The Group has alleged that NSE issued certain circulars in contravention to the rules and guidelines of the SEBI and thus favoured brokers over investors
Delhi-based Investor Protection Group (IPG) has filed a writ petition in the Delhi High Court (HC) against the National Stock Exchange (NSE), requesting to give directions to the Securities and Exchange Board of India (SEBI), to conduct an in-depth investigation into the alleged illegalities committed by the NSE. The petition is scheduled to be heard on 16th November.
In a release, IPG said, “We have asked court to direct SEBI to conduct a thorough investigation into the illegalities committed by the NSE and investigate if the acts of NSE are biased and are responsible for plotting loopholes in the system and to initiate appropriate legal action including cancellation or suspension of the registration/ licenses of NSE, if the same is established.”
According to the IPG, the Exchange deliberately issued certain circulars, in contravention to the rules and guidelines issued by SEBI, favouring the brokers and not to the investors. The group has also prayed to declare “those clauses of the circulars as null and void.”
Explaining the dubious role of NSE, the Group alleged that, “NSE acts as an informer to the brokers whereby they retrieve the critical information/ complaint from client and provides the information to the broker, but do not provide the complete documents /information to the client from brokers.”
It adds that, “Clients are made to fight their cases with incomplete information and as a result loose their case. NSE also does not support or provide any information about your account till they are forced by the Arbitrators.”
It has also alleged that illegal and unauthorized trading is carried out by the stock brokers under shelter of NSE. SEBI is also been named in the writ petition, because according to the group, such illegal trading are not monitored by the SEBI, as its responsibility as a stock market regulator.
The Delhi-based group has also alleged NSE for allowing brokers to make agreements/ contracts on their own without the mandatory signature of the clients required at the time of registration. The writ petition has been referred to a division Bench of Delhi HC in the category of Public Interest Litigation (PIL).
IRDA may allow agents to sell products of more than one company similar to opening bancassurance to two insurers. Will it help agents increase remuneration or confuse customers and undermine the intension of the change? Will it increase mis-selling?
Insurance Regulatory and Development Authority (IRDA) plans to allow agents to sell products of more than one insurance company just as they are considering opening bancassurance to allow selling insurance products of two companies. There are arguments from both sides, but private insurers will stand to benefit more than LIC.
An official from the Life Insurance Corp of India (LIC) said, “Customer buys LIC product due to trust in the company. If agents sell insurance products of more than one company, they will be seen as mere individual and no longer carry the goodwill of LIC. The customer will get suspicious and not make buying decision. Even if 2% of the agents indulge in mis-selling to earn higher commission, it will ruin the whole system. As such, insurance is push product in India and takes lot of efforts by the agents to make a sale.”
Private insurers on the other hand have lot to gain as they may be able to tap into the huge pool of about 13.5 lakh agents of LIC. Their interest will mainly be the big agents of LIC who can drive volumes and help penetration. There has been steep decrease in the number of agents in life insurance business and opening of tied agency will only help private insurers. According to Life Insurance Council, “The number of agents came down from 3 million in 2009-10 to 2.65 million in 2010-11.”
Amitabh Chaudhry, managing director and chief executive, HDFC Life, said, “I know the regulator has brought this up in a recent interaction with media. However, I think it is a bit early to comment without getting to know more about this. On the face of it, such a move will help agents to offer more choice, which is good for the customer. It might also help bring agents back to the industry since the completion of a licensing process will enable them to get two licenses which is a positive for the agent”.
“We have seen almost three lakh agents have gone out of the pool in the last year since the economics of life insurance business doesn't enable them to go out and connect with customers, provide right financial advise and service the customer over the long term. The small and mid-sized agents who were instrumental in spreading life insurance across the country are not willing to get into the industry. Will allowing agents to sell products of two life insurance companies redress that? Also, will we have safeguards against unintended consequences of such a move like agents churning the customer portfolio between two insurers? I don't think we can answer these till we have a more detailed proposal from the regulator. If it does manage these issues, I am sure the industry and the agents will welcome it,” Mr Chaudhry added.
The bigger question is whether IRDA will really open the tied agency model? According to a life insurance agent, “IRDA talked about it when it came in existence. Due to opposition from LIC they (IRDA) put it off for 10 years. Over 90% of LIC agents work part-time and allowing them to sell other insurer products will help in increasing their remuneration. Ultimately, the choice should be left to customer and agent. Today, agent cannot talk about products from other insurance company and hence cannot offer best insurance to a customer. Moreover, if brokers are allowed to sell all insurance company products, why not agents?”
“General insurance agent association had in the past recommended to IRDA about allowing agents to sell mediclaim and other general insurance products from more than one insurance company. IRDA argument in the past for not allowing was about insurance company spending on agent training. At that time they were thinking of opening of tied agents if they had completed certain number of years in the business,” said another agent who sells general insurance products.
Life and general insurance agents also sell other financial products like mutual funds and there may be no real need for them to be tied to one insurance company. In UK the tied agency model has vanished. Are there any local circumstances that prevent from India to adopt the same?
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Experts and activists who under the Pune Metro Jagruti Abhiyaan have been campaigning for a well planned metro, may have some hope now
Unarguably, public transport is the biggest issue concerning Pune. With nearly 25 lakh private vehicles on roads, more than 70% of which comprise two-wheelers, traffic chaos on roads has turned commuting into a nightmare. Add to this is poor show of the Pune Municipal Corporation (PMC) in the management of public transport buses and BRT routes.
It was against this background that the Pune Metro proposal was floated in 2008. However, predictably, lack of application and transparency put the metro proposal, made haphazardly by the Delhi Metro Rail Corporation (DMRC) into a whirlpool of controversy. The Detailed Project Report (DPR) of the Pune Metro was passed by 143 out of 144 corporators unanimously in a few minutes, without even studying the proposal. When the lone independent corporator Ujwal Keskar asked for its copy at that General Body meeting where the resolution was passed, the city engineer replied that "He had forgotten to get it''. So much for the seriousness of the most expensive project ever to come to Pune, then estimated to be over Rs10,000 crore.
Things began to derail in 2010 when the PMC declared it would choose the least priority corridor of around 16 kms, completely elevated running though congested roads; would demolish heritage structures and residential buildings, would go over sensitive areas like Pune Railway station (for which permission was not sought) and 4 FSI would be permitted along the corridor which would lead to unimaginable congestion and stress on civic infrastructure. The haphazardness also reflected in the casual manner in which the DPR stated levying of an array taxes on citizens for any number of years without giving specifis; location of metro depots which were opposed, one by the College of Agriculture authorities and the other at the Kothrud garbage dump, earmarked for ShivShahi Pratishthan.
The Pune Metro Jagruti Abhiyaan (PMJA), an umbrella of organizations comprising civic and social activists, civil engineers, architects and urban planners and corporate leaders campaigned rigorously through mass awareness campaigns through PPT presentations and intense dialogues with political leaders of the city and state as well as officers of the PMC administration. The demand was an independent assessment of the faulty DPR and to consider an underground metro for the maximum effect in terms of passenger utlisation and undisturbed progress of work.
Hyderabad Metro is a sterling example of the progress of its elevated metro stuck due to 60 per cent of land acquisition either in litigation or vehement opposition. The Jaipur elevated metro too has brought in demands by citizens of stopping work midway due to enormous inconveniences to citizens. In Mumbai, the fully elevated 12 km Versova-Ghatkopar corridor which was scheduled for completion in December 2010 is not even 50 per cent complete. The second corridor of Charkop-Bandra-Mankhurd also fully elevated and scheduled to complete in December 2014 is yet to clearances from MoEF, Coastal regulation autorities, Fire department, civil aviation and railways. Now, wisdom has dawned, as the third corridor of Colaba-Bandra which was to be partly elevated is now going to be completely underground.
Despite intense dialogues with stakeholders by the PMJA, the PMC passed the defective Pune Metro proposal wherein a large part of the funding was to come from the state and central government. However, it is languishing with the state government since the last one year. Thankfully, deputy chief minister Ajit Pawar declared last week that after seeing the mess that elevated corridors have created in cities like Mumbai, Hyderabad and Bangalore, he would support underground metro for Pune, even if it is not as cost-effective as the elevated metro, since in the long run the former would be more beneficial.
Underground Metro for Pune which was one of the primary demands of PMJA seems to suddenly have a glimmer of hope. In a Press Conference organized by PMJA on Monday evening, Arun Firodia, leading industrialist and an integral part of the PMJA campaign through MCCIA's social NGO Janwani stated that, "We welcome the statement by Pune's Guardian Minister Mr Ajit Pawar supporting underground Metro for Pune. As against the common perception that an underground metro will take time, it, in fact can be implemented faster as there would be very minimal land acquisition issues; no shifting of utilities as an underground metro would be below 15 or 30 metres; no disturbance or inconveniences to citizens as work would not be on the road - the machines would be working smoothly and uninterrupted below the soil.''
Narendra Bhagwat, underground metro expert who was a consultant for the Bangkok, Bulgaria and part of Delhi underground metro said, "Pune being in the Seismic Zone IV, it was unadvisable to have an elevated metro. Underground metro is ideal for Pune as it has hard rock, which is extremely good for the corridor. All over the world, it has been observed that an elevated metro has a life of only 20 to 30 years whereas underground metro lasts more than 100 years as has been witnessed in cities like London and Moscow.''
Talking about the costs, KK Gokhale, railway engineering expert said, "The DMRC's DPR has touched upon only the construction cost for the elevated corridor which PMC has chosen to build first but it has not taken into consideration land acquisition charges, shifting of utilities etc which it has put the onus on the PMC. Also, an elevated metro corridor has to go along the road design whereas the underground metro has no such restrictions and therefore the routes will be shorter, thus saving upon money and the network between stations would be more comprehensive and easier to build.''
Civic activist Prashant Inamdar said, "DMRC report also states (Chapter 4, pg 2) that underground metro is preferable over elevated metro if corridor is on busy roads.''
So, what is now required for the consideration of Underground Metro as the elevated metro proposal is already with the state government? Experts stated that, ``there is already a few kilometers of underground metro line planned in the present DPR - all that is required is modification in the plan.'' Corporator Ujwal Keskar who is also keen on a underground metro plans to seal it technically in the parliament of the Pune Municipal Corporation in a day or two before the code of conduct comes into effect for the PMC elections to be held early next year.
(Vinita Deshmukh is consulting editor of Moneylife. She is also an RTI activist and convener of the Pune Metro Jagruti Abhiyaan. She can be reached at [email protected]).