Regulations
SEBI wants greater say for investors in companies

Institutional investors can protect interests of minority shareholders by playing an active role in company decisions, says UK Sinha

 
New Delhi: Market regulator Securities and Exchange Board of India (SEBI) has said institutional shareholders should have a larger say in the functioning of Indian companies to help make the voice of investors heard at the right forum, reports PTI.
 
"We would be very happy, if we had a large presence of institutional shareholders in the Indian corporates," UK Sinha, Chairman, SEBI told reporters.
 
Speaking on the sidelines of a lecture on 'Making Companies' Boards More Effective and Accountable", organised by International Management Institute (IMI), Sinha said there is a belief that the matter is not giving the regulator the comfort that is required.
 
"Voice of retail investors is not getting addressed," he said.
 
Sinha said almost 50% of shareholding in India in top companies is with promoter group, which is very high, when compared globally.
 
FII and domestic institutional investors put together are less than 25% equity in the companies, but they have less than 2-3% representation on the boards, he said.
 
"In a situation like this, majority shareholders have their way. I am quite surprised pension funds are not allowed to invest in the market. If institutional investors play a role, minority interests are protected because the institutional investors give voice to minority shareholders," he added.
 
Asked about the reports of SEBI setting up a special 'Sahara cell' to deal with the Sahara case, wherein the Supreme Court has upheld the regulator's order directing the group to refund thousands of crores collected from investors with interest, Sinha said SEBI is fully equipped with any matter related to concern of shareholders and investors.
 
"This country has enough manpower and resources," he said.
 
On SEBI's long-pending demand to grant it access to call data records to assist it in stock market manipulation cases, especially the matters of insider trading, Sinha said the regulator has been told that a decision would be taken soon in this regard by the government.
 
"We asked the government that rule should be modified to make SEBI eligible for that. It is still under consideration by the government. SEBI has been told that a decision will be reached soon," he said. .
 
Speaking about the independent directors on the company boards, Sinha said the regulator is in favour of strict norms for their selection.
 
"I am more focussed on quality of independent directors and not on the number of independent directors. Many companies in India have taken advantage of extended family norms because the definition of independent director in the country is not clear.
 
"We need strict norms for selection of independent directors," he said.
 
Listing out the areas where SEBI is working with a long- term vision, Sinha said that the companies should disclose the agenda items of their AGMs on their websites and on the stock exchanges.
 
SEBI chairman also said that PSUs and private companies are treated separately for various regulations and the regulator wants "similarly placed companies to be treated similarly." 
 
"SEBI will also work on norms that will review the performance of independent directors," Sinha said.
 
 

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COMMENTS

siddharth biswal

4 years ago

i agree that it is not possible for MF's to vote on every resolution as it will add to the cost but MF's are silent on even promoter biased resolutions.There is a time to speak & there is a time to be silent & it should never be inter-changed.Had MF's been voting then cases like Indiabulls would have been limelight much earlier than be put forth by a foreign research house.I am ready to pay for the added cost rather than let my money be spent on dubious integrity co.Morever postal ballots or online voting can also be done if made an option by SEBI for MF's.Voting is imp because common investors don't have the expertise to analyze it.Its true proxy firms are creating all sort of noises to get noticed but its also true they wouldn't have been in the first place if MF's had been doing their job.By doing this MF's will be doing a service to all those haples investors still invested in dubious firms.Morever SEBI can always compensate MF's from investor protection fund expenses incurred for this.This will be one area where i can say idle funds best utilized.

siddharth biswal

4 years ago

if sebi is so much concerned about retail investors then it should make it mandatory for MF's to vote for every resolution or outsource it to professional firms just like in US.While MF's are getting all the support of SEBI in maintaining their income level they are not that forward in fighting for resolutions that are customer friendly.According to one fund house they prefer to shift their investment rather than fight a resolution.I hope SEBI is listening ?

REPLY

Sucheta Dalal

In Reply to siddharth biswal 4 years ago

We disagree. In fact SEBI has already asked mutual funds to vote on every resolution and publish their stand. This may sound good on paper but in India, it has only opened the doors to such outsourcing of proxy advice when the mutual fund industry itself is still unable to stand on its own feet and attract investors. Consequently, SEBI's order smacks of ulterior motives. Three proxy advisory firms have already sprung up to grab this opportunity. They put out their views but even blue chip companies such as Infosys and Wipro have ignored their advice regarding directors and auditors. Such toothless advice only adds to costs and will be at the cost of mutual fund investors. After all someone has to pay for the advice.
What is stranger is that SEBI's on ex- executive directors and lawyers are employed by some of these firms.
Makes us wonder whether SEBI's Executive Directors in the C B Bhave regime created job opportunities for themselves through this order.

Chandragupta Acharya

4 years ago

Promoters should not be allowed to vote on Resolutions appointing Auditors. It is a clear case of conflict of interest

Foreclosure Fail: Study in the US pins blame on big banks

A study by the US government and academic researchers finds that about 800,000 homeowners missed out on mortgage modifications because of big banks' poor performance

Over the past several years, we've reported extensively on the big banks' foreclosure failings. As a result of banks' disorganization and understaffing — particularly at the peak of the crisis in 2009 and 2010 — homeowners were often forced to run a gauntlet of confusion, delays, and errors when seeking a mortgage modification.
 

But while evidence of these problems was pervasive, it was always hard to quantify the damage. Just how many more people could have qualified under the administration's mortgage modification program if the banks had done a better job? In other words, how many people have been pushed toward foreclosure unnecessarily?
 

A thorough study released last week provides one number, and it's a big one: about 800,000 homeowners.
 

The study's authors — from the Federal Reserve Bank of Chicago, the government's Office of the Comptroller of the Currency (OCC), Ohio State University, Columbia Business School, and the University of Chicago — arrived at this conclusion by analyzing a vast data set available to the OCC. They wanted to measure the impact of HAMP, the government's main foreclosure prevention program.
 

What they found was that certain banks were far better at modifying loans than others. The reasons for the difference, they established, were pretty predictable: The banks that were better at helping homeowners avoid foreclosure had staff who were both more numerous and better trained.
 

Unfortunately for homeowners, most mortgages are handled by banks that haven't been properly staffed and thus have modified far fewer loans. If these worse-performing banks had simply modified loans at the same pace as their better performing peers, then HAMP would have produced about 800,000 more modifications. Instead of about 1.2 million modifications by the end of this year, HAMP would have resulted in about 2 million.
 

That's still well short of the 3-4 million modifications President Obama promised when he announced the program back in early 2009. But it's a big difference, and a reasonable, basic benchmark against which to compare the program's failings.
 

The report does not identify these poor performing banks, but it's not hard to ID them. A “few large servicers [have offered] modifications at half the rate of others,” the authors say. The largest mortgage servicers are Bank of America, JPMorgan Chase, Wells Fargo and Citi.
 

Bank of America in particular (the largest of all the servicers when HAMP launched) has been far slower to modify loans than even the other large servicers, as other analyses we've cited haveshown.

Rick Simon, a spokesman for Bank of America, said the banks' “home retention results are significant and in line with our industry peers to date.”
 

The Home Affordable Modification Program (HAMP) paid subsidies to mortgage servicers on the theory that doing so would convince them to embrace modifications. The authors say that voluntary approach apparently didn't have much effect with the biggest servicers. They weren't very good at modifying loans before HAMP was launched and weren't much better after it launched.
 

The authors wrote that while they can't be sure why these banks underperformed, they “may not have responded to the program since doing so would involve changing their business focus from processing and channeling payments to actively renegotiating loans. In addition, this may have involved significantly altering their organizational capabilities, such as building appropriate infrastructure and hiring and training servicing staff.”
 

That echoes on our reporting on how ill-suited the big banks were when it came to modifying loans. The result inside the banks has sometimes been chaosAs one Bank of America employee complained, "The whole documentation collection thing has got to be purposely not funded. Like, I can't get a fax. I work for a huge bank that has tons of money, and you're telling me that I can't get a fax?"

 

Since HAMP's oversight has been lax — the Treasury Department, which runs the program, has responded indulgently to mortgage servicers breaking HAMP's rules — banks haven't had to worry much about their low modification rates. (You can see this explained with a song. It's also a big part of our book on the foreclosure crisis.)

 

A Treasury spokeswoman, responding to the new report, said HAMP had resulted in “one of the most comprehensive compliance reviews of mortgage servicing operations in the country. Servicers in the Making Home Affordable Program are subject to an unprecedented level of compliance oversight.”
 

The report did have some positive findings concerning HAMP. As we've reported, modifications in the program have been more generous to homeowners than modifications done outside HAMP. The authors also found that the program did boost the number of modifications — i.e. it caused modifications that likely would not have happened if not for the program.

 

The authors also say that HAMP might have induced more modifications if the program had not required such extensive screening of homeowners seeking a modification. From the program's launch, the administration emphasized that the program wouldn't help the wrong sort of “irresponsible” homeowner. That emphasis led to requirements that homeowners send in lots of paperwork to prove their income, which in turn further taxed the big servicers' inadequate systems.

 

Despite the recent stabilization in home prices and a drop in the rate of homeowners falling behind on their payments, HAMP's limited impact remains a very relevant issue. Even in the sixth year of the foreclosure crisis, the country remains saddled with an extraordinarily high number of loans in foreclosure — about 2 million. That backlog hasn't improved much in the last couple years, meaning it's still hard to forecast when the foreclosure rate will return to a normal level.

 

Courtesy: http://www.propublica.org/

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SEBI asks bourses to synchronise listing date, approval

SEBI has asked stock exchanges to synchronise their listing dates and trading approvals with each other for fresh shares to check transfer of shares before listing

Mumbai: With an aim to check transfer of shares and other securities issued through public offers and other issues even before listing, market regulator Securities and Exchange Board of India (SEBI) has asked the stock exchanges to synchronise their listing dates and trading approvals with each other for fresh shares, reports PTI.

 

The move follows a directive from SEBI last month barring the activation of International Securities Identification Number (ISIN) codes of additional securities being issued through follow on public offers (FPOs), rights issue, preferential allotment and bonus issues.

 

The ISIN is a 12-character alpha-numeric code that uniquely identifies equity, debt or other securities. The ISIN code serves the purpose of uniform identification of securities for their trading and settlement in the market.

 

In a circular issued on Tuesday, SEBI further widened the scope of such additional shares and said that the directive would apply to any shares or securities being issued through any means and said that such securities would remain frozen till the time final listing or trading permission is granted by the exchange.

 

"The stock exchanges are advised to provide the details to the depositories whenever final listing or trading permission is given to securities.

 

"Further, in case of issuance of equity shares by a company, listed on multiple stock exchanges, the concerned stock exchanges shall synchronise their effective dates of listing or trading approvals and intimate the same to depositories in advance," SEBI said.
 

After coming across fraudulent transfer of shares being allotted through IPOs even before the actual listing of the companies, SEBI in January 2006 had allowed activation of ISINs only after the commencement of trading on the stock exchanges in case of shares of the companies.

 

Through its circular last month, SEBI had decided that in case of public offers for debt securities as well, the ISINs shall be activated only on the date of commencement of trading on the stock exchange.

 

Further, in order to curtail the transfer of additional issue of shares and securities through FPO, rights issue, preferential allotment and bonus issue of the listed company, the depositories would have to keep such securities frozen till final listing or trading permission is granted.

 

For this, SEBI has asked the depositories to allot such additional securities under a temporary ISIN which shall be kept frozen.

 

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