Regulations
SEBI revokes ban on 317 entities in Alka Securities matter

Based on the preliminary findings in 2009 SEBI had barred 317 second-level entities identified in the interim order as used as conduits by Alka Securities, its promoters and other related entities

 
Mumbai: Market regulator Securities and Exchange Board of India (SEBI) has revoked its ban on 317 entities, earlier alleged to have been used by promoter and related entities of Alka Securities for involvement in circular trading, and allowed them to deal in the company's shares, reports PTI.
 
The case relates to a probe by SEBI into a spurt in the price and volume in the shares of Alka Securities Ltd (ASL) during the period of November 2008 to March 2009.
 
Based on the preliminary findings, SEBI had identified nine promoter level entities to have allegedly indulged in price manipulation, as also 42 other entities directly and 317 indirectly being part of the stock manipulation practices.
 
Consequently, SEBI passed an interim order against these entities in 2009, barring them from dealing in ASL shares.
 
SEBI said the completion of its investigation into the matter shows that the said 317 second-level entities identified in the interim order were used as conduits by ASL, its promoters and other related entities.
 
No further action, however, has been contemplated as against these entities pursuant to the investigation and therefore the interim directions issued by SEBI need not be continued, the regulator said in its final order dated 10 September 2012.
 
Accordingly, SEBI has decided to "revoke the interim directions issued vide ad interim ex-parte order dated 28 July 2009 (against the said 317 ) with immediate effect," the order said.
 
SEBI probe had found that ASL promoters had used off-market route to transfer shares to 42 first-level entities and these entities in turn dealt transferred them to other 317 'second-level' entities.
 
Further, the company, its promoters and directors were charged to have failed to provide mandatory disclosure for change in their shareholdings on various occasions. The shareholding disclosures made to BSE were incorrect and apparently false.
 

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SEBI rejigs primary market advisory panel

The Primary Market Advisory Committee chaired by TV Mohandas Pai would have 18 members, including chiefs of several financial institutions and other companies

 
Mumbai: Market regulator Securities and Exchange Board of India (SEBI) has reconstituted its Primary Market Advisory Committee (PMAC) which advises it on issues related to regulation and development of IPOs and other primary market segments, reports PTI.
 
The panel would be chaired by TV Mohandas Pai, formerly a senior executive at IT giant Infosys and currently Chairman of Manipal Global Education Services Pvt Ltd.
 
The other members of the 18-member panel include BSE interim CEO Ashish Chauhan, Tata Steel Group CFO Koushik Chatterjee, Morgan Stanley India CEO PJ Nayak, CRISIL Managing Director and CEO Roopa Kudva and Kotak Mahindra Bank chief Uday Kotak.
 
The panel would also have three representatives from SEBI, Executive Directors S Ravindran and J Ranganayakulu, Ministry of Finance Director (Primary Markets) Ramesh Krishnamurthi and RBI Chief General Manager KK Vohra.
 
Other members include Prime Database chief Prithvi Haldea, SIDBI Chairman Sushil Muhnot, Association of Investment Bankers of India Chairman Sanjay Sharma, Crawford Bayley and Co Partner Sanjay Asher, IIM Lucknow Faculty Member Manoj Anand and Bhopal Stock Investors Association President Arun Kothari.
 
The terms of reference of the committee includes advising SEBI on matters required to be taken up for changes in legal framework to introduce simplification and transparency in systems and procedures in the primary market.
 
Besides, it is also mandated to advise SEBI on matters relating to regulation of intermediaries for ensuring investor protection in the primary market.
 

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SEBI implements measures to revive mutual fund industry

SEBI said a number of steps are being taken to increase the penetration of MF and to energise the distribution network while protecting the interest of investors

 
Mumbai: Market regulator Securities and Exchange Board of India (SEBI) has announced implementation of a number of steps for the benefit of mutual fund (MF) industry, including an additional levy on investors for catering to smaller cities and availing the services of a whole new class of persons as distributors, reports PTI.
 
As per the proposals approved by SEBI's board on 16th August, the market regulator said, a number of steps are being taken to increase the penetration of MF and to energise the distribution network while protecting the interest of investors.
 
Among the measures announced, the MFs can charge up to 30 percentage points of additional TER (Total Expense Ratio) -- a fee charged to investors for MF investments under fund management and other heads -- if the new inflows from beyond top 15 cities are at least 30% of gross new inflows in the scheme or 15% of the average assets under management (year to date), whichever is higher.
 
The top 15 cities would be decided on the basis of data compiled by the Association of Mutual Funds in India (AMFI) data for 'AUM by Geography Consolidated Data for Mutual Fund Industry' as at the end of the previous financial year.
 
MFs would need to make complete disclosures in their half yearly report to SEBI regarding the efforts to increase geographical penetration and the details of opening of new branches, especially those beyond top 15 cities.
 
In another step, SEBI has allowed MFs to charge service tax on investment and advisory fees to the scheme.
 
Also, MFs have been asked to launch schemes under a single plan and ensure that all new investors are subject to single expense structure. Existing schemes with multiple plans can accept fresh subscriptions only under one plan and other plans will continue till the existing investors remain invested in the plan.
 
SEBI also asked MFs to provide a separate plan for direct investments (investments not routed through distributor) in existing as well as new schemes. Such separate plans shall have a lower expense ratio excluding distribution expenses and commission, and no commission shall be paid from such plans.
 
The SEBI directive for direct MF investments would be effective from 1 January 2013, while all other measures would come into effect from next month, or 1 October 2012.
 
Regarding distribution of mutual fund products, SEBI said that all the agents or distributors of MF units are required to obtain certification from the National Institute of Securities Markets (NISM) and registration from AMFI.
 
A new cadre of distributors, such as postal agents, retired government and semi-government officials, teachers and bank officers with a service of at least 10 years, and other similar persons (such as Bank correspondents) may be allowed to sell units of simple and performing mutual fund schemes.
 
SEBI said that this new cadre of distributors would require a simplified form of NISM certification and AMFI registration.
 
Also, AMFI should create a unique identity number of the employee/relationship manager/ sales person of the distributor interacting with the investor for the sale of mutual fund products, in addition to the AMFI Registration Number.
 
SEBI also asked MFs to annually set apart at least two percentage points on daily net assets within the maximum limit of TER for investor education and awareness initiatives.
 
Besides, MFs have been asked to make monthly portfolio disclosures for all their schemes "in a user-friendly and downloadable format (preferably in a spreadsheet)" and in the same format as that of half yearly portfolio disclosures.
 
MFs may have to disclose certain additional information such as charges and fees as well, subject to compliance with the Advertisement Code.
 
In order to help enhance the reach of MF products amongst small investors, who may not have PAN/bank accounts, such as farmers, small traders/businessmen/workers, SEBI has allowed cash transactions of up to Rs 20,000 per investor in a mutual fund every year.
 
However, any repayment like redemptions and dividend with respect to such investments would be paid only through banking channel.
 
SEBI has also set certain prudential limits and disclosure norms for portfolio concentration risk in debt-oriented mutual fund schemes. It has asked MFs to ensure that total exposure of debt schemes of mutual funds in a particular sector, barring a few exceptions, shall not exceed 30 per cent of the net assets of the scheme.
 
For transaction charges, distributors shall have the option to either opt in or opt out of levying transaction charge based on type of the product.
 
Also, MFs would need to make half yearly disclosures of their unaudited financial results, along with additional details like total commission and expenses paid to distributors, distributor-wise gross inflows, net inflows and average assets under management.
 
In case the data suggests that a distributor has an excessive portfolio turnover ratio, say more than two times the industry average, AMCs shall conduct additional due-diligence of such distributors, SEBI said.
 
For harmonising the applicability of NAV across schemes, SEBI said that in respect of purchase of units of MF schemes, the closing NAV of the day on which the funds are available for utilisation shall be applicable for application amount equal to or more than two lakh, irrespective of the time of receipt of such application.
 

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