Regulations
SEBI to relax mutual fund exposure norms for housing finance companies

SEBI decided that an additional exposure to financial services sector (over and above the existing 30%) not exceeding 10% of the net assets of the scheme in debt oriented mutual fund schemes will be allowed by way of increase in exposure to HFCs only

Mumbai: Providing respite for housing finance companies (HFCs), market regulator Securities and Exchange Board of India (SEBI) decided to relax the investment limit for such entities in debt mutual funds, reports PTI.

 

The decision to relax the exposure norms for HFCs was taken at SEBI's board meeting.

 

"... it has been decided that an additional exposure to financial services sector (over and above the existing 30%) not exceeding 10% of the net assets of the scheme in debt oriented mutual fund schemes will be allowed by way of increase in exposure to HFCs only," SEBI said in a press release.

 

According to the regulator, the decision has been taken after taking into consideration the important role played by HFCs in fulfilling the social objective of increased home ownership and supporting the economy by creating demand for construction of new homes.

 

In a circular last month, SEBI had directed mutual funds to ensure that total exposure of their debt schemes in a particular sector shall not exceed 30% of the net assets of the scheme.

 

However, the move had raised concerns of adversely impacting the funding costs for HFCs.

 

Regarding this decision, SEBI said the relaxation would be subject to certain conditions such as that the securities issued by HFCs are rated 'AA' and above. Also, the HFCs should have been registered with the National Housing Bank (NHB).

 

"However, the total investment in HFCs cannot exceed 30% of the net assets of the scheme," the release said.

 

Earlier this week, rating agency ICRA had said that SEBI's directive for investment caps on debt mutual funds could adversely impact the funding costs for NBFCs and HFCs.

 

Certain debt mutual fund schemes, such as long-term FMPs (Fixed Maturity Plans) have been a preferred route for the NBFC (Non-Banking Finance Company) sector to raise medium to long term funds at attractive rates from the bond markets, ICRA said in a research note.

 

Under the regulatory framework, NBFCs include HFCs.

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SEBI initiates probe into 900-point 'flash crash' on Nifty

SEBI would also look into whether adequate safeguard mechanism was in place to avoid a 'flash crash' like situation, as the so-called freak trades were executed in a number of well-known blue-chip stocks, including some large banking shares

 
Mumbai: Market regulator Securities and Exchange Board of India (SEBI) has begun initial probe into the 'flash crash' of NSE index Nifty, which fell by nearly 900 points on Friday morning, halting the trade on the exchange for about 15 minutes, reports PTI.
 
While the National Stock Exchange (NSE) blamed "abnormal" orders placed by stock broker Emkay Global in multiple trades of various stocks at low prices for the crash, sources said that regulator is looking into all aspects of the incident.
 
NSE has claimed there were no technical glitches in its system and the crash was due to 'erroneous' trade orders worth over Rs650 crore by Emkay Global, which has been now disabled by the bourse for trading.
 
However, a senior regulatory official said that SEBI would look into whether adequate safeguard mechanism was in place to avoid a 'flash crash' like situation, as the so-called freak trades were executed in a number of well-known blue-chip stocks, including some large banking shares.
 
While there are no circuit filters in large blue-chip stocks, the market systems are generally well-prepared to handle any mischief or large erroneous trades.
 
The regulator is also concerned that the instances of 'freak trades' seem to be on the rise, including the recent one that involved the shares of Reliance Industries.
 
NSE said the abnormal orders were 'non-algo' in nature and were entered for an erroneous quantity which resulted in executing trades at multiple price points across the entire order book. The exchange has also identified these orders to a specific dealer terminal.
 
The incident occurred on a day when expectations were high for a significant upward rally on the bourses, following some major reform measures approved by the government last evening, including on foreign direct investment (FDI) in sectors like insurance and pension.
 
SEBI is also looking into the issues related to 'algorithmic' trade -- a latest-technology mechanism that allows execution of orders at a very high speed to take benefit of smallest of the change in share price, the official said.
 
This trade mechanism has been criticised in various quarters on apprehensions that it helps market manipulators to take benefit of the high-speed technology.
 
The trading had commenced normally today at both the BSE and the NSE, with the Nifty opening with a gain of nearly 27 points.
 
While trading continued normally at BSE, a 'flash crash' like situation occurred later in the morning at Nifty.
 
The NSE index showed a sudden fall of nearly 900 points or over 15% within seconds, triggering the circuit filter (maximum permissible limit of movement in the index), halting the trade at 0950 hours.
 
The NSE, on its part, said that the exchange's systems functioned normally without any glitch and the abnormal trades caused market closure automatically as the index circuit filter was triggered.
 
Trading resumed at NSE at 1005 hrs, NSE said, adding that the market is functioning normally since then and the incident is being investigated.
 
The Sensex had also fallen about 300 points in the morning, in reaction to the Nifty crash, as many stocks are common to the two indices.
 

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SAT dismisses appeal of financiers against SEBI's order

SEBI had slapped a fine of Rs14 crore on Dushyant N Dalal and Puloma Dushyant Dalal, the two chartered accountants for alleged unlawful gains made during the infamous IPO scam of 2003-05

Mumbai: The Securities Appellate Tribunal (SAT) has dismissed an appeal by two financiers--Dushyant N Dalal and Puloma Dushyant Dalal--against orders issued by Securities and Exchange Board of India (SEBI)that had imposed a penalty of Rs14 crore on them for allegedly making gains in the initial public offering (IPO) scam, reports PTI.

 

"The appeal (of Dushyant N Dalal and Puloma Dushyant Dalal) stands disposed of (against SEBI)...," SAT said.

 

SEBI had slapped a fine of Rs14 crore on the two chartered accountants in June last year for alleged unlawful gains made during the infamous IPO scam of 2003-05.

 

The two had been accused of making unlawful gains of over Rs 4.94 crore by cornering shares of various companies meant for retail individual investors and the penalty is three times of the amount.

 

Hearing an appeal against a SEBI order, SAT directed market regulator to pass orders expeditiously since the case relates to an old matter.

 

Besides, Tribunal asked the two individuals to fully co-operate with SEBI and "avail of the earliest opportunities for speedy finalisation of the adjudication proceedings."

 

The Dalals had been charged with being financiers to two key operators -- Sugandh Estates and Investments Pvt Ltd and Purshottam Budhwani.

 

The key operators had allegedly opened large number of demat accounts in the name of non-existent persons or name lenders and acquired shares of various companies by making applications in fictitious names.

 

The key operators subsequently transferred these shares through off-market deals to ultimate beneficiaries who had acted as financiers.

 

The Dalals were charged with being parties to such unlawful act of cornering shares and acting in connivance with others to make unlawful gains at the cost of other individual investors.

 

IPOs of major firms like IL&FS, IDFC, FSC Software Solutions, Gateway Distriparks, Provogue, MSP Steel, Nectar Lifesciences, Shoppers' Stop and Suzlon were alleged to be targeted by the two key operators the Dalals had allegedly connived with.

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