SEBI to review consent settlement procedure

SEBI is considering changing consent orders in such a way so that they can be taken as a warning from the regulator and also a ‘name and shame’ directive for entities alleged to have indulged in market irregularities

New Delhi: Market regulator Securities and Exchange Board of India (SEBI) is mulling changes in the way it settles probes against listed companies and various market entities through a consent procedure—an out-of-court-like settlement—as it has found the prevailing system to be lacking in uniformity, reports PTI.

In the consent settlement that is in vogue since 2007, the entity facing probe is subjected to certain fees and restrictions without admission or denial of alleged irregularities and SEBI thereafter drops its charges and the investigations.

An internal study by SEBI has, however, found that different yardsticks might have been applied in different consent cases and there is no consistency and any clear-cut uniformity in the way such cases are handled, sources said.

Subsequently, SEBI has decided to consider a revamp of its consent settlement procedure and is currently working on the required regulatory framework for the same, sources said.

SEBI has also come across cases being settled with entities from same group on more than one occasion, although a consent order is broadly considered as a warning to the related party for not repeating similar offences.

The current regulations also give some discretionary powers to SEBI officials settling the probe and the regulator would now look at bringing in detailed and exhausting rules to be followed uniformly by all its officials while settling the probe under consent procedure.

The regulator’s internal study found that there was a perception about the consent orders being mostly subjective and not adequately transparent in nature and these procedures providing an escape route to alleged offenders.

SEBI would consider changing consent orders in such a way, so that they can be taken as a warning from the regulator and also a ‘name and shame’ directive for entities alleged to have indulged in market irregularities, sources said.

The regulator would look at bringing in more clarity on how such orders should be framed, as also at what time and in which cases consent orders should be passed, sources added.

SEBI introduced consent settlement system in April 2007 with a view to cut down on its costs, time and efforts in taking up the enforcement actions. So far, the regulator has passed more than 1,000 consent orders, which includes those passed against three companies of Anil Ambani group.

Earlier in June, SEBI settled a probe against Reliance Securities for a settlement charge of Rs25 lakh and other settlement terms.

In January, two other Anil Ambani group firms Reliance Infra and RNRL (Reliance Natural Resources) had reached a settlement with SEBI after paying consent charges of a record Rs50 crore and some other restrictions.

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CII pitches for raising investment limit by PEs, VCs to 25%

The CII report suggests that SEBI -registered PE and VC funds should be allowed to invest the permitted one-third of fund capital through both primary and secondary purchase of equity shares or equity linked instruments

New Delhi: Private equity (PE) and venture capital (VC) funds should be allowed to invest 25% of the capital of the target companies, up from the existing limit of 15%, without having to resort to an open offer, reports PTI quoting the Confederation of Indian Industries (CII).

“Private equity and venture capital funds engage in substantial minority investments in private and public listed companies. Yet, they are constrained in terms of not being permitted to purchase secondary shares and are limited to acquire stakes only up to 15%” CII said in a statement.

The CII report suggests that (SEBI) Securities and Exchange Board of India-registered PE and VC funds should be allowed to invest the permitted one-third of fund capital through both primary and secondary purchase of equity shares or equity linked instruments.

Further, it said, such investments should be construed as complying with prevailing capital market regulations, including open offer requirements.

The investments by these institutions are of medium to long-term nature, aimed at not purely investing but also nurturing the companies in terms of provision of management and operational support, it said.

With $9.5 billion investments in India, PEs and VCs have created an impact in terms of helping companies achieve stellar performance.

The profits after tax of PE backed firms have registered a growth of 35% as against 21% registered by other listed companies.

CII said that given the growth needs of the Indian economy, it is pivotal that PE and VC governance is re-conceptualised towards a favourable regulatory environment that would promote investment.

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CMIE cuts industrial production growth forecast to 8.2% in FY11-12

A lower-than-expected production growth witnessed by a few industries in the first 2-4 months of the year and delays in commissioning of plants by companies prompted the think-tank to revise the forecast downwards

Mumbai: The Centre for Monitoring Indian Economy (CMIE) has scaled down its forecast for the industrial production growth in 2011-12 to 8.2% from 8.7% earlier, reports PTI.

A lower-than-expected production growth witnessed by a few industries in the first 2-4 months of the year and delays in commissioning of plants by companies prompted it to revise the forecast downwards, CMIE said in its monthly review here.

Delays in commissioning of power projects have caused a downward revision in the forecast for the growth in electricity generation in F11-Y12 to 9% from 10.1% earlier, it said.

CMIE revised its forecast for growth in steel production in FY11-12 from 12% to 9.5% due to a lower-than-expected growth in steel consumption in the first three months, and a shortfall of iron ore likely to be faced by the steel manufacturing units located in Karnataka, following the suspension of mining from Bellary ordered by the Supreme Court.

“Postponing of project commissioning by HPCL-Mittal Energy, Essar Oil and MRPL and a lower than expected growth in the June 2011 quarter prompted us to bring down our forecast for growth in petroleum throughput in FY11-12 from 9.3% to 7.7%.
Consequently, our forecast for diesel, petrol and other petroleum products has been revised downwards,” CMIE said.

CMIE has also revised its forecast for natural gas production in FY11-12 downwards due to the fall witnessed in the last seven months ended July 2011.

“The growth in production of passenger cars and MUVs during the June 2011 quarter turned out to be lower than our expectations. The early numbers released by leading companies in the car industry hint at an 11% fall in passenger car sales in July 2011.

A steady hike in interest rates and an increase in car and fuel prices are expected to push up the cost of car ownership. This is likely to hurt the consumer sentiment and restrict the growth in car sales and consequently production.

Hence, we have scaled down our forecast for the growth in motor vehicles and trailers production in FY11-12 to 12% from 13.2% earlier, CMIE said.

CMIE has also revised its forecast for growth in copper production in FY11-12 to 4.4% from 6.7% earlier.

It has also scaled down its forecast for edible oils production in FY11-12 because of the downward revision in estimates of kharif 2011 oilseeds crop.

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