SEBI mulls reducing timeline for investors to apply for IPO

Chennai: Market regulator Securities and Exchange Board of India (SEB) is mulling reducing the timeline for investors to apply for an initial public offer (IPO) through the Applications Supported by Blocked Accounts (ASBA) model, SEBI chairman CB Bhave said on Sunday, reports PTI.

ASBA is a new system that allows investors to apply for an IPO, keeping the application money in their bank accounts till the finalisation of the allotment.

"We are examining the feasibility of doing this…", SEBI chairman CB Bhave told reporters here.

Currently, it is a 21 day process and the financial transactions are structured in such a manner that investor has to pay on day one when applying for an IPO and the return comes to him after 30 days with the money getting blocked.

However, with the introduction of new system, retail investors, whose IPO application money is often blocked, would be able to complete procedures in one week, he said.

Investors would benefit because they do not need to pay anything upfront. So cash would not be required to be paid immediately. The time and costs involved in waiting to get the refunds and then crediting them to the account would be eliminated altogether under the new system.

Currently, in India only about 20% of retail investors were using this system despite banks implementing it. "India is a vast country and we want it to increase it further…"

Besides, Mr Bhave said they would take action against those companies which had violated the norms for obtaining 2G spectrum.

"SEBI looks into those areas where there is a violation on the capital market.... if there is any such violation we will look into it..", Mr Bhave said.

He said the market regulator would always keep its "eyes" and "ears" open on the capital market, and if there is any violation they would intervene in it.

About high-frequency trading practices in India, he wanted to know whether high-frequency trade by itself was a problem or the structure of exchanges were a problem.

"...We have looked at some exchanges in other countries....

They have given access to some members... something like they can see the order ahead of other members... I do not think that is a good idea," he said.

High-frequency trading is a programme trading platform that uses powerful computers to transact a large number of orders at very fast speeds. It uses complex algorithms to analyze multiple markets and execute orders based on market conditions for making huge profits.

It also helps brokerages execute transactions at rapid speed using co-location services.

Mr Bhave was here to take part in the valedictory of a three day seminar, CRESCITA-2010, organised by Bharatidasan Institute of Management, Tiruchirapalli.




7 years ago


Home truths: Living by the rules

Rules for co-operative housing societies have been in existence for some years now, but there is a serious lack of knowledge and understanding of these important guidelines even today. Mr Vimal Punmiya, a leading property expert, explained some of these issues at a well-attended seminar hosted by the Moneylife Foundation recently

Vimal Punmiya, one of the leading property experts in the country, has underlined the importance of co-operative housing societies operating by the rules to safeguard the interests of resident members and the smooth functioning of day-to-day affairs.

Mr Punmiya was addressing a seminar on co-operative society rules at a well-attended seminar hosted by the Moneylife Foundation recently. "In this state, the Maharashtra Co-operative Societies Act (1960) is the guiding legislation which covers co-operative housing societies (CHS) too. Model bye-laws were introduced for housing societies by the state government, in 1984, to facilitate functioning. These rules were improved through the new model bye-laws published in 2001," he explained.

Mr Punmiya pointed out that co-operative housing societies can amend the bye-laws according to their requirements, and as per the procedure laid down for such changes, but these must be in line with the common interest of the members and have to be ratified by the registrar of co-operative societies. While older societies can continue to follow the old model bye-laws, new societies are expected to adopt and follow the new model bye-laws.

Mr Punmiya also shared information with examples from his extensive experience of over three decades on matters such as stamp duty charges, registration procedures, income-tax and accounting practices, as well as wills, nominations and transmission.

"In the co-operative housing society system the ownership of the building rests with the society and all members hold a certain share in it. The residents are superior to tenants, but inferior to a landlord as the society is the owner and not the individual," he explained.

NoC for flat re-sale
Giving an example of a change in the bye-laws, Mr Punmiya said that previously, a flat owner was required to apply for a no-objection letter from the society to sell his property. However, under the new bye-laws, the owner is free to sell the flat to anybody without requiring the society's permission. This is one reason why several societies had chosen not to shift to the new bye-laws, he pointed out.

Owner and associates
Another example is that of ownership. Under the previous rules, the person whose name appears on the share certificate of the society is considered the deemed owner, whereas the others whose names are also listed are termed 'associates'. There is a dichotomy here. For income-tax purposes, all persons whose names appear on the share certificate of a co-operative housing society are deemed to be the owners of the property, Mr Punmiya said. But the new laws recognise joint ownership.

In Maharashtra, a daughter is considered a part of the family even after her marriage. But for the purpose of taxes, a married daughter is not included in the father's family. Under the new rules, if a flat is given to the daughter after her marriage, or if she stays in the flat after marriage, she is still using the property as a member of the family and, therefore, the society cannot charge non-occupancy charges.

One other example of a change in the rules is nomination. In the old bye-laws, a flat owner could file a nomination form before death, whereas a legal heir could apply whenever he/she wants. But under the new bye-laws, the legal heirs must apply for nomination within six months, failing which the society has the right to refuse registration of the nomination. In such cases, the legal heirs can approach the registrar, who has the power to accept it, Mr Punmiya said.

Structural audit
Regular upkeep and maintenance of the building and premises is yet another important matter.
According to the rules, any building that is about 15-30 years old must conduct a structural audit at least once in five years. Older buildings should be surveyed at least once in three years.

Society expenses
There are rules also on the limit of expenditure that a secretary of a society is allowed. Previously, the principal managing committee member was allowed to spend Rs300 at a time, for daily expenses, without having to seek sanction. That amount has been hiked to Rs1,500 for a society with up to 20 members, Rs2,500 for a society of 20-50 members and Rs4,500 for a society with more than 50 members.

According to the new model bye-laws, in the event that a member/s of the managing committee, or the committee itself, resigns, the member/committee will continue to fulfil the responsibilities till a new member/committee is appointed.

Transfer fee
In the case of charges levied at the time of transfer of a flat, Mr Punmiya said that under the Maharashtra Co-operative Societies Act a housing society can levy a fee of up to Rs25,000 or 2.5% of the agreement value, whichever is lower.

Income tax
The Bombay High Court has ruled that under the concept of 'mutuality', the money that a society receives from a member is not taxable. However, receipts collected from non-members are taxable. So any revenue generated by a society from sources other than its members is liable for income-tax, Mr Punmiya explained.

Member not traceable
If a member is not traceable for a period of over seven years and has not paid the maintenance charges, the society can approach the registrar and initiate the process to take possession of the vacant flat. Previously, the society had to file a civil suit in such a matter. Similarly, if the flat owner passes away and no legal heirs come forward to claim the property, the society can take over such property.



psn atmaram

6 years ago

what about provision of sale of parking space since it is against the ruling of the Apex Court

Nagesh KiniFCA

7 years ago

As one present during the talk , i must say it was one of the most brilliant and lucid elaborations on the subject. Money life summarisation is very apt. Shall appreciate your making them as hand-outs for those unable to attend.

sam varghese

7 years ago

kindly confirfm the applicablity of filing of income tax return for coperative society if there is no income from other sources and regualar maintenance

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