SEBI disposes of proceedings against three brokerages

 

After considering all the facts of the case and going through the replies sent by the brokerages to the notices, SEBI said the exposure provided by them to their clients was as per the policy followed by them and no exceptions were seen to have been made

Mumbai: The Securities and Exchange Board of India (SEBI) on Tuesday disposed off proceedings against three brokerage firms, including Geojit BNP Paribas Financial Services, in a case relating to trading in the scrips of RTS Power Corporation, reports PTI.

In three separate orders, SEBI disposed of case relating to Geojit BNP Paribas Financial Services, Destomonies Security Pvt Ltd and Networth Stock Broking.

“Considering the facts and circumstances of the case...

do not find the instant matter fit for imposition of penalty in terms of Section 15 HB of SEBI Act and dispose of the proceedings accordingly,” SEBI said in identical orders.

Section 15 HB deals with penalty for contravention where no separate penalty has been provided in cases of failure to comply with any provisions of the SEBI Act.

SEBI had earlier conducted investigation in trading in the scrip of RTS Power Corporation at the BSE for the period 1 September 2008 and 11 February 2009.

It had received complaints that some individuals bought shares of RTS Power in February 2009 and failed to fulfil their respective pay-in-obligations.

On analysing the KYCs (know your customers) obtained from various trading members, it was observed that the three brokerage firms trading on behalf of some of the individual clients allowed huge positions within one month of registration with them even though the annual income was as below as Rs1 lakh.

“It was alleged that the exposure given to the newly registered clients considering their financial strength indicated a failure of risk management at the noticee’s end,” SEBI said, adding that the brokerage firms were alleged to have failed to exercise due care and abide by code of conduct under SEBI regulations.

In December 2010, the regulator issued separate show-cause notices to all the three firms.

After considering all the facts of the case and going through the replies sent by the brokerages to the notices, SEBI said the exposure provided by them to their clients was as per the policy followed by them and no exceptions were seen to have been made. 

It also found that the noticees allowed the clients to trade only after the cheques got cleared and exposure was given after the clients had sufficient credit balance.

 

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SEBI directs merchant bankers to disclose track record of public issues

 

SEBI on Tuesday directed merchant bankers to disclose the track record of the performance of the public issues managed by them. The move will enable investors to take well-informed investment decision, the regulator added

Mumbai: With a view to enable investors to take well-informed investment decisions, the Securities and Exchange of India (SEBI) on Tuesday directed merchant bankers to disclose the track record of the performance of the public issues managed by them, reports PTI.

In a circular, SEBI of India said the decision has been taken after consultation with merchant banks.

“...it has now been decided in consultation with the merchant bankers that they shall disclose the track record of the performance of the public issues managed by them,” it said.

SEBI further added: “The track record shall be disclosed for a period of three financial years from the date of listing for each public issue managed by the merchant banker”.

It also said that the track record will have to be disclosed on the website of the merchant banker and a reference to this effect shall be made in the offer documents of public issues managed in the future.

“In case more than one merchant banker is associated with a public issue, all merchant bankers who have signed the due diligence certificate, as disclosed in the offer document, shall disclose the track record,” SEBI said.

According to the regulator, it is necessary for investors to evaluate the post-issue performance of the issuer in terms of disclosures made in the offer documents.

“This will also enable them to understand the level of due diligence exercised by the merchant bankers,” SEBI said.

It said the new rule will come into force with immediate effect.

 

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Govt notifies 100% FDI in single-brand retail

Single-brand retailing would cover products which are branded during manufacturing and the foreign investor should be owner of the brand. However, in respect of proposals involving FDI beyond 51%, mandatory sourcing of at least 30% would have to be done from the domestic small and cottage industries

New Delhi: Notwithstanding its inability to open multi-brand retail for foreign investment, the government on Tuesday notified 100% foreign direct investment (FDI) in single-brand retail, paving way for global chains like Adidas, Louis Vuitton and Gucci to have full ownership of their India operations, reports PTI.

“Foreign Direct Investment (FDI), up to 100%, under the government approval route, would be permitted in single brand product retail trading,” a press note by the Department of Industrial Policy and Promotion (DIPP) said.

However, in respect of proposals involving FDI beyond 51%, mandatory sourcing of at least 30% would have to be done from the domestic small and cottage industries which have a maximum investment in plant and machinery of $1 million (about Rs5 crore).

“FDI in single-brand has led to emergence of some global majors in Indian market... This will provide stimulus to domestic manufacturing value addition and help in technical upgradation of our small industry,” commerce and industry minister Anand Sharma said.

The decision to increase FDI in single-brand retail was taken by the Cabinet on 24th November along with opening the gates for overseas investment in multi-brand retail.

However, the government was forced to put on hold FDI in multi-brand retail by several political parties, including UPA ally Trinamool Congress.

At present, for single-brand retailers, 51% FDI is permitted. Removal of investment cap would help global fashion brands especially from Italy and France to strengthen their interest in the growing Indian market.

Many big names have already set up their operations in the country by partnering with Indian partners. The new policy would allow them to buy out the domestic partners.

The government said the move which comes into effect immediately would enhance competitiveness of Indian enterprises through access to global design, technologies and management practices.

According to the riders, however, the products by the global chains should be of ‘single brand’ only and be sold under the same brand internationally.

Single-brand retailing would cover products which are branded during manufacturing and the foreign investor should be owner of the brand.

Though 51% FDI in single-brand was allowed in February 2006, not much investment has come in the sector.

During last three-and-half years, FDI worth only Rs196 crore was received in the sector.

Experts hailed the decision and said that the move would make India a retail destination and help in enhancing foreign investments.

“It is an excellent move which would help in bringing more FDI into the country,” KPMG executive director Krishan Malhotra said.

“The decision would help in bringing latest products and technologies. It would also provide more choices to consumers,” PricewaterhouseCoopers associate director Goldie Dhama said.

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