Unichem Laboratories: Growth Formula

Unichem has bright prospects and is managed well

Unichem Laboratories is a typical...

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Unquoted: Nova Iron & Steel

Stories of price manipulation

Nova Iron & Steel (Rs40)

Nova Iron & Steel is partly owned by Bhushan Power & Steel Ltd; the latter holds over 39.48% of the shares outstanding. The latter also has a subsidiary which holds 27.57% of Nova Iron & Steel. It is pertinent to note that Nova Iron & Steel was suspended by the BSE in the past for violation of listing norms.

BSE revoked the suspension on 7 May 2010. In October 2012, the company reduced the face value of its equity share from Rs10 to Rs2.40. The fundamentals of the company have been erratic. Sales seesawed over the past five quarters; in the March 2012 quarter, sales were Rs54.85 crore; they were Rs15.15 crore in the June quarter, Rs53.92 crore in the September quarter and Rs24.20 crore in the December quarter before sliding to Rs12.09 crore in the March 2013 quarter.

The company did not make profits in four out of these five quarters. Yet, the share price rocketed 591% between 17 September 2012 and 12 July 2013, from Rs6.08 to Rs42. As usual, after investing crores of rupees in surveillance equipment, SEBI couldn’t care less.


SEBI gets more powers; can seek old case details

The amendments have made it clear that SEBI would have powers to pass orders against any person who has made profit or averted loss by indulging in any transaction or activity in contravention of the provisions of the SEBI regulations

In a major upgrade of powers given to the Securities and Exchange Board of India (SEBI), the government has allowed it to pass orders like search and seizure, attachment of properties, arrest and detention of defaulters and pass disgorgement directions to recover the wrongful gains made in contravention of laws.


At the same time, the government has also allowed SEBI to seek information from other regulators within India and abroad with retrospective effect, paving way for collection of details pertaining to cases pending for over 15 years now.


In another retrospective change, which forms part of the Securities Laws Amendment Ordinance promulgated by the President of India last week, the individuals and companies being probed by SEBI can settle their pending investigations. Such settlements can be undertaken in cases that are currently pending for more than six years.


To tackle the growing menace of Ponzi schemes being floated as Collective Investment Schemes (CIS), the rules have also been amended to classify any money collection of Rs 100 crore or more as CIS operation. SEBI has been given powers to crack down on illegal investment schemes floated by individuals as well, as against companies only as of now.


However, all government-notified schemes would be out of the Collective Investment Scheme framework.


The changes are part of as many as 22 amendments made by the government in three main Acts governing SEBI and its operations—the Securities and Exchange Board of India (SEBI) Act, the Securities Contracts Regulation Act (SCRA) and the Depositories Act—through a 16-page Ordinance.


Among others, SEBI has also been given powers to pass disgorgement orders for amount equivalent to wrongful gains or to losses averted by contravention of regulations.


Besides, the regulator can now enter and search buildings, places, vessels, vehicles and aircraft of defaulters.


Its officers can also break open the lock of any door, box, locker, safe almirah, etc to get information from suspected entities.


At the same time, the defaulters can seek settlement of pending cases with SEBI with retrospective effect from 20 April 2012.


The Ordinance also allows the government to set up as many special courts, as required, to expedite hearing of cases involving contravention of securities laws.


SEBI has also been given direct powers to attach properties and bank accounts of persons and companies failing to comply with directions, involving payment of penalties, refunds to the investors and other dues. The regulator can also order arrest and detention of defaulters in prison.


The powers to seek information from other domestic and foreign regulators have been made effective retrospectively from 6 March 1998.


For seeking information from outside the country, SEBI can enter into an arrangement, agreement or understanding with relevant foreign authorities with the prior approval of the central government.


At the same time, SEBI can now ask for information or records from any person, banks, authorities, boards or corporation, if the regulator is of the opinion that such details could be relevant to any investigation or inquiry being undertaken by it.


With regard to its new search and seizure powers, SEBI can also access the documents maintained in the electronic format.


On settlement, the Ordinance provides that any person against whom any proceedings have been or may be initiated by SEBI under certain sections, may file an application to SEBI proposing for settlement of such proceedings for the alleged defaults.


After taking into account the “nature, gravity and impact of defaults”, SEBI can accept or reject such a settlement on payment of an amount to be decided by the regulator, subject to various terms and conditions.


However, no appeals can be made against SEBI's decision in these matters.


The settlement provision has been made applicable retrospectively with effect from April 20, 2007.


For speedy trial of offences under various SEBI regulations, the Ordinance also provides for setting up of "as many special courts as may be necessary" by the central government.


Such courts would consist of a single judge to be appointed by the central government with concurrence of the chief justice of the high court within whose jurisdiction the judge to be appointed is working.


The judge would need to hold the office of a sessions judge or an additional sessions judge immediately before such appointment.


Also, the person conducting prosecution on behalf of SEBI before such a special court would be deemed to be a public prosecutor within the meaning of the relevant clause of the Code of Criminal Procedure.


Such prosecutors would need to have been in practice as an advocate for at least seven years or should have a minimum experience of seven years in a relevant government job.


Till the time a special court is established, any offences committed under SEBI Acts would be tried by a session court.


If a person fails to pay the penalty imposed by SEBI or fails to comply with any direction for refund of money or any disgorgement orders, the recovery officer appointed by SEBI can proceed to recover such an amount.


The amendments have made it clear that SEBI would have powers to pass orders against any person who has made profit or averted loss by indulging in any transaction or activity in contravention of the provisions of the SEBI regulations.


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