The apex court issued notice to union government on a PIL challenging Finance Minister's power to nominate two members in the search and selection board for appointment of SEBI chairman and full time members
New Delhi: The Supreme Court on Friday issued notice to the Centre on a public interest litigation (PIL) challenging the Finance Minister's power to nominate two members in the search and selection board for appointment of Securities and Exchange Board of India (SEBI) chairman and full time members.
A bench headed by Justice SS Nijjar, however, refused to stay Rule 3 (5)(e) of SEBI (Terms and Conditions of Service of Chairman and Members) Rules, 1992, which empower the Finance Minister to nominate two members.
The court passed the order on a petition filed by former IPS officer Julio Ribeiro and other members of civil society alleging that the rules framed by the government were contrary to the SEBI Act.
Ribeiro had earlier also approached the apex court challenging appointment of UK Sinha as SEBI chairman on the same ground, but the court had refused to entertain his plea on the ground that the allegations levelled in the petition were of personal nature.
The petitioner later filed a fresh PIL dropping all those allegations and challenging only the rules framed by the government.
The apex court on 21st November declined to entertain a plea questioning the appointment of Sinha as SEBI Chairman, saying it is aimed against an individual under the garb of raising legal and constitutional issues.
Ribeiro, in his earlier petition, had submitted that the new procedure, stipulating a five-member panel for selection of the SEBI chief in place of the existing three members, was wrong and there was an ulterior motive behind it.
The petition had alleged that rules were changed for appointment of the SEBI chairman and members under corporate pressure.
The government had refuted the allegations and had submitted an affidavit, which had said Sinha was the unanimous choice of the search and selection panel and no undue favour was shown to him by his appointment at the post.
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The panel recommended that general insurance companies proposing to come out with IPOs should disclose the “claims arising out of catastrophic losses, which could impact the profitability or cash flow of the insurance companies.”
Mumbai: Clearing the decks for the Insurance Regulatory and Development Authority (IRDA) to come out with initial public offer (IPO) guidelines for general insurers, a Securities and Exchange Board of India (SEBI) appointed panel has suggested outlining risk factors in the offer document, including return from their investments, reports PTI.
“The insurance industry is different from other industries and has risks which are unique to it,” the panel said, adding that specific risk areas need to be disclosed in the offer document.
The SEBI Committee on Disclosures and Accounting Standards (SCODA) recommended that general insurance companies proposing to come out with public offer should disclose in offer document the “claims arising out of catastrophic losses, which could materially and adversely impact the profitability or cash flow of the insurance companies.”
The report of the panel, having representatives of both SEBI and IRDA, will now be used by insurance regulator IRDA to finalise the guidelines for general insurance companies to come out with IPO.
The offer document, it suggested, would outline industry specific risk factors like interest rate risk, liquidity risk, catastrophic risk, re-insurance risk, regulatory risk and market growth risk.
IRDA had last year issued IPO norms for life insurance companies.
Also they need to inform regulatory restrictions on investments and the impact of any possible default any re-insurers which could materially affect the financial condition and results of their operations.
The meeting of the panel held in January this year has suggested that the insurer should come out with overview of the entire industry and a specific format as prescribed by the IRDA.
“...considering the fact that no insurance company in India has come out with an issue so far, it is felt necessary that the investors get a broad overview of the insurance industry,” it said.
Broad parameters under which such disclosure would be made by insurance industry has been suggested, it added.
Insurance companies have to disclose financial information at regular interval to IRDA.
The panel has also given its suggestions with regard to advertisements, objects of issue, definition of Promoters and disclosure with regard to uniform financial denomination.
The sub-group recommends that report of an independent actuary on the Economic Capital of the insurance company should be made a part of the offer document.
The contents and format of the reports and criteria for actuaries who are authorised to prepare such report may be prescribed by IRDA, it said.
These suggestions are based on the study of existing practices in other global markets..