The regulator had observed that certain employees and clients had sold Satyam shares between 25 November 2008 and 16 December 2008 till before the announcement. Besides, some 80 clients of the company sold shares before 7 January 2009, on the eve of Mr Raju’s confession about fudging of the accounts
Mumbai: The Securities and Exchange Board of India (SEBI) on Tuesday imposed a penalty of Rs5 lakh on G Jayaraman, compliance officer of the erstwhile Satyam Computer Services for his failure to adhere to market regulations, reports PTI.
“After taking into consideration all the facts and circumstances of the case... impose a penalty of Rs5 lakh on the noticee (G Jayaraman) in terms of Section 15 HB of the SEBI Act...” SEBI said in an order.
Section 15 HB states that “Whoever fails to comply with any provision of this Act, the rules or the regulations made or directions issued by the board... shall be liable to a penalty which may extend to one crore rupees”.
Mr Jayaraman has been directed to submit the penalty amount within 45 days.
SEBI had conducted an investigation pertaining to issues relating to insider trading in the scrip of Satyam in 2008-09.
It had said that the company’s announcement on 16 December 2008 to acquire Maytas Infra and Maytas Properties, and the subsequent withdrawal of the proposal a day later, besides the confessions made by Satyam chairman Ramalinga Raju in January 2009, were price sensitive information.
The regulator said it was observed that certain employees and clients had sold Satyam shares between 25 November 2008 and 16 December 2008 till before the announcement. Besides, some 80 clients of the company sold shares before 7 January 2009, on the eve of Mr Raju’s confession about fudging of the accounts.
The investigation had revealed that Mr Jayaraman had allegedly violated the provisions of the Model Code of Conduct for Prevention of Insider Trading for Listed Companies during the investigation period by not closing the trading window when there was unpublished price sensitive information about the acquisition of MIL and MPL by SCSL.
SEBI had initiated adjudication proceedings against Mr Jayaraman and a show-cause notice was issued to him in September this year.
Mr Jayaraman had replied to the show-cause notice and given his version of events including stating that since there was no direction from the board of directors of Satyam to close the trading window, such a step was not carried out.
After consideration of evidences, SEBI, in its order said: “Even though the clause specifies that the compliance officer is to execute his responsibilities under the overall supervision of the board, yet the provision confers key responsibilities on the compliance officer per se, which cannot be overlooked.”
According to SEBI, matters like consideration of accounts, declaration of dividend, bonus and acquisition of entities are information which become price sensitive from the proposal stage itself.
“As the proposal is not in public domain, it is imperative on the compliance officer to close the trading window so that insiders and connected persons do not take advantage of such information.
“... as compliance officer, he cannot raise the defence that internal approvals were not available. Such contention, if accepted, would render the concept of appointment of compliance officer meaningless and is therefore not acceptable,” the order said.
It said certain employees of erstwhile Satyam got to know about the announcement of acquisition of MIL and MPL in advance and indulged in insider trading.
“...the noticee has not fulfilled his duties and responsibilities as the compliance officer of SCSL,” SEBI said.
“This was very significant information which led to a fall of 33.5% of share price which is quite substantial. It has been established that the noticee failed to comply with the Code requirements under the Prohibition of Insider Trading (PIT) Regulations and some of the employees even traded in SCSL shares,” SEBI further added.
In January 2009, Satyam chairman Raju admitted to fudging the accounts of Satyam, which turned out to be one of the biggest corporate frauds to come to light in country. The company was later taken over by Tech Mahindra and renamed as Mahindra Satyam.
Revising the rules for the annual system audit of stock exchanges and depositories, market regulator SEBI on Tuesday said an auditor can perform a maximum of three successive audits only
Mumbai: Revising the rules for the annual system audit of stock exchanges and depositories, market regulator Securities and Exchange Board of India (SEBI) on Tuesday said an auditor can perform a maximum of three successive audits only, reports PTI.
“Based on discussions with the stock exchanges and depositories and recommendations of Technical Advisory Committee, the present system audit framework has been reviewed encompassing the system audit process, auditor selection norms, terms of reference and audit report guidelines,” it said in a circular.
SEBI had in 2008 mandated that exchanges and depositories have to conduct an annual system audit by a reputed independent auditor.
“Stock exchange/depository may negotiate and the board of the stock exchange/depository shall appoint the auditors...
The auditors can perform a maximum of three successive audits,” it said, adding that the proposal from auditor must be submitted to SEBI for records.
“Audit schedule shall be submitted to SEBI at least two months in advance, along with scope of current audit and previous audit. The scope of the audit may be extended by SEBI, considering the changes which have taken place during last year or post previous audit report,” it said.
The audit report should have specific compliance and non-compliance issues, observations for minor deviations as well as qualitative comments for scope for improvement.
Besides, the report should also take previous audit reports in consideration.
“Follow-on audit, if any, has to be scheduled within three months of the audit to ensure that the corrective actions have been taken. If follow-on audit is not required, the auditee management has to submit a report of actions taken and evidence of corrections to the auditors and SEBI within three months,” it said.
An auditor must have minimum three years of experience in IT audit of securities industry participants like stock exchanges, clearing houses and depositories.
“The systems audit reports and compliance status should be placed before the governing board of the stock exchanges/ depositories and the system audit report along with comments of stock exchanges/depositories should be communicated to SEBI,” it said.
SEBI further added: “Along with the audit report, stock exchanges/depositories are advised to submit a declaration from the managing director/chief executive officer certifying the security and integrity of their IT Systems.”
As per the revised guidelines, an auditor undertaking a systems audit must not have any conflict of interest in conducting fair, objective and independent audit of the concerned exchange or depository and should not have engaged in any consulting engagement with any departments or units of the entity being audited during the previous three years.
The regulator further said that the audit report should have explicit coverage of each major area mentioned in the terms of reference indicating any nonconformity or observations.
“For each section auditors should also provide qualitative input about ways to improve the process, based upon the best practices observed,” SEBI said.
With regard to terms of reference, besides details of application, maintenance and physical access of the system, the audit has to also include change in the software control like user awareness, processing of new feature and reporting of fault.
“In case the exchanges/depositories have commenced their annual system audit, they may follow existing annual system audit framework of SEBI Circular issued in 2008.
“The exchanges/depositories who are yet to commence annual system audit would carry out their annual system audit as per the framework given in this circular.
The decision to raise the maturity period of NSC has been taken on the basis of the recommendations of the Committee for Comprehensive Review of National Small Savings Fund, headed by Shyamala Gopinath, the then deputy governor of Reserve Bank of India
New Delhi: The government on Tuesday introduced a 10-year National Savings Certificate (NSC) which will earn an interest rate of 8.7% per annum, reports PTI.
The notification for the launch of new savings instrument, 10-Year National Savings Certificate (IX-Issue), 2011, has been issued, an official statement said.
The scheme will come into effect from 1 December 2011, it added.
Investments in NSC will earn interest at the rate of 8.7% compounded semi-annually, it said, adding that on an investment of Rs100, the depositor will get Rs234.35 on maturity of the NSC.
“There is no upper limit for investment in the Certificate,” it added.
The new scheme will give better returns along with tax benefit to savers.
At present, the maturity period of NSC is six years and it qualifies for tax relief for investment up to Rs1 lakh under Section 80C.
The decision to raise the maturity period of NSC has been taken on the basis of the recommendations of the Committee for Comprehensive Review of National Small Savings Fund (NSSF), headed by Shyamala Gopinath, the then deputy governor of Reserve Bank of India.
Under the new scheme, the certificate can be transferred from the post office where it is registered, to any other post office and can be pledged as a security.
This certificate will be available in the denominations of Rs100, Rs500, Rs1,000, Rs5,000 and Rs10,000.
The spread on 10-year NSC (new instrument) will be 50 percentage points higher than the 10-year government security.
The interest rates for every financial year will be notified before 1st April of that year.