Regulations
SEBI drops insider trading charges against Vakrangee Softwares

In two separate orders, SEBI, exonerated Vakrangee Softwares along with its eight executives from the charges, saying 'there is no history of any irregularity or indulgence of any violation' by the these entities

 
Mumbai: Market regulator Securities and Exchange Board of India (SEBI) has dropped charges against Vakrangee Softwares and its eight executives, related to violations of insider trading norms, reports PTI.
 
In two separate orders, SEBI, exonerated Vakrangee Softwares (VSL) along with its eight executives from the charges, saying "there is no history of any irregularity or indulgence of any violation" by the these entities.
 
The regulator has dropped charges against company's compliance officer, Pratik Bhanushali, its Finance Head Prem Meiwal and six directors- Dinesh Nandwana, NK Hayatnagarkar, Ramesh M Joshi, Anil Patodia, Sunil Agarwal, BL Meena and BK Gupta.
 
SEBI in its probe had found that Meiwal had sold significant quantities of VSL's shares prior to the announcement of results for the quarter ended March 2009.
 
During the quarter ended 31 March 2009 VSL incurred a loss of Rs29.72 crore compared to a profit of Rs4.03 crore made by the company in the quarter ended 31 December 2008 due to write off of certain IT assets.
 
However, the investigation could not conclusively establish that Meiwal has traded while in possession of unpublished price sensitive information (UPSI) related to the company.
 
SEBI's probe had revealed that Bhanushali failed to implement the code of conduct in order to prevent insider trading and six directors had failed in supervision and ensuring that the required compliance with regard to the code.
 
Besides, it was also alleged that VSL has wrongly disclosed Prem Meiwal and Nishikant Hayantnagarkar as promoters of the company during March 2008 to September 2009, for misleading the investors.
 
"VSL has also failed to frame, adopt and enforce the code of internal procedures and conduct as near thereto the model code of conduct without diluting it in any manner and ensure the compliance of the same," SEBI had found.
 

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SBI MF, L&T Mutual Fund to discontinue 19 schemes

About 10 schemes of SBI MF and nine schemes of L&T MF would be discontinued for fresh SIP registration and subscription

 
New Delhi: SBI Mutual Fund and L&T Mutual Fund have decided to discontinue 19 schemes cumulatively for fresh systematic investment plan (SIP) investments to comply with 'one-plan, one scheme' guidelines issued by market regulator Securities and Exchange Board of India (SEBI), reports PTI.
 
The two fund houses have informed the BSE, where these schemes were listed, that 10 schemes of SBI MF and nine of L&T MF would be discontinued for fresh SIP registration and subscription.
 
Earlier this month, five fund houses, including leading players including Reliance and ICICI Prudential MF, had listed out a total of 190 schemes that have been discontinued for fresh SIP investments to comply with SEBI guidelines.
 
The move follows new SEBI regulations, which require fund houses to launch only one plan per scheme with effect from this month. The SEBI direction has affected hundreds of schemes across the found houses.
 
Reliance MF, ICICI Pru, HSBC, Morgan Stanley and IDFC Mutual Funds have already communicated the required changes in their schemes to the BSE, where many of their schemes are listed for trading.
 
SIP offers mutual fund investors an option to invest as low as Rs100 per month and have gained popularity in the market in recent past.
 
However, many fund houses have launched multiple SIP plans under one scheme, prompting market regulator SEBI to ask them to move to 'single plan per scheme' model in a move to make the investment process simpler for investors.
 
The five fund houses had also communicated to the BSE a list of 22 schemes where the Minimum Purchase Amount and Additional Purchase Amount have been lowered as per SEBI guidelines.
 
All the changes are effective immediately and are part of wide-ranging reforms notified by SEBI recently.
 

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SEBI issues framework for rejection of draft offer proposals

SEBI said draft document of companies would not be entertained in case major portion of the issue proceeds are utilised for expenses towards brand building, advertisement and payment to consultants

 
New Delhi: Companies will not be able to access the capital market if the utilisation plan is too long or if they intend to use the proceeds for brand building and advertisements, reports PTI.
 
Market regulator Securities and Exchange Board of India (SEBI) in the 'Framework For Rejection Of Draft Offer Documents Order, 2012' has listed various factors that could lead to disapproval of draft offer papers for fund-raising by companies.
 
SEBI in its order dated 9th October has said that an offer document could be rejected if the purpose of utilising the proceeds is vague.
 
It said draft document would not be entertained in case a major portion of the issue proceeds are proposed to be utilised for the purpose which does not create any tangible asset, like expenses towards brand building, advertisement, payment to consultants.
 
The draft document would be rejected if there is not enough justification for creation of such assets in terms of past performance, experience and concrete business plan of the issue. 
 
The draft papers could also be rejected if the proposed issue proceeds are intended to be utilised for plants which have no "crucial clearances/licenses/ permissions/ approvals from the required competent authority" at time of filing of papers.
 
Another criteria for rejection, SEBI said, would be on the basis of audit reports doubts or concerns have been raised over the accounting policies of the company.
 
"This would also be applicable for the subsidiaries, joint ventures and associate companies of the issuer which significantly contributes to the business of the issuer. This would also be applicable for the entities where the issue proceeds are proposed to be utilised," SEBI said.
 
SEBI said the list of draft offer documents rejected on the basis of the framework, along with the details of issuers or merchant bankers and the reasons for rejection, would be made public on the market regulator's website.
 
Among others, the market regulator would not entertain proposals where the issuer is unable to provide satisfactory replies and clarifications in case there is sudden spurt in the business just before filing the draft offer document.
 
"This will include spurt in line items such as income, debtors/creditors, intangible assets, etc," the order said.
 
Further, change in accounting policy with a view to show enhanced prospects for the issuer in contradiction with accounting norms is another criteria under the framework.
 
SEBI said draft offers will be rejected if majority of the business is with related parties or where circular transactions with connected or group entities exist with a view to show enhanced prospects of the issuer.
 
Another reason for not approving the draft offer document would be if the issuer's survival is dependent on the outcome of the pending litigation or such a thing is wilfully concealed or covered.
 
Existence of circular transactions for boosting the issuer's capital/net worth apart from premises that ultimate promoters are unidentifiable would also invite rejection, SEBI said.
 
Other factors that could lead to rejection of offer documents include failure to provide complete documentation, furnishing of incorrect information and "failure to resolve conflict of interest, whether direct or indirect, between the issuer and merchant banker appointed by the issuer to undertake the book building process".
 
SEBI said that quantification of conflict of interest may not always be possible but it would largely depend upon the board's assessment on whether such conflict of interest may affect the judgement and ability of the merchant banker in conducting due diligence activity of issuer.
 
The norms are aimed at protecting the interest of investors besides ensuring the adequacy and quality of disclosures in the offer documents.
 
The norms are part of SEBI (Framework For Rejection Of Draft Offer Documents) Order, 2012. Issued on October 9, the general order has come into immediate effect.
 
The market regulator said it would provide one-time opportunity to issuers for withdrawal of draft offer documents pending with the board.
 
The offer documents can be withdrawn within one month from the issue date of this general order, it added.
 
Meanwhile, entities whose draft offer documents are rejected would not be allowed to access capital markets for "at least one year from the date of such rejection".
 
The period might be increased depending upon the materiality of the omissions and commissions, SEBI said.
 
"In cases where the board rejects a draft offer document or where an issuer or a merchant banker to an issue chooses to withdraw the draft offer document, there shall be no refund of filing fees with the board," SEBI said.
 
According to the regulator, mere triggering of any criteria in the general order would not be considered as an automatic case for rejection and a final view would be taken after due consideration on a case-to-case basis.
 

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