Companies & Sectors
United Spirits to be excluded from F&O for not filing financials
United Spirits, in which Diageo holds a majority stake, has not submitted its financial results for FY2013-14 and June 2014 quarter, and therefore, would be excluded from F&O segment, both NSE and BSE said
 
Indian bourses National Stock Exchange (NSE) and BSE has decided to drop United Spirits Ltd (USL) from the future and option (F&O) segment from 19th September as the company has failed to comply with the listing agreement including timely submission of financial results. UK-based Diageo Plc owns majority stake in USL, it acquired from Vijay Mallya-led UB group.
 
In similar-worded circulars, BSE and NSE said, "United Spirits has not submitted financial results for the year ended 31 March 2014 and quarter ended 30 June 2014 as required under Clause 41 of the listing agreement."
 
Consequently, the exchanges have decided to exclude United Spirits from equity derivatives segment.
 
It further said that no fresh month contracts for the expiry month November shall be issued on expiration of existing August month contract.
 
In fact, all the existing contracts i.e. contracts with expiry month September and October will expire on 18 September 2014.
 
Accordingly, "no future and option (F&O) contract on scrip United Spirits shall be available for trading on equity derivative segment of the exchange with effect from 19 September 2014 onwards," the exchanges said in the circular.
 
Earlier this week, NSE said that United Spirits will be replaced by Zee Entertainment Enterprises in the Nifty from 19th September.

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COMMENTS

VGANESAN

2 years ago

It is no secret for operator driven and strongly manipulated stocks are brought in the index wihch clearly known by BSE and NSE.Earlier cases are SUZLON UNITECH JPASSOCIATES which atock prices are driven by manipulators.In future both exchanges should keep only investor interest and not driven by speculators and market players.Already indian investors holding in indian equities at multi year low.

Low-risk bank customer accounts can be a conduit for money laundering
Transactions in low income individual account also need to be monitored with the same keen eyes as in other accounts by bank officials. There are several instances about low-risk customers allowing someone to use their bank account for a small commission
 
Money laundering is trading in criminal money. Money launderers seek out areas, which seem low risk due to existence of ineffective anti-money laundering systems. Launderers, prefer to move funds through areas with stable financial systems. For this purpose, they also seek out low income individuals having accounts with banks and use them as mules to transfer their illicit funds. The narrative that follows highlights how a low risk customer with a bank account was used to transfer funds illegally. It also brings into focus how ill trained, grossly negligent bank officials, ignored the obvious red flags that triggered large amounts being transferred through savings account of a factory worker. The identities of the country, the bank and the account holder are not disclosed here.
 
Mrs A was an employee in a garment factory in the Middle East. Like many other factory workers, she also walked to the bank branch every other week to deposit a few hundred of hard-earned dirhams in cash into her savings account. And, like thousands of other bank customers, she would occasionally transfer some money from that account to an account overseas apparently to her home country. This went on for three years, until, the branch manager noticed a considerable number of wire transfers being made from her account. This had all the earmarks of money laundering, which meant the branch manager should quit business (close account) with Mrs A immediately. But he hesitated. First of all, the idea that Mrs A might be laundering money seemed silly for him. Second, he did not want to close her account abruptly, because there were number of customers from the same factory where she worked. If word got around that the bank had abruptly closed her account, that would not have helped the bank's business.
 
The first step was to take a closer look at her account records. A single large deposit, the branch manager said, would not have caused him any concern. After all, Mrs A might have had a big win in the weekly lottery. But a single large deposit is not what he found. What he saw was that, over the past six months, a woman who had in the past made small deposits every other week was now depositing as much as 80,000 dirham in cash, on a random but frequent basis.
 
To the manager this looked like ‘placement’ – getting the money into the system. He was upset that his tellers had not brought the new pattern of deposits to his attention. In addition, he saw that relatively similar amounts were now being sent by wire transfer to accounts in other countries and other banks. This he thought looked like ‘layering' – moving money around to confuse the trail. But it was the next day, before he could follow through with inquiries with managers of the bank’s branches in other countries. Could they tell him, he asked, whether the accounts receiving the wire transfers were still open and active? It turned out that one account had been closed and the equivalent of 350,000 dirhams, most of it remitted in by telegraphic transfer, had been withdrawn. An equal amount of money in a second account, most of it also remitted in by telegraphic transfer, had been used as the down payment for a mortgage on a restaurant property. Another two accounts were still open but funds remitted (from Mrs A's account) had already been turned around and remitted out to other accounts elsewhere. A fifth account in the name of a small business had a balance that fluctuated frequently, though lately the average balance had climbed.
 
To the branch manager it seemed obvious. This was a money laundering operation, functioning on a fairly small scale, but successfully cleaning up dirty money –– and ‘integrating’ it into the legitimate economy. He also guessed that his customer, Mrs A, was not the source of the money but was probably letting her account be used for a small cut of the proceeds.
 
Finally, the branch manager decided to close her bank account. But he stopped. He was not sure what to do, especially since funds have already moved through his branch. The case indicates that there was ‘MONEY LAUNDERING’ going on under the Manager’s nose. Mrs  A was used as a mule against payment of some commission and the bank manager and staff were either inadequately trained or grossly negligent in ignoring the obvious red flags. The moral is that transactions in low income individual account should also be monitored with the same keen eyes as in other accounts and also employees should be well trained and fully equipped to spot such patterns of transactions.
 
(Saiyid (SSA) Zaidi is a training and development consultant as well as external subject matter expert at the Educom Group Banker's Academy in New York.) 

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Corporate governance as an ingredient of stock market Index
By creating an index that factors in corporate governance practices of a listed entity, investors can be provided a good alternative to select scrips. This will help in protecting interest of investors in a much better way
 
Removal of United Spirits Ltd (USL) from NSE's CNX Nifty, the most actively traded index in the India, has brought to fore one of the key variables that all stock market indices fail to capture. The point is that of factoring in corporate governance practices in formation of any Index. Before moving ahead it is pertinent to note that as per media reports, removal of USL from Nifty is not just a periodic exercise, but an outcome of non-reporting of financials by the company. The issue is indeed series and warrants attention. Even otherwise, significance of corporate governance in creation of an index cannot be overlooked.
 
Let us look at an index like Nifty. It is based on some of the key variables that determine the formation on any equity index. The benchmark considers impact cost, investible weight factor and a listing history as some of the eligibility criteria for formation of Nifty. But there is no mention of corporate governance as a variable in the creation of the index.  The same applies to other indices as well. As a result of these criteria, most trader friendly companies become part of the index, leaving behind interest of investors. This is not to say that once companies with high standard of corporate governance are included in the index, the issues related to fraud and cheating will permanently get eliminated. But definitely interest of investors will be protected in a much better way.
 
Now the most interesting aspect of the issue i.e. how to create an index, which will factor corporate governance practices of the company. While this may be debated, there are exclusive examples in the world that give an insight into this kind of index. Let us look at one such index. Borsa Istanbul has an index, which takes on consideration corporate governance practices. The index is known as BIST Corporate Governance Index (XKURY). As per the website of Borsa Istanbul, “BIST Corporate Governance Index is the index in which the companies that apply Corporate Governance Principles are included. BIST Corporate Governance Index aims to measure the price and return performances of companies traded on Borsa ─░stanbul Markets (except companies in Watchlist Companies Market and List C) with a corporate governance rating of minimum 7 over 10 as a whole and minimum of 6.5 for each main section. The corporate governance rating is determined by the rating institutions incorporated by CMB in its list of rating agencies as a result of their assessment of the company's compliance with the corporate governance principles”.
 
This experiment is however not just limited to Istanbul. There are at least eight stock exchanges,  which have launched indices with corporate governance as the critical ingredient:
 
 
While creating these indices, some of the key criteria have been considered. Here is an insight into what Italy and Brazil consider as the criteria for creating indices:
 
 
While many of these criteria are part of corporate governance practices that we follow in India, they are not included in any of the benchmarks. As regards the success that these indices have achieved in their respective countries, here is a table which shows that large number of companies have joined these indices, wherever number of companies in an index is not capped.
 
 
Small investors often find it difficult to comprehend and gauge corporate governance practices of companies. However, by building an index which factors in corporate governance practices investors can be provided a good alternative to select companies which are high on corporate governance standard. At least time has come to think on these lines. 
 
(Vivek Sharma has worked for 17 years in the stock market, debt market and banking. He is a post graduate in Economics and MBA in Finance. He writes on personal finance and economics and is invited as an expert on personal finance shows.) 

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