The affidavit filed in the apex court says that Pranab Mukherjee tried to put in place a statutory search mechanism for the post of SEBI chairman and the whole time directors
In a hard-hitting affidavit, the Finance Ministry (FinMin) has challenged the assumptions and motivations of a group of the eminent citizens who have filed a writ petition in the Supreme Court over the appointment of the chairman of the Securities & Exchange Board of India (SEBI) and the whole time directors.
The affidavit filed by Amit Bansal, an under secretary in the Finance Ministry refutes two assumptions on the basis of which the ‘eminent citizens’ have sought to quash the appointment of UK Sinha as chairman and to extend the term of two whole time directors MS Sahoo and KM Abraham from three to five years (they have already quit SEBI ).
The petition makes two allegations. First, that the rules have "been altered and it is now possible for people with no expertise in the area to be handpicked at the whims and fancies of those empowered to do so under the amendment and this will impair the working of SEBI."
As has already been reported by various newspapers, the affidavit points out that the search committee in 2009 had mentioned four names. First M Damodaran who was already the SEBI chairman, UK Sinha and Jaimini Bhagwati (both former joint secretaries in charge of the capital markets portfolio at the Finance Ministry) and it mentioned that CB Bhave had mentioned that he was disinclined to accept the post. Yet, strangely enough, Mr Bhave was selected, when (as Moneylife has frequently reported) the Prime Minister was all set to grant an extension to Mr Damodaran.
The affidavit says that Finance Minister Pranab Mukherjee tried to put in place a statutory search mechanism for the post of SEBI chairman and the whole time directors.
The full affidavit of the finance ministry is as below:
The market regulator is considering expediting the clearance of IPO offer documents. It is also in the process of implementing regulation for centralised KYC for making the process easy
New Delhi: Market regulator Securities and Exchange Board of India (SEBI) today said it is looking at revamping the initial public offering (IPO) norms and putting in place a common KYC (know your customer) regulation for financial sector intermediaries, reports PTI.
“Whenever we find instances of violation (IPO norms), we will take deterrent action. It also calls for a relook at our entire IPO process. So we are doing that as well,” SEBI chairman UK Sinha told reporters on the sidelines of an ANMI event here.
He said very soon a regulation for centralised KYC would be put into place for making the process easy. “We have decided to have a thorough review of our risk management system as the current system is more than 10 years old,” Mr Sinha said.
Earlier this year, SEBI had decided to introduce a new short and simple form for IPO investors for increasing retail participation in the stock markets.
In the first half of the current fiscal, 30 companies have raised funds totalling over Rs5,000 crore through IPOs.
Sources in the know of the move say that the market regulator is considering expediting the clearance of IPO offer documents. Companies have a one-year time to come out with public offers from the date of SEBI clearance.
Mr Sinha further said that SEBI takes quick, effective and non-discriminatory action in case of market manipulation.
Speaking on the occasion, NSE chairman and managing director Ravi Narain said, “We want to have more products. But we are not interested in speculative products. However, any product which manage volatility and eliminate systems risk are welcome.”
Mr Sinha said the cost of trading has gone up in the country and that SEBI has taken up the issue with the government.
“It is now time for having a re-look at the Securities Transaction Tax (STT). SEBI has taken it up with government,” he said.
The government had introduced STT in 2004 on transactions in different types of securities. The rate presently varies from 0.025% to 0.25% depending upon the type of security traded and transaction—whether sale or purchase.
Mr Sinha further supported the call for bringing the investments of EPFO (Employees Provident Fund Organisation) and retirement fund to the stock market.
“I would recommend that we engage the labour leader and the trustees of such fund to tell them how the market functions,” he said.
Echoing similar view, Mr Narain said, “We should look at the New Pension Scheme (NPS) and Employee Provident Fund to increase participation in the markets.”
Equity funds record net inflow for three months in a row though the figure is drastically lower in October
The equity mutual fund schemes have enjoyed net inflows for the third successive month but inflows have tapered off drastically. According to statistics available from industry body Association of Mutual Funds in India (AMFI), equity funds witnessed a net inflow of Rs210 crore during October. As compared to the last month, which saw equity inflows of Rs1,440 crore, October inflows registered a 85% drop. The entire addition came from existing schemes. There were no additions from new fund offers. This has taken the overall net inflows in FY11-12 to Rs2,820 crore against a net outflow of a massive Rs18, 424 crore during the same period last year.
This small positive inflow belies the mood prevailing among investors and the marketplace. The market is in a volatile mode (the Sensex had gained 10% in the previous month) and a lot of buying and selling of mutual funds happened even as investors looked to directions. This is reflected in the fact that while equity inflows were Rs3,734 crore during the month, there as a huge redemption of Rs3,524 crore leading to a net inflow of only Rs 210 crore.
The heartening aspect is that a lot of investment is happening through systematic investment plans even through a depressed market. Earlier, money used to flow in only in a rising market.
The breakup for various funds for October 2011, available from the Association of Mutual Funds of India, indicates that there was an inflow of Rs8,288 crore from income funds, balanced funds saw a net inflow of Rs12 crore, liquid/ money market funds had an inflow of Rs32,745 crore, gilt funds had an outflow of Rs252 crore, gold ETF funds received a net inflow of Rs455 crore, whereas other ETFs saw an outflow of Rs191 crore, and fund of funds investing overseas had an inflow of Rs20 crore. The aggregate for October 2011 for all categories of mutual funds has been a net inflow of Rs41,287 crore. The aggregate for equity funds for 2011-12 has been an inflow of Rs3,285 crore till now.
One of the reasons for the net equity inflows consecutively in the last two months may be because mutual fund houses are leaving no stone unturned to keep distributors in good humour. Asset Management Companies (AMCs) are paying a higher upfront fee to distribution subsidiaries of foreign and private banks nowadays to drive ‘exclusive sales’ of their schemes, mainly equity schemes. This commission is in addition to the upfront and annual trail fees that mutual funds pay distributors for selling their schemes.