The National Stock Exchange has suffered three reverses in just one week: The Delhi HC verdict that it falls under the RTI Act; the verdict in the case filed by an ex-employee and finally, an order by the Competition Commission about its predatory practices
The National Stock Exchange (NSE), which projects the image of a government organisation, has been fighting multiple cases. In a sudden reversal of fate, it has suffered three blows in just one week. On Monday came the news that the Competition Commission of India has ordered an investigation into its predatory practices in the currency derivatives segment to kill the upstart competitor MCX Stock Exchange. Then, the Bombay High Court turned down its application to block a case in the lower courts, under which former employee A Sebastin has charged NSE of tarnishing his reputation (see here).
Finally, NSE’s effort to stay outside the public scrutiny under the Right to Information (RTI) Act has been thwarted. In a significant judgement, the Delhi High Court recently quashed NSE’s appeal against an earlier order by the Central Information Commission (CIC), rightly declaring the stock exchange as a public authority.
With this order, the stock exchange will now fall under the ambit of the RTI Act. As such, it will be forced to disclose information demanded by the public on various matters, subject to certain exceptions.
However, the embattled exchange may not take the order lying down and may soon appeal to the apex court, the Supreme Court of India. When Moneylife contacted an NSE official for their future plan of action, we were told that an immediate response would not be available.
In another similar case, the Bombay Stock Exchange (BSE) has moved the Bombay High Court.
The NSE has been vehemently fighting against any attempt at putting itself in the public eye, despite claiming to be a company run by ‘professionals’. Its contention is that, being an autonomous body with no government control over it, it cannot be forced to disclose information under the transparency law.
The exchange’s apprehension over disclosing company information has baffled many RTI activists and lawmakers alike. It is being viewed as desperate attempts on part of the exchange to cover up its various misdeeds.
The lack of transparency surrounding stock exchanges in the country is not surprising given that none of the exchanges are listed. This itself is highly detrimental to the interests of investors, shareholders and the society at large. Institutions which are at the core of stock-trading activities should be the first in line to bear the consequences of reckless trading and subterfuge of certain market participants.
The CIC had announced in June 2007 that all registered stock exchanges are public authorities under the RTI Act and therefore these organisations are obliged to give information to any requisitioner under the Act. The CIC had given its decision in response to two appeals filed by the NSE and the Jaipur Stock Exchange.
The CIC had made it perfectly clear that functioning of all recognised stock exchanges are under the ‘deep and all-pervasive close control’ of the Central government and hence they fall within the definition of ‘public authority’ under the RTI Act. The CIC in its ruling had elaborately enumerated various provisions of the Securities Contract Regulation Act (SCRA) to underscore the control that the government exercises over stock exchanges.
Yet, the NSE remained adamant and approached the higher judiciary challenging the interpretation pronounced by the CIC and obtained a stay order.
However, with the Delhi HC upholding the CIC order, the NSE has very few cards left to play. It will no doubt bring out every last trick in its bag to ensure that transparency and disclosures continue to remain outside its domain of ‘professional’ activities.
Markets reeled under selling pressure on fears that the RBI might increase borrowing costs in its forthcoming policy meeting, to check inflation. The trend is still down
The market was down today after a volatile trading session. The Sensex closed at 17,591, lower by 48 points (0.27%) and the Nifty closed at 5,262, down by 11 points (0.21%). The market rebounded in early morning trade after touching the intraday low. However, trading remained range-bound till mid-afternoon when the bourse touched the intraday high. It slid from there soon and traded in a narrow range for the rest of the session.
Asian stocks retreated from 22-month highs on Friday as fresh doubts about the US economic recovery and the Greece rescue package prompted profit-booking. Key benchmark indices in China, Hong Kong, Indonesia, Japan, Singapore, South Korea and Taiwan fell by 0.24% to 1.52%. Property and banking stocks led the decline in China after Beijing tightened policies on residential property markets on Thursday. US stocks posted their sixth straight day of gains on Thursday as an encouraging profit forecast from United Parcel Service lifted transportation shares, though concerns over a rise in weekly jobless claims limited the market’s advance. The Dow rose 21.46 points (0.19%) to 11,144. The Nasdaq rose 11 points (0.43%) to 2,515 and the S&P 500 rose 1 point (0.08%) to 1,211. European finance ministers discussed the Greek debt crisis today. While an emergency loan facility has been arranged, Greece said that the nation is imposing a painful austerity plan and any external help will be taken only after due consideration, based on the nation’s interest.
Closer home, a pre-monetary policy meeting is scheduled today between the finance ministry and the RBI governor. It is expected that balancing growth while keeping inflation under control will be the major subject of the discussions. The government expects private companies to invest half of the projected $1-trillion investment in infrastructure between 2012 and 2017. Difficulties in acquisition of land, and underdeveloped bond markets have been coming in the way of long-term infrastructure projects.
A new regulation from the Securities and Exchange Board of India (SEBI) has tightened disclosure norms for foreign institutional investors. Foreign investors now have to disclose to the regulator whether investments are in the form of multi-class vehicles (MCVs), segregated portfolio companies (SPCs) or protected cell companies (PCCs).
Foreign institutional investors were net buyers yesterday of Rs99 crore. Domestic institutional buyers were net sellers of Rs76 crore. The rupee recovered from yesterday’s low on dollar inflows.
JSW Energy (up 3.8%), through its wholly-owned overseas subsidiary, acquired 49.8% stake in Royal Bafokeng Capital from Strider Holdings with an option to acquire the balance stake. Ramco Systems (up 6.9%) has entered into an agreement to provide its repair, procurement and invoicing functions to ESIS. The partnership will leverage all versions of Ramco System’s aviation software, maintenance repair & overhaul systems and enterprise resource planning. Aurobindo Pharma (down 0.3%) has received approval for its Abbreviated New Drug Submission for Cefprozil tablets in strengths of 250mg and 500mg and Cefprozil powder for oral suspension (PFOS) in strengths of 125mg/5ml and 250mg/5ml from Health Canada. Reliance Industries (down 0.6%) has invested around 26% in Deccan 360. This investment will be used to increase the air and surface coverage of the logistics company. Goenka Diamond & Jewels (down 5.3%) listed on the market today. The company had priced its initial public offer at the lower end of the Rs135 to Rs145 per share price band following a muted investor response to the issue. The issue was subscribed 1.07 times. Larsen & Toubro (down 0.1%) is in discussions with Mitsubishi Heavy Industries to form a joint venture for manufacturing a wide range of heavy industrial tyres. Pipavav Shipyard (up 0.2%) is in talks to buy an oil rig and shipping company in Europe.
Team Life Care Co, an authorised corporate agent of Bajaj Allianz Life Insurance, is carrying on a multi-level marketing scheme under a sister entity called TLC Insurance (India) Pvt Ltd, in open violation of the law
Peddlers of multi-level marketing (MLM) schemes in insurance products are coming up with new ways to cover up their shady activities. One such company is Team Life Care Co India Pvt Ltd, a corporate agent of Bajaj Allianz Life Insurance Company Ltd.
Team Life Care Co (India) has a website (see here) in which it lists down all the Bajaj Allianz products that it sells. However, Team Life Care Co (India) seems to be running a mirror website in a company called TLC Insurance (India) Pvt Ltd (see here) where it lists down an elaborate and bizarre MLM scheme.
Section (41) of the Insurance Act (1938), clearly says that “a licensed agent, whether individual or corporate, can’t appoint a sub-agent and pass on a commission to another person or entity. Any passing of commission by an agent is construed as rebating and is prohibited under the Act.”
Moneylife contacted both Team Life Care Co and TLC Insurance (India) Pvt Ltd. Soumya Nair from Team Life Care Co confirmed that TLC Insurance (India) Pvt Ltd was an outfit that it was running. Saurabh Dahayat from TLC Insurance (India) Pvt Ltd also confirmed that it was a part of Team Life Care Co. Both Ms Nair and Mr Dahayat confirmed that both these entities share a common managing director, one Mr Jagannath (initials or first name not available).
When Moneylife contacted Mr Dahayat from TLC on how the MLM scheme operates and the relationship between the two entities, he said, “Team Life Care is an operations department of TLC where you get a login ID and all your queries are cleared. You have to draw a demand draft (DD) on the name of TLC Insurance. You have to issue one DD in favour of Bajaj Allianz and the other for TLC Insurance (India) Pvt Ltd. Both companies are a part of one group. Our managing director is (the) same. You have to work for TLC Insurance (for the MLM scheme).”
Here is a clear case of a company which is running a legitimate insurance agent business, but which has a mirror entity which is engaging in an MLM insurance scheme, expressly prohibited under the Insurance Act.
If you take a look at the websites of both these companies, you would notice that they carry a common logo (see above links).
Santosh Balan, head, (Corporate Communications) from Bajaj Allianz sent us this email: “We wish to inform you that Team Life Care Co (India) Ltd is a Corporate Agent of Bajaj Allianz Life Insurance and they solicit business through approved specified persons only. All our agents are strictly advised to follow all regulations and procedures while soliciting business. If we find anyone violating any norm or regulations, we would take strict action against them.”
However, Mr Balan also added, “The two entities mentioned in your mail are distinct and are two different companies.”
The question is, why is Team Life Care Co operating an MLM scheme through another entity (TLC Insurance (India) Pvt Ltd)? As we mentioned earlier, both companies have confirmed to us (over the telephone) that they are related to each other and share a common managing director.
What's more, the entity running the MLM scheme, TLC Insurance (India) Pvt Ltd, has a number of 'testimonials' in its website which point to various court orders and attestations from legal luminaries confirming that the MLM scheme that it is running is a legitimate business.
Moneylife is not in a position to confirm the legitimacy (or otherwise) of these various court orders and testimonials that TLC Insurance (India) is carrying on its website.
But if MLM schemes are expressly prohibited under the Act, how can a company run such a scheme under such a guise?
When we contacted the regulator, the Insurance Regulatory and Development Authority, an official told Moneylife (on conditions of anonymity), “Only licensed individuals (are) allowed at the point of sale, and sharing of commission is not allowed.”