SEBI issues rules on identification of beneficial ownership

The regulator has directed all the market entities to identify the natural person, who, whether acting alone or together ultimately has a controlling ownership interest

Mumbai: The Securities and Exchange Board of India (SEBI) has asked market entities, including stock brokers and mutual funds, to take “reasonable measures” to identify the ultimate beneficiaries of their clients, as part of efforts to ensure more transparency in securities market, reports PTI.


The capital market regulator has directed all the market entities to identify the “natural person”, who, whether acting alone or together ultimately has a controlling ownership interest.


“Where the client is a person other than an individual or trust, company, partnership or unincorporated association/body of individuals, the intermediary shall identify the beneficial owners of the client and take reasonable measures to verify the identity of such persons,” SEBI said in a circular.


Controlling ownership refers to entities having more than 25% of shares or capital or profits in a company.


In the case of a partnership, association or body of individuals, the threshold level to be described as controlling ownership is “more than 15% of the capital”.


SEBI said guidelines would come into force with immediate effect.


The market regulator said if a market intermediary is not able to identify the “natural person” who is entitled to have the controlling ownership, then a verification of a senior managing official has to be carried out.


In instances where there are doubts about the person having controlling ownership interest in an entity, SEBI said that such control could also be exercised through “voting rights, agreement, arrangements or in any other manner”.


SEBI said in case the client is a trust, market entities are required to identify the beneficiaries through the identity of the settler of the trust, the trustee, the protector.


The regulator said the beneficiaries would be those having 15% or more interest in the trust and any other natural person exercising ultimate effective control over the trust through a chain of control or ownership.


SEBI has exempted from verifying identities if the client or the owner of the controlling interest is a company listed on a stock exchange, or is a majority-owned subsidiary of such a company.


SAT pulls up SEBI for lackadaisical approach in Onelife Capital case

The Appellate Tribunal, while pulling up SEBI for its lackadaisical approach, asked the market regulator to issue a show-cause notice to Onelife Capital Advisors within five weeks and pass final order within four months

Mumbai: Pulling up the Securities and Exchange Board of India (SEBI) for its “lackadaisical approach” in holding an inquiry, the Securities Appellate Tribunal (SAT) directed the market regulator to pass a final order in the case related to Onelife Capital Advisors (OCAL) within four months, reports PTI.


The case is regarding alleged irregularities in the utilisation of proceeds from the initial public offering (IPO) by OCAL.


SAT's direction came on a plea from the company and its directors that they have not traded in the capital market for more than a year.


According to the tribunal, SEBI completed its probe in October 2012, but is yet to issue a show-cause notice.


“It needs to be appreciated that if Board (SEBI) feels that the charges are serious enough to keep a market player out of the market, it should complete the proceedings expeditiously,” SAT said in its order.


“This only shows the lackadaisical approach of the Board in holding inquiry against the appellants,” it added.


In its order, SAT directed SEBI to “issue show-cause notice to the appellants within five weeks and pass final order within a period of four months from today”.


“If the Board fails to pass final order within the stipulated period, the interim order passed against the appellants by the Board shall stand vacated without prejudice to the continuation of proceedings,” it said.


Meanwhile, SAT has allowed OCAL’s two independent directors—AP Shukla and Dhananjay Parikh—to sell the shares in their respective demat accounts.


It said that the sale proceeds have to be kept in fixed deposit with a nationalised bank and withdrawal should be with the prior permission of SEBI.


However, SAT has not permitted OCAL's directors -- Thiruvidaimarudur Krishna and Pandoo Naig -- to sell shares held by them.


SAT has also directed the company and its directors to extend full cooperation to SEBI.


SEBI, through an interim order in 28 December 2011, had barred OCAL and various executives from the securities market.


Last week, SEBI had declined to revoke a ban on OCAL and its directors.


The regulator had initiated a probe after the shares of OCAL were issued at premium and the IPO was over-subscribed despite having poor fundamentals.


OCAL came out with an IPO in September 2011 to raise Rs36.85 crore.


Preliminary investigations revealed that OCAL had made mis-statements in the offer documents and had utilised the IPO proceeds for purposes other than the objectives of the share sale as stated in the Red Herring Prospectus.


SEBI issues guidelines for separate debt segment on bourses

SEBI said the debt segment would provide separate trading, reporting, membership, clearing and settlement rules

Mumbai: Continuing with its efforts to develop the country's corporate debt market, Securities and Exchange Board of India (SEBI) issued elaborate guidelines for setting up a separate debt segment on stock exchanges where entities like banks and pension funds can execute trades, reports PTI.


The decision to have separate debt segment on the bourses was taken at market regulator SEBI's board meeting last week.


SEBI said the debt segment would provide separate trading, reporting, membership, clearing and settlement rules.


Debt securities may be called debentures, bonds, deposits, notes or commercial paper depending on various factors including maturity periods.


In the proposed debt segment, trading would be from 0900 hours to 1700 hours.


"Institutions such as scheduled commercial banks, primary dealers, pension funds, provident funds, insurance companies, mutual funds... can trade on the debt segment either as clients of registered trading members or directly as trading member on proprietary basis only.


"Such institutions desirous of trading on own account only shall be given trading membership under SEBI (Stock Broker and Sub-Broker) Regulations, 1992 as proprietary trading member," SEBI said in a circular.


According to the regulator, the market for debt securities differs from equity markets in several ways such as risk, returns, liquidity, type of participants and method of trading.


"While publicly issued debt securities are listed, traded and settled in a manner similar to equity, privately placed debt is usually traded between institutional investors on 'over the counter' (OTC) basis. Such OTC transactions are mandatorily reported on reporting platforms at FIMMDA, BSE and NSE," SEBI said.


The regulator said an existing stock exchange or new bourse willing to set up debt segment is required to make an application with SEBI providing operational, regulatory and any other necessary details.


SEBI said minimum capital deposit required to be maintained by a stock broker for trading in the debt segment would up to Rs50 lakh.


"With the view to infuse liquidity in the market, market makers shall be permitted in the debt segment. Market making may be provided by merchant bankers, issuers through brokers or any other entity as may be specified," it said.


The debt segment has to list all the securities and debt instruments and has offer electronic, screen-based trading system.


As per SEBI, the trading facility for the bond market can make use of access methods such as internet and mobile trading. Further, the segment should have separate trading platforms for retail as well as institutional players.


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