh guidelines issued by the International Organisation of Securities Commissions (IOSCO), a global body of market regulators.

The proposed steps were discussed at SEBI’s last board meeting, where approval was sought to take necessary regulatory actions in this regard.

Regarding auditors, SEBI said that it would write to the government of India pointing out gaps in the regulations for auditors and suggest possible solutions.

SEBI will request the government to consider a separate oversight authority for auditors, which is independent of audit profession.

The market regulator will put in place a proper mechanism “for enforcing compliance with auditing standards by the auditors of listed companies.”

Currently, the Institute of Chartered Accountants of India (ICAI) regulates accounting and auditing professions. ICAI is a licensing-cum-regulating body of the audit and accounting profession in India.

With regard to research analysts, SEBI said that there was a need for an ‘exclusive and comprehensive regulation’ for regulating the research analysts in Indian markets.

Currently, there is no regulatory framework for entities providing analytical services in India except for disclosure of holding in a client company and they are not supposed to trade in the securities of the company whose report they are preparing, for 30 days from preparation of such report.

Among other proposed steps, SEBI plans to set up a ‘Systemic Stability Unit’ to assess systemic risks emanating from the market for the overall economy.

The Unit will also help SEBI offer assistance and inputs to Financial Sector Development Council (FSDC) in monitoring Systemic Risks in respect of the market and monitoring of Systemically Important Financial Institutions under the jurisdiction of SEBI.

Besides, SEBI will also set up an inter-departmental regulations review committee to review gaps, to meet relevant global standards, deal with over regulation, repeal unnecessary regulations, update outdated regulations, simplify procedures and undertake assessment of overall costs to stakeholders.

In order to have a framework to deal with conflicts of interests by all market participants, associated persons, investment vehicles, collective capital pools, institutional investors, stock exchanges etc, SEBI will prescribe “Guidelines For Dealing With Conflicts of Interest in Securities Market.”

These guidelines would focus on active involvement of senior management of market participants, adoption of clear and concise policies, adequate disclosures, information barriers, effective procedures, remuneration, maintaining record of activities and specific prohibitions.

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COMMENTS

R Balakrishnan

5 years ago

It is time the auditors were put under an independent regulator. It is shameful that the CA Institute has not made any comment on the Vertias research report on Reliance group. One would have expected them to react, since the report virtually accuses the auditors too.

SEBI to keep an eye on credit rating agencies

In a memorandum to its board, SEBI said that it has laid down comprehensive framework for regulation of CRAs and also to address conflicts which may arise in their activities

New Delhi: Amid a global market mayhem triggered by a rating action in the US, the Securities and Exchange Board of India (SEBI) has decided to keep an ‘intent watch’ on the role of credit rating agencies and risks they might pose to the market—with an aim to make necessary changes in regulations for these entities, reports PTI.

The regulator will revisit the regulations for credit rating agencies (CRAs) after monitoring the domestic and global developments in this regard, a senior official said.

The issue was discussed by SEBI board in its last meeting and the regulator would propose required changes, if required.

A credit rating is indicative of the creditworthiness and potential risks associated with an entity being rated. CRAs, which give such ratings, are regulated by SEBI in India.

Global rating agency major Standard and Poor’s last Friday downgraded the long-term sovereign credit rating of the US, triggering a mayhem in the markets across the world. This is the first time the US has lost its top-notch ‘AAA’ rating.

Strongly objecting to the downgrade, the US had said that the rating agency’s analysis was flawed and also questioned the credibility and integrity of S&P over its action.

In the past also, questions were raised over the role of credit rating agencies, especially at the time of the global financial crisis of 2008 when many institutions and instruments, which were top-rated by CRAs, had collapsed.

The regulators, including in India, have been particularly concerned about the conflict of interest issue with regard to the actions of CRAs, as they are generally paid by the companies that actually get rated.

Also, it has been feared that the companies not agreeable to the terms of CRAs might get bad ratings.

In a memorandum to its board, SEBI said that it has laid down comprehensive framework for regulation of CRAs and also to address conflicts which may arise in their activities.

“However, as the area of CRA regulations is undergoing changes in the developed countries too, SEBI may keep an intent watch on both international and domestic developments and revisit CRA regulations from time to time to address any emerging issues in connection with role of CRAs and the risks they may pose to the market,” it noted.

In its new guidelines, the International Organisation of Securities Commissions (IOSCO), a global body of regulators, has called for CRAs being subjected to adequate oversight and a regulatory system for their registration and supervision.

While SEBI regulations are already compliant with this guideline, the Indian regulator has decided to keep a close watch on the developments surrounding CRAs with an aim to make necessary changes, whenever required.

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