SEBI probes violation in income proof rules in Citi fraud

New Delhi: In connection with the alleged Rs300-crore Citibank fraud, the Securities and Exchange Board of India (SEBI) is probing whether the stock brokers collected income proof documents from the accused, a mandatory requirement for trade in derivatives market, reports PTI.

The market regulator had made it mandatory in December 2009 for the brokerage firms to collect income proof documents from all their clients before allowing them to trade in derivatives segment of the market.

Preliminary investigations into the alleged fraud committed by Shivraj Puri, a senior employee at a Citibank branch in Gurgaon, has found that he diverted his clients' money into derivatives market.

Investigation teams from SEBI have already more than once questioned Mr Puri as well as other parties connected to the fraud, including the officials from the bank and the two brokerage firms used by Puri-Religare and Bonanza.

As per the preliminary probe, SEBI has found lapses on part of the brokerage firms in collecting all the required financial documents from Puri and others through whose accounts he invested in stock market, a senior official said.

The brokers have been asked by SEBI to furnish all the documents that they had collected from Mr Puri, subsequent to which the regulator would check their veracity.

Most of these funds were invested into Nifty options-a derivative product with the market benchmark index Nifty as underlying security, where the investor has no obligation to take the delivery and needs to pay only margin money.

In this derivative, investors bet on upward or downward move of Nifty and returns depend on accuracy of such bets.

As the derivatives trade involve large-scale transactions, there are greater chances of black money or money earned through dubious means finding way to stock market through derivatives, the official said.

This was the reason behind SEBI in December 2009 making it mandatory for all the brokerage firms to allow their clients to trade in derivatives only after submission of valid income proof. In cases of discrepancies or the income profile not matching with the investment portfolio, the brokers are supposed to immediately inform the regulator.

Initially, brokerage firms had resisted implementation of these guidelines and agreed to abide by them only by mid-2010.

Brokers are supposed to collect these documents every year and these include copies of latest Income Tax Return Acknowledgment, Annual Accounts (last financial year for individuals, last two financial years for non individuals) and copy of Form 16 in case of salary income.

Besides, the clients also need to submit a CA-certified net worth certificate for the latest financial year, salary slip of one month in current financial year, bank account statement for last six months, demat account holding statement and other documents substantiating ownership of assets.


Govt amends Power Tariff Policy; boost clean energy usage

New Delhi: In a bid to boost clean energy generation in the country, the government today amended the Power Tariff Policy, which mandates states to have solar energy as 3% of their total power purchases by 2022, reports PTI.

"The solar power purchase obligation for states may start with 0.25% in phase I (by 2013) and go up to 3% by 2022," an official statement said.

The decision was taken at a meeting of the Cabinet held here today, it added.

"The present amendment in the Tariff Policy is as per the National Solar Mission Strategy, which was approved by the Cabinet on 19 November 2009," the statement added.

As per the amendment, the power purchased by the state electricity boards or other state utilities will be complemented by solar specific Renewable Energy Certificate (REC) mechanism, through which solar power generation companies will sell certificates to the buyers.

The certificate will also help the buyers to meet their solar power purchasing obligations, the statement said.

Earlier, the ministry of power had asked the Cabinet to amend the tariff policy 2006, so that state electricity regulators can fix a percentage of energy purchased from solar power.

The amendment will come into effect from the date of its publication in the official gazette, the statement added.


Indian economy to grow 8.8% in 2010-11; inflation remains a concern

Washington/New Delhi: The International Monetary Fund (IMF) expects Indian economy to grow by 8.8% during the current financial year, up from 7.4% a year ago, mainly driven by robust growth in farm sector and pick up in consumption, reports PTI.

The multilateral lending agency, however, expressed concern over rising prices and underlined the need for controlling inflationary expectations by more monetary actions by the Reserve Bank of India (RBI).

"The Indian economy is projected to grow by 8.8% in 2010-11...This year's growth is already benefiting from the rebound in agriculture and pick up in private consumption and employment prospects have improved and disposable income continues to rise," the IMF said in a report after Article IV consultations with the Indian officials.

The economy expanded by 8.9% during the first half of the current fiscal and, according to the government estimates, may revert to the pre-global crisis level of 9% growth.

However, the IMF has projected moderation in growth form the current high levels to 8.1% in the next fiscal.

Listing rising prices as a major area of concern, the IMF said the RBI could take more monetary steps to contain inflationary expectations.

"We see room for further rate increase (by RBI) but at the same time it has to be done gradually and needs to be looked at continuously," senior resident representative of the IMF Sanjaya Panth told reporters in Delhi.

Food inflation, according to the data released by the government, rose to the yearly high of 18.32% for the week ended 25th December. The overall inflation was 7.48% in November.

The inflation, according to IMF, could moderate to 6.5% by March end.

Besides inflation, high capital inflows and uncertainty in the global economy are the other areas of concern that could impair growth.

"Risks to growth are broadly balanced with downside risks relating mainly to the global economy. Surging capital inflows could further spur investment but could complicate macroeconomic management", the report said.

In 2010, the overseas portfolio investment more than doubled to $39 billion from $18 billion a year ago.

According to Mr Panth, "The current inflows are in comfortable zone and there is no need for capital control.

However, inflows could increase absorptive capacity in future."

Following the global financial meltdown, the growth rate of the India economy slipped to 6.7% in 2008-09 from over 9% in the previous three years.

Driven by stimulus packages provided by the government, the growth rate picked up to 7.4% during 2009-10.

In its annual assessment of the world's fastest growing economies, IMF, however, said that India should speed up its return to pre-crisis monetary and fiscal policies to keep the economy in check.

In its report, the IMF backed the government's policy of exiting the stimulus measures implemented in the past two years.

The IMF economists, however, preferred tightening of fiscal policy, as they felt that the stimulus exit strategy remained incomplete given the high level of government debt and large capital inflows.

The IMF also supported the objective to raise public investment, especially in infrastructure, and to improve social outcomes.

With tax reforms designed to be revenue neutral, IMF economists see the need for subsidy reforms-particularly liberalization of diesel and fertiliser prices-coupled with more efficient spending.

"A commendable first step in fuel price liberalization has been taken and promising tax reforms are in the works," the report said.

The IMF said the current account deficit is projected to reach 3.3% of GDP in 2010-11 and 3.5% next year.

The deficit has so far been financed mainly by foreign direct investment and equity inflows, but the authorities need to keep an eye on the level of the current account deficit, it said.


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