Regulations
SEBI to rejig its supervision model based on risk level

Under the new model, SEBI would divide market entities into four groups -- very low risk, low risk, medium risk and high risk -- and the quantum of surveillance and number of inspections would increase as per the risk level

 

Market regulator Securities and Exchange Board of India (SEBI) has decided to adopt a supervision model based on risk levels for various market entities including brokers and mutual funds. This is being done to help SEBI in better regulate marketplace and strengthen its surveillance system.

 

Under the new model, various market entities would be divided into four groups -- very low risk, low risk, medium risk and high risk -- and the quantum of surveillance and number of inspections would increase as per the risk level.

 

This new supervision regime has been put in in place as per recommendations of an independent global consultant and the subsequent suggestions made by an internal Task Force at SEBI, while taking into account practices followed by many overseas regulators, a senior official said.

 

The move would help the existing surveillance system take care of most of the smaller offences, so that the investigation resources are utilised more effectively to tackle serious violations in the market place.

 

The new model would follow four distinct steps -- assessing the risk posed by a market entity, assigning 'risk and impact rating' to it, determine the supervisory risk rating score and then adopt a suitable supervisory approach.

 

The overall risk profile of an entity would be computed as a function of two components -- business or activity specific risk and the impact risk arising out of default or failure.

 

The supervisory approach based on risk levels is being implemented in a phased manner, the official said, while adding that the first step towards its implementation has been achieved with finalisation of a report in this regard that provides necessary guidance to the supervisory divisions to formulate policies for supervision and inspections in future.

 

Earlier in September, SEBI chairman UK Sinha had said the market regulator was working on this risk-based supervision model while becoming the first financial sector regulator in the country to have done a study of its own regulatory impact.

 

The SEBI chief had further said that specific metrics would be put in place to determine the risk that every firm poses to the system and based on which enforcement actions can also be initiated.

 

While the existing supervision model followed by SEBI has been very effective, it was found that the approach was 'loosely risk based', where no formal risk ratings were assigned to regulated intermediaries and the current resource allocation approach did not allow for an assessment of risk concentration across all regulated intermediaries.

 

The new supervisory approach is based upon overall risk assessment of the intermediary rather than on individual factors such as turnover, complaints, penalties, etc.

 

"The total number of inspections per intermediary will increase and the new approach would involve a combination of comprehensive, thematic and off-site monitoring for inclusive supervision of the intermediaries," the official said.

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The BJP-Shiv Sena game in Maharashtra is still on!

So far, there were only reports of back channel talks between Shiv Sena and BJP, but chief minister Fadnavis formally announced that talks will be back on track on Friday

 

Notwithstanding the recent bickering between the former allies, the Bharatiya Janata Party (BJP) Thursday announced that it will start afresh talks with Shiv Sena on the issue of the latter's joining the four-week-old government in Maharashtra.

 

Maharashtra chief minister Devendra Fadnavis told reporters "From tomorrow, senior BJP leaders Devendra Pradhan and Chandrakant Patil will hold talks with Sena leaders."

 

"It is not only the feeling of wrokers from both parties, but also that of the people of Maharashtra that Shiv Sena join the government. “BJP also wants Shiv Sena to join the government. We fully favour this," he said.

 

"We fought the recent Assembly elections separately, but we were also together for 25 years. Sena is also part of our government at the Centre," Fadanavis added.

 

According to the chief minister, Pradhan and Patil will start talks with Shive Sena and they have been given full authority to deal with any issue. If needed, they will consult with me and the party leadership," Fadanavis said.

 

"I am confident that Shiv Sena will join the state government soon," Fadnavis said.

 

So far, there were only reports of back channel talks between Shiv Sena and BJP, but Fadnavis formally announced that talks will be back on track.

 

There were reports of a deal being reached between BJP president Amit Shah and Shiv Sena chief Uddhav Thackeray and of Sena likely to get 10 berths in the Fadnavis government, with at least four of Cabinet rank, but there was no confirmation of the same.

 

In the 288-member Maharashtra Assembly, the BJP has 121 MLAs, while the Shiv Sena is the second largest party with 63 legislators.

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Stock manipulation: Maa Jagdambe Tradelinks

Over a one-year period, the share price of Maa Jagdambe Tradelinks has gone up nearly 5,799% or 60 times

 

Maa Jagdambe Tradelinks (MJT), formerly known as Parasrampuria Credit and Investments, is into textiles trading activities. Listed on the BSE, MJT was earlier into the financial services business. In March 2013, the promoter group’s stake

 

drastically fell to 5.26% from 74.95%. In FY13-14, MJT reported total revenue of Rs27.86 crore from operations compared to Rs50 lakh in FY12-13. Profits increased to Rs59 lakh from Rs60 thousand over the same period. The stock price movement, of course, is another matter.

 

Over a one-year period ended 30 May 2014, the stock has been on an uninterrupted rally—from just Rs1.68 to Rs99.10—up 5799% or nearly 60 times. From May 2014 until now, a six-month period, the stock has traded flat at around Rs100. The number of trades, too, shot up to around 5,000-30,000 a month between March 2014 and October 2014 from just around 10-20 trades a month between May 2013 and February 2014. At the current price, MJT is quoting a price-to-earnings (trailing four quarters) of 1,117 times! MJT has even been suspended in the past for not complying with the listing agreement. But this did not result in any disciplinary action against the company.

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