SEBI wants listed companies to be ethical, but no to policing

SEBI, which regulates thousands of listed companies as well as hundreds of other market entities like brokers, merchant banks and ratings agencies, has informed its board that it cannot adopt a private sector role similar to that of the CVC for government entities. Instead, it wants listed entities to follow a nine-point disclosure norm against non-ethical business practices

New Delhi: Rejecting the idea of assuming a Central Vigilance Commission (CVC)-like role of an anti-corruption watchdog for the private sector, capital market regulator Securities and Exchange Board of India (SEBI) has said it wants listed entities to follow a nine-point disclosure norm against non-ethical business practices instead, reports PTI.

SEBI, which regulates thousands of listed companies as well as hundreds of other market entities like brokers, merchant banks and ratings agencies, has informed its board that it cannot adopt a private sector role similar to that of the CVC for government entities.

In a memorandum submitted to its board at its last meeting on 24th November, SEBI said a CVC-like role “is not within the mandate of SEBI under the existing legal framework”.

At the same board meeting, SEBI approved a new disclosure-based regime for listed companies with respect to non-ethical business practices.

As per the decision, companies would need to submit a ‘Business Responsibility Report’, along with their annual reports, to help assess the fulfilment of their environmental, social and the corporate governance responsibilities.

These disclosures, which SEBI has proposed to be based on nine key principles of responsible, transparent and ethical business practices, would initially apply to the top 100 companies.

Regarding the adoption of a CVC-like role in respect of activities of private sector companies, SEBI said its jurisdiction extends to listed companies in the private sector on certain matters delegated under the Companies Act.

“Further, SEBI has been established to protect the interest of investors in securities and to promote the development of, and to regulate, the securities market as enshrined in the SEBI Act,” the regulator told its board.

The matter came up for discussion in the backdrop of a proposal to SEBI by Transparency International, a global civil society organisation working against corruption, for exploring the possibility of SEBI performing a CVC-like role with respect to the activities of private companies.

The CVC was set up by the government with a mandate to inquire into offences alleged to have been committed under the Prevention of Corruption Act by certain categories of central government employees, corporations established by or under any Central Act, government companies and other entities owned and controlled by the central government.

SEBI said that Transparency International India (TII) was also working toward eradication of corruption by “bringing together relevant players from government, civil society, business and the media to promote transparency in elections, in public administration, in procurement and in business.”

In a letter sent to SEBI in July, inviting the regulator to participate in a Conference on Ethics in Business, TII had suggested exploring the possibility of SEBI performing a role similar to the CVC with regard to the activities of private sector firms.

SEBI participated in the conference, held in August.

SEBI said the conference was focused on the performance of Integrity Pacts (IP), a tool developed by TII for preventing corruption in public contracting.

An IP is an agreement between a government agency and all the bidders for a public contract and lays down each parties' rights and obligations for prevention of bribery and other corrupt practices.

This tool also introduces a monitoring system with the approval of the CVC that provides for independent oversight and accountability.

SEBI told its board that it was also informed by the TII representatives about their initiatives for extending the principles of business ethics and adoption of IP by corporates in private sector in their business dealings.

SEBI also noted that the “CVC has issued various circulars emphasising the necessity of adopting IP in government organisations in their major procurement activities."

However, in view of the limited procurement activities of public sector banks, insurance companies and financial institutions, these organisations were exempted from the IPs.

Noting that SEBI, being a government organisation, was covered under the said circulars of the CVC, the board was told “... the fact remains that SEBI has only very limited procurement activities.”

On the Business Responsibility Report, SEBI told its board that companies were “accountable not merely to their shareholders from a revenue and profitability perspective, but also to the larger society, which is also its stakeholder.”

“Hence, adoption of responsible business practices in the interest of the social set-up and the environment are as vital as their financial and operational performance.

“This is all the more relevant for listed entities, which, considering the fact that they have accessed funds from the public, have an element of public interest involved, and are obligated to make exhaustive continuous disclosures on a regular basis,” the board was informed.

The nine key principles proposed for the new disclosures include the companies’ conduct and governance being based on ethics, transparency and accountability, promotion of the well-being of all employees, respect toward human rights and environmental issues, among others.

They also call for businesses to act responsibly when engaged in influencing public and regulatory policy.

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SEBI sets up committee to find ways to utilise IPEF

 

The panel is entrusted to recommend whether investor education and protection activities that may be undertaken directly by the board, or through any other agency, for utilisation of the SEBI Investor Protection and Education Fund for the purposes stated in the SEBI (Investor Protection and Education Fund) Regulations, 2009

New Delhi: Capital market regulator Securities and Exchange Board of India (SEBI) has set up a committee to find out the ways and means to best utilise the Investor Protection and Education Fund (IPEF), reports PTI.

“We have set up a committee. It is guiding us in how this fund (IPEF) is spent,” SEBI whole-time member Prashant Saran said.

The panel is entrusted to recommend whether investor education and protection activities that may be undertaken directly by the board, or through any other agency, for utilisation of the SEBI Investor Protection and Education Fund for the purposes stated in the SEBI (Investor Protection and Education Fund) Regulations, 2009.

The IPEF, set up in July 2007, had Rs13.15 crore as on 31 March 2008 which increased to Rs16.63 crore a year later.

However, until 31 March 2009, SEBI had not spent even a single penny from this fund.

The eight-member committee is headed by ICICI Bank chairman KV Kamath. Apart from Mr Kamath, the other members include retired bureaucrat PK Ghosh, IIM Ahmedabad professor Abraham Koshy, communications consultant Ramesh Narayan and managing director of Shri Mahila SEWA Sahkari Bank, Jayashree Vyas.

SEBI will be represented by executive director Ananta Barua and chief general managers GP Garg and VS Sundaresan.

 

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BNP Paribas cuts India growth projection to 6.5% for FY11-12

“Our FY11-12 gross domestic product (GDP) forecast is cut to 6.5% and that for FY12-13 at 7.1% expectation underlining that the economy will not quickly regain its prior dynamism thanks to sliding capex spending,” BNP Paribas said in the latest issue of ‘India Economics: Eye on the Tiger’

New Delhi: Global finance major BNP Paribas has revised downward its growth forecast for the Indian economy to 6.5% for 2011-12, down from its earlier projection of over 7%, citing sliding capital expenditure and the country's exposure to European banks, reports PTI.

“Our FY11-12 gross domestic product (GDP) forecast is cut to 6.5% and that for FY12-13 at 7.1% expectation underlining that the economy will not quickly regain its prior dynamism thanks to sliding capex spending,” BNP Paribas said in the latest issue of ‘India Economics: Eye on the Tiger’.

“India’s relatively high exposure to European bank de-leveraging leaves the risks to even these downbeat forecasts still skewed to the downside,” it added.

BNP also said the Indian rupee is highly exposed to accelerated, and potentially disorderly, de-leveraging by European banks and over the next 3-6 months the risk is clearly for further weakness which may worsen growth.

BNP said that while a healthy monsoon has boosted agriculture output, with the farm sector expected to grow by around 5%-6% in the current fiscal, non-agricultural GDP is projected to be unusually weak with.

Its GDP growth projection is almost a full percentage point below the Reserve Bank of India’s 7.6% forecast made in its October review and the government’s recently reduced 7.5% expectation for FY11-12. The Indian economy had expanded by 8.5% in 2010-11.

“As we have long warned, with the weakness concentrated in the end of the fiscal year and weak capital spending inhibiting supply-side developments, FY12-13 is unlikely to see a rapid recovery,” it said.

Economic growth in the second quarter (July-September) was a meagre 6.9%, the lowest in over two years, because of poor performance by manufacturing and mining sectors.

Industrial production entered negative zone in October and contracted by 5.1%.

In its mid-quarter policy review released on Friday, RBI said that the domestic policy uncertainties and the tight monetary stance are among the factors leading to slowdown and cautioned against downside risks to growth.

With regard to its growth projection of 7.6% for the current fiscal, RBI said, “considering the global and domestic macroeconomic situation, the downside risks to the RBI growth projection, as set out in the second quarter review (in October), have increased significantly”.

BNP said, meanwhile, that the overall inflation in India will moderate to 7%, as projected by the government and the RBI, by the fiscal-end and may fall even below that.

“A collapse in food inflation through November leaves Wholesale Price Index (WPI) inflation on course to meet, even undershoot, the RBI’s 7% March 2012 forecast, increasing the central bank’s scope to cushion these downside risks,” BNP said.

Headline inflation has been above the 9% mark since December 2010. However, it fell to one year low of 9.11% in November this year.

Food inflation also moderated to a four-year low of 4.35% as on 3rd December. It has witnessed a declining trend since late October when it was in double-digits.

RBI has increased interest rates 13 times since March 2010 to tame inflation. India Inc has blamed the repeated rate hikes, which have led to an increase in the cost of borrowings, for hindering fresh investments and industrial slowdown.

In its mid-quarterly review on Friday, the central bank kept its key policy rates unchanged and hinted at rate cuts in future.

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