Stock exchanges for abolition of STT in Budget

The finance ministry has been pushing for lowering of STT as it would boost investor sentiments. However, the stock exchanges are seeking removal of the levy as it would reduce transaction cost, promote equity culture and encourage retail participation

New Delhi: Stock exchanges on Tuesday pitched for abolition of the Securities Transaction Tax (STT) on equity trades at their meeting with finance ministry officials here, reports PTI.

The issue of removal of STT was raised by representatives of different stock exchanges, including Bombay Stock Exchange (BSE), National Stock Exchange (NSE), MCX-SX and United Stock Exchange USE). Besides, the officials of the market regulator Securities and Exchange Board of India (SEBI) were also present in the meeting.

“Finance ministry has taken our view on developments in stock markets and STT. We have suggested removal of STT. Based on our view the ministry will take a view,” a representative of a stock exchange said.

“We are expecting some announcement in budget. We also stressed that taxes should not be increased and no new taxes should be introduced,” an official from another stock exchange said.

Earlier in the day SEBI chairman UK Sinha, too, met finance ministry officials.

The government had introduced STT in 2004 on transactions in different types of securities. The rate presently varies from 0.025% to 0.25% depending upon the type of security traded and transaction—whether sale or purchase.

The government collects around Rs7,500 crore per annum from STT and it would be difficult for it to forego the revenue at a time when efforts are needed to raise revenue and bridge the fiscal deficit, which during the current fiscal is likely to exceed the budget target of 4.6% of the gross domestic product (GDP).

The discussions are aimed at providing inputs to the budget for 2012-13 which will be unveiled by finance minister Pranab Mukherjee on 16th March.

The Capital Markets division of the finance ministry has been pushing for lowering of STT as it would boost investor sentiments.

The stock exchanges, however, are seeking removal of the levy as it would reduce transaction cost, promote equity culture and encourage retail participation.

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Cos to reserve 15% for small shareholders in buyback through tender

The buyback through the tender can be completed within 41 days of the board approval. A company would have to publish advertisement in newspapers within two days after securing board approval and after five days it has to file the offer document with SEBI. The offer shall remain open for 10 working days and the company would have to would have to pay the buyback amount to the shareholders within seven days

New Delhi: Market regulator Securities and Exchange Board of India (SEBI) on Tuesday modified norms for share buyback through the tender offer route under which companies will have to reserve 15% of the offer for small shareholders, reports PTI.

“15% of the number of securities which the company proposes to buy back (through tender offer)... shall be reserved for small shareholders,” SEBI (Buyback of Securities) (Amendment) Regulations 2012 said.

Small shareholder refers to a shareholder who holds shares not exceeding Rs2 lakh of a listed company.

The buyback process through the tender offer route can be completed within 41 days of the board approval.

As per the guidelines, a company would have to publish advertisement in newspapers within two days after securing board approval for the buyback and after five days it has to file the offer document with SEBI.

“The offer for buyback shall remain open for 10 working days,” SEBI said, adding that within seven days the company would have to pay the buyback amount to the shareholders.

At present there are two ways by which a company can come out with a buyback—open market and tender offer.

While in open market offer companies can buy back shares from shareholders without knowing the buyer, under tender offer the company has to write to every shareholder saying it is willing to buy back shares in proportion to the issue.

SMC Global head of research Jagannadham Thunuguntla said private companies are unlikely to take the tender offer route to buy back as the process is tedious and time taking.

“The guideline is more theoretical. Companies are likely to execute buyback through the open market route,” he said.

The last company which came out with buyback by way of tender offer was Piramal Healthcare.

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SEBI directs two persons to pay Rs2.72 crore for unlawful gains

SEBI has directed Shailesh S Jhaveri and Harsha M Shah to collectively pay Rs2.72 crore for their involvement in fraudulent and unfair trade practices during preferential allotment of shares of Ojas Technochem Products in 2000

Mumbai: The Securities and Exchange Board of India (SEBI) has directed two individuals—Shailesh S Jhaveri and Harsha M Shah—to collectively pay Rs2.72 crore for their involvement in fraudulent and unfair trade practices during preferential allotment of shares of Ojas Technochem Products (OTPL) in 2000, reports PTI.

“The noticees namely Shailesh S Jhaveri and Harsha M Shah shall disgorge the unlawful gain of Rs60,72,000 each. In addition to the above, they shall also pay Rs75,31,111 each, being the simple interest at the rate of 12% per annum on the unlawful gain of Rs60,72,000, for the period of January 2000 to May 2010,” the regulator said in an order.

It has directed the duo to pay the total Rs2,72,06,222 within 45 days failing which they will be “restrained from buying, selling or dealing in securities market in any manner whatsoever or accessing the securities market, directly or indirectly.”

SEBI had earlier in 2007 barred Mr Jhaveri and Ms Shah from the market for two years for their involvement in the case.

Pursuant to that, the regulator had issued a show-cause notice in February 2008 to them asking why directions to disgorge the amount equivalent to the illegal profits should not be issued against them as a remedial measure, in order to protect the interest of the securities market and to prevent the noticees from retaining the ill gotten gains.

The show-cause notice alleged that the shares allotted to the noticees in the preferential allotment by OTPL on January 2000, were without actual infusion of funds by them as consideration.

Further, Mr Jhaveri and Ms Shah were found to have sold these shares subsequently at an average price of Rs10.12 per share, making illegal profits of over Rs1.21 crore.

After several adjournments, the two noticees filed their written submissions in December 2009 and again in March 2010.

After consideration of the submission, SEBI said that OTPL had made the preferential allotment for its 60 lakh shares in January 2000 and of these, six lakh shares each were allotted to Mr Jhaveri and Ms Shah.

“The sequence of events show that entities/persons viz., OTPL, the allottees in the preferential allotment, Top Cassettes and M/s Rajesh N Jhaveri were maintaining their bank accounts in the same bank at the same branch and all these bank accounts bear entries of transactions in relation to the preferential allotment by OTPL,” it said.

While stating that having accounts in the same branch cannot be co-incidental, SEBI also said that all cheques involved in the transactions were presented on the same day.

“The common date for presenting the said cheques also raised suspicion, as it appears that the entity that presented the cheque was aware of common funds moving from one account to another. The pattern of fund flow indicates deliberate efforts on the part of the controlling entity.

“These facts points that the bank entries were mere book entries and there was no actual fund transfer to OTPL for making the allotment to the noticees,” SEBI said.

The regulator said that the noticees have failed to produce documents showing their bank details or any communication regarding the preferential allotment.

“... find that the noticees had got the preferential allotment of shares without any consideration. Later on the noticees sold these shares in the market and made profits,” SEBI said in its order, adding that this amounted to employing fraudulent and unfair trade practices to get the shares and making unlawful gains by selling them.

As the matter is also before the Gujarat High Court, SEBI has stated that if Mr Jhaveri and Ms Shah furnish bank guarantees of Rs1,36,03,111 each within 45 days, the implementation of the order shall be kept in abeyance, as per the direction of the court.

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