Regulations
SEBI panel seeks clarity in tax rules for FPI

The committee, headed by former cabinet secretary KM Chandrasekhar, recommended that “government may consider bringing more clarity and certainty while prescribing the taxation provisions for FPIs”

A Securities and Exchange Board of India (SEBI) panel has suggested that the government should bring more clarity and certainty in the taxation provisions for the newly proposed overseas investor category—Foreign Portfolio Investors (FPIs).

 

The committee, headed by former cabinet secretary KM Chandrasekhar, recommended that “government may consider bringing more clarity and certainty while prescribing the taxation provisions for FPIs”.

 

The suggestion was made after the panel discussed the present taxation framework for various categories of investors.

 

The panel was formed with an aim to attract larger number of foreign investors to the Indian capital market and it submitted its proposals to SEBI last month. SEBI’s board has approved most of its recommendations, while the regulator has decided to consult the government on some of the issues.

 

According to one of the key proposals that have been approved by SEBI, various classes of foreign investors, including FIIs (Foreign Institutional Investors), sub-accounts and qualified foreign investors (QFIs), could be merged into FPI to put in place a simplified and uniform set of entry norms for them.

 

These measures come at a time when the rupee has weakened considerably against the dollar and recently hit its all-time low levels of 60 against the American currency.

 

Also, FIIs have been pulling out money from the Indian debt market, which has resulted in the hardening of yields on government bonds.

 

In order to make the entry norms easier, SEBI has also approved doing away with the current practice of FIIs and their sub-accounts requiring a prior direct registration of the regulator to operate in Indian markets.

 

Besides, market regulator SEBI would adopt a risk-based KYC (Know Your Client) approach in dealing with the overseas investors.

 

SEBI was of the view that most of the proposals made by this committee were well thought out and they have also been welcomed by the market entities and government departments.

 

The panel also suggested certain modifications in the present legal framework for evolving an integrated policy on foreign investments.

 

It said that FII and QFI regulations would be required to be repealed and replaced by a new framework for FPIs. The panel has also suggested various changes in the provisions of the Prevention of Money Laundering Act, Income Tax Act and Foreign Exchange Management Act.

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Centre open to TN govt’s offer on Neyveli divestment: Finance minister

“We have an open mind. We are disinvesting in Neyveli only for one reason, mainly to comply with the SEBI regulations. If there is another way to comply with SEBI regulation why should I shut my mind to that? Finance minister P Chidambaram said

The Centre will consider the Tamil Nadu government’s offer to buy 5% shares of the proposed disinvestment of public sector Neyveli Lignite Corporation (NLC) and sought to assuage employees’ concerns, saying there will be no change in management or staff policies.

 

“I have read about it (Tamil Nadu government’s offer) in the newspapers. I have not seen the letter (written by chief minister Jayalalithaa),” finance minister P Chidambaram said on Monday.

 

“The letter, I believe, is addressed to the prime minister. The copy of the letter has not come to me but assuming that is what the letter says, I will ask the Capital Markets division to quickly consult SEBI (Securities and Exchange Board of India) whether that would amount to compliance with the SEBI regulations,” he said.

 

“We have an open mind. We are disinvesting in Neyveli only for one reason, mainly to comply with the SEBI regulations. If there is another way to comply with SEBI regulation why should I shut my mind to that? I am willing to consider that option but I will have to consult SEBI,” Chidambaram said.

 

Asked about workers’ threat to go on strike against the disinvestment, Chidambaram said, “But why should they go on strike. There is a suggestion (of the Tamil Nadu government), we have not rejected it. We will consider it (and) if that’s a feasible suggestion we will accept it.”

 

“Be that as it may, what is the reason for a strike,” he asked.

 

“We are complying with the law. How can you say that the government should not comply with the law? Even after disinvestment, 89% of the shares of Neyveli Lignite will be held by the Government of India and the remaining bulk of it will be held by some public sector institutions—LIC, GIC, etc. So the character of NLC as public sector navratna does not change,” the finance minister said.

 

NLC is facing stiff protests over the disinvestment decision and 17 trade unions have already announced they would go on indefinite strike from the midnight of 3rd July till the decision of disinvestment is withdrawn.

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SAT upholds SEBI’s order in T Spiritual case

SEBI had slapped a penalty of Rs2 lakh on Bengani after its probe had revealed that he along with some other entities had dealt in the scrip of T Spiritual World “in a fraudulent and manipulative manner” from 12 July 2004 to 4 February 2005

The Securities and Appellate Tribunal (SAT) has upheld the Securities and Exchange Board of India’s (SEBI) order against an individual related to fraudulent trading in T Spiritual World shares but has reduced the penalty imposed on him to Rs1 lakh from Rs2 lakh.

 

“We do not see any legal infirmity in the order passed by the respondent (SEBI) against the appellant (Vikas Ganeshmal Bengani) but keeping in view the totality of the facts and circumstances of the case and submissions made at the Bar, we reduce the penalty to Rs1 lakh while upholding rest of the order against the appellant,” SAT said in its order dated 26th June.

 

In September 2012, SEBI had slapped a penalty of Rs2 lakh on Bengani after its probe had revealed that he along with some other entities had dealt in the scrip of T Spiritual World “in a fraudulent and manipulative manner” from 12 July 2004 to 4 February 2005.

 

These trades had created false and misleading appearance of trading, artificial volume and price manipulation in the scrip facilitating the promoters to offload their stake.

 

Thereafter, Bengani had approached the SAT challenging SEBI’s order.

 

SAT noted that SEBI’s “adjudicating officer himself has not found two main charges against the appellant sustainable”.

 

“However, the appellant appears to be having some connection with some of the promoter group members and only for this the appellant has been held to be guilty of violating the law in this regard,” it added.

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