EPFO to pay 8.5% interest rate for FY20 in 2 instalments
The Employees' Provident Fund Organisation (EPFO) will pay 8.50% interest rate to the formal sector employees for the last fiscal year in a staggered manner due to the impact of the coronavirus pandemic.
 
The total payment would include 8.15 per cent interest rate from debt income and the balance 0.35 per cent from the sale of ETFs subject to their redemption by December 31, 2020, said an official statement.
 
The decision was at the meeting of EPFO's Central Board on Wednesday.
 
"In view of exceptional circumstances arising out of Covid-19, the agenda regarding interest rate was reviewed by the Central Board and it recommended the same rate at 8.50 per cent to the Central government. It would comprise of 8.15 per cent from debt income and balance 0.35 per cent (capital gain) from the sale of ETFs subject to their redemption by 31st December, 2020," the Labour and Employment Ministry statement said.
 
The Central Board also recommended to account such capital gains in the income of the financial year 2019-20 as being an exceptional case.
 
It also accorded approval for amendment of paragraph 22(3) of Employees' Deposit Linked Insurance Scheme, 1976 to enhance the maximum assurance benefit to Rs 7 lakh from the present maximum assurance benefit of Rs 6 lakh.
 
"This amendment will provide additional succour to families and dependents of members of the scheme in case of their unfortunate death while in service," it said.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    “Swift, Collective Action is the Need of the Hour for Anugrah Investors”, advise ex-SEBI Legal Officers
    “Investors have a right and a duty to go by the market risk. But this is beyond a market risk, this is actually a fraud,” said former SEBI GM Advocate PR Ramesh, while speaking at a webinar organised by Moneylife Foundation for aggrieved investors of Anugrah, who were trying to find a solution to recover their losses. Advocate Sumit Agrawal, former SEBI Legal Assistant, was also part of the webinar as Moneylife Foundation attempted to provide an open platform for investors to present their concerns and doubts. 
     
    As we have recently learned, Anugrah Stock and Broking is another firm in a series of such incidents, whose investors are facing losses totaling Rs1000 crores. Moneylife has been extensively covering this issue for the past couple of weeks and has also been writing about the serious gaps in investor protection laws. 
     
    The webinar began with the opening remarks from Adv Ramesh who explained how after years since the 1992 Harshad Mehta scam, investors have still “not been accustomed to handling of broking entities and entire systems and processes” and ended up getting caught in frauds such as Anugrah. 
     
     “Prior to Anugrah, we had Karvy, BMA, IndiaNivesh…we had a lot of issues. But still I think this algorithmic trading was sort of a tempter which actually made a lot of investors give money and maybe they were able to generate returns of 18-19% initially,” he explained. 
     
    According to him, frauds of this nature keep happening even after tight regulations partly because of naïve investors and also educated investors taking a market risk, but also because of lapses and failures on the regulatory side. He further stressed that such investors should not be forced to bear the brunt of the losses for an outright fraud. “We have to take them to task and shake up the system, so that such a fraud does not repeat again,” he added. 
     
    Adv Sumit gave a brief presentation covering the facts of the case that are available in the public domain, the actions that regulatory bodies have taken to date, the general position in law in such cases and also any possible steps that investors can take for recovery. 
     
     
    “In such cases, generally various laws kick in, either SEBI’s, BSE’s or NSE’s by-laws or Sec 9 of Arbitration and Conciliation Act, Indian Penal code, MPID Act etc. Legal advisors will have varying strategies depending on the client’s particular situation and their exposure to the broker or the associate of the broker,” explained Adv Sumit. 
     
    In his opinion, before connecting with any legal advisors, aggrieved investors should first collate information that is available and applicable to their particular case including, a demat holding statement, contract notes, margin statement, 3 years IT returns, profit statements provided by Teji Mandi and global profit statements and any correspondence with Anugrah or Teji Mandi.
     
     
     “Having such documentation prepared in advance will not only give you a better picture of the position you are in, it will also provide a legal advisor better understanding of your particular case,” advised Adv Sumit. 
     
     
    During the course of the Q&A, many attendees present had some pressing questions on safe-guarding their savings from such frauds in the future and making prudent investments. Adv Ramesh in response to one such question, rightly observed that, “there is lot of material now available online, on what investors should do to protect their own investments…a lot of YouTube videos and educational materials. But the basic issue remains, that when you are dealing with your own money, please don’t be focused solely on the returns, but also on the safety part, which is the first and foremost thing. Documentation is also important, since many clients do not bother about documentation, so long as the cheques are coming to their bank accounts. This is where the fundamental problem begins.”
     
    One of the attendees wanted to check if getting the company declared insolvent would help. In response to this, both Adv Ramesh and Adv Sumit unanimously replied that it would be a disastrous decision for the investors, since in cases of bankruptcy, and during distribution of assets, an equity holder or a futures and options holder are not a priority. 
     
    Throughout the webinar, both advocates vehemently agreed that the system was flawed, but to bring about change would be a monumental task that requires persistence and patience of aggrieved investors. Although there have been failures at each stage, from SEBI, the clearing corporation and the clearing brokers, investors will have to take swift action perhaps as a group to recover their losses. 
     
    Note: Moneylife Foundation has organised this webinar in the interest on educating investors and will not be directly filing a petition in the courts or representing any investors. This webinar has been part of our efforts to facilitate an action group where aggrieved investors can meet and discuss their way forward. In case you are an investor and are not part of our Anugrah-Teji Mandi-Action Group on Telegram, you can join using the below link: https://telegram.me/joinchat/OOrsZVXo_dP9ILG64VmtKw
     
    Watch a video recording of the session:
     
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    COMMENTS

    swarke

    3 weeks ago

    You say so much about SEBI. Have you even seen any courtesy that they (SEBI) cared to even reply investors' letter ?
    Its nothing better than another government undertaking. Had they had little intelligence, there would not have been so many frauds.
    It continues unabated.

    How Exchanges, Clearing Houses, Clearing Brokers and Banks are Permitting Frauds by Brokers
    A long list of broker defaults, that have decimated investors’ savings in the past one year or so, have one thing in common. Investigation has always focused on what happens within the trading systems of exchanges and ignores the role of those who facilitate and enable the fraud perpetrated on investors. Massive losses are distributed among thousands of disaggregated investors, spread across the country, who do not have the ability and resources to fight back effectively. While it is easy to blame investors for being greedy and ignoring risks, those complicit in enabling fraudulent activity are getting away. 
     
    A legal system that is slow and expensive and (makes a virtue of disallowing American-style outcome-based fees) also works against investors and savers looted by financial fraud. What is worse, the Securities and Exchange Board of India (SEBI), the exchanges and other empowered intermediaries are also complicit in their failure to detect fraud soon enough. Consequently, when a broker fails, all of them get active and work at covering up their own negligence and failure. This takes the form of long-winded investigation and delays, seizing of books and computers, refusing to update investors and forcing them into individual arbitration proceedings, where they are invariably at a disadvantage. 
     
    Advocate PR Ramesh, who has spent over two decades with SEBI and the financial sector, brought the issue centre stage by pointing out that what Anugrah, Karvy, Allied and a dozen other brokers have done is beyond what can be termed as naïve investing or taking market risk;there is also a large element of fraud which has never received the attention it deserves. To summarise what he said: it is true that investors fell for the promise of high returns; but that is only a part of the problem. While investors must be willing to bear losses arising from speculation, they cannot be made to carry the can for outright fraud which is not being investigated as a criminal offence.
     
    Advocate Ramesh has over two decades of experience in securities law and advocate Sumit Agrawal, also formerly from SEBI’s legal department, were addressing investors at Moneylife Foundation’s webinar on “What Was Wrong with Anugrah’s Promise & How Can Investors Protect Themselves in This Crisis?” which was attended by hundreds of investors. Here is a link to the event. 
     
    The point that advocates Ramesh and Agrawal made in the discussion is that key players who tacitly support such fraud also ought to be held accountable. These start with SEBI (whose highly sophisticated market monitoring system never seems to work), the clearing corporation (which has framed rules to protect itself from liability without any accountability), the clearing brokers (large brokerage firms may be facilitating poor margins or misuse of client funds and securities) and, finally, banks and finance companies who are willing parties to defrauding investors with dubious arrangements that earn them fees. None of them has ever been called out or held accountable, until now. But, as advocate Ramesh pointed out, it is high time they were dragged to court and held responsible. 
     
    Role of Clearing Members
    Of these, the clearing corporations (CC) are best protected. They are empowered to order clearing brokers to auction shares, invoke margins in the form of bank guarantees (BGs)/fixed deposits (FDs) and protect itself. The role of the clearing broker is important in the context of many recent failures. Let us look at Edelweiss Custodial Services (Edelweiss), which has played a controversial role in at least three recent broker defaults: Anugrah, India Nivesh (where Edelweiss took a Rs100 crore hit in April, when the broker shut down operations and is now litigating the matter) and VRise Securities.
     
     
    The founder of Anugrah and Teji Mandi Analytics (TMA) have been blaming Edelweiss for their problems. An email from Arun Gandhi, founder of TMA says, “The Clearing Member made ‘unnecessary and wrongful deductions’ from some accounts by selling their stocks.” 
     
    Our attempt to get answers from Edelweiss resulted in denials, partly incorrect information and then silence. We have no answer to a simple query: Did Edelweiss choose to sell investors’ shares to meet mark-to-market losses rather than invoke a BG that was provided. Instead, a spokesperson claimed that Anugrah was repeatedly warned about hitting loss limits (before the account moved to ICICI on 20 July 2020 and not early June, as we were informed by Edelweiss earlier) and pending corrective action, “we will take necessary action as per our risk policy.” 
     
    Further, that “Anugrah, at no point in time communicated nor instructed us to invoke their Bank Guarantee (BG).” In another message, the same person had said, “If a BG is given as collateral, there's no reason for us to not invoke unless BG itself is deficient.” In another email, the spokesperson said, there is “no incentive for a clearing member to make unauthorised sales” of client securities. But what if there are indirect incentives, such as evading responsibility for having hidden defective and deficient margins in the form of FDs and BGs? 
     
    Just a few weeks ago, I wrote a piece on how a 14-year old brokerage firm, India Nivesh Securities went belly up in April and HDFC Bank has refused to honour a Rs100-crore FD because it was ‘funded’. While the matter is under arbitration, we have no clarity from SEBI or the Reserve Bank of India (RBI) on the legality of ‘funded FD’ and how it was accepted by the clearing broker (again Edelweiss) or issued by HDFC Bank. The National Stock Exchange (NSE) and its clearing house has strongly refuted our queries about a the existence of many more deficient FDs and BGs by elaborating its strict control systems. 
     
    As advocate Ramesh says, delays and litigation always work in favour of the regulator and bigger market intermediaries. The possibility of the BG also being deficient is a new twist which needs investigation, because there is no clarity on how a guarantee can be defective. We learn that NSE has sent a set of questions to Edelweiss; but, as always, nobody is forthcoming with answers.
     
    There is a third case where NSE’s clearing corporation had even issued directions to Edelweiss to return securities belonging to a banned sub-broker VRise in February 2020. Investors have complained that their shares were fraudulently submitted as collateral. Edelweiss has challenged NSE’s order before securities appellate tribunal (SAT) and advocate Ravi Hegde has filed an intervention petition on behalf of investors. 
     
    In VRise as well as Anugrah, there are allegations that Edelweiss allowed the brokers to ‘intermingle’ collateral provided by clients with that required from the broker for his proprietary trades. When the broker incurred losses in proprietary trades, client collateral has been sold by clearing member, knowing full well that the shares belonged to investor clients. 
     
    Advocate Hegde points out that the regulations of clearing corporations are explicit that a clearing member cannot ‘make improper use of client securities and funds’. More importantly, the regulations clearly say, “no clearing member shall exercise any discretionary power in a client’s account unless such a client has given prior written authorization…” Although the rules are explicit, here again, long-drawn litigation tends to work in favour of larger intermediaries. 
     
    Role of Banks and Lenders  
    The next set of intermediaries, who tacitly or inadvertently collude with dubious brokers, are banks. The best recent example is that of Karvy Stock brokers where SEBI acted quickly to protect over 83,000 investors (although another 7,000+ were left in the lurch). Here, a set of banks—HDFC, ICIC Bank, Indusind Bank and Bajaj Finance had allowed Karvy to borrow money by pledging clients’ shares, putting the investment of over 90,000 investors at risk. This is the only time that SEBI pointed to their failure to do due diligence and moved swiftly to protect a majority of clients. Karvy has been very slow in paying back investors and some money/shares have been released recently after my follow-up.
     
    Funded FDs, exposed by the India Nivesh case, are another fraudulent way of defrauding retail investors. Extending a short-term loan that is fraudulently shown as an FD for margin payments to make larger speculative punts endangers the market. We have seen no action from either regulator as yet and the extent of this problem is unknown. As for the defective BG, NSE strongly refutes such a possibility, even when a large clearing member has alluded to such a possibility. 
     
    A third example, involving HDFC Bank, is that of BMA Wealth, where HDFC Bank has refused to return shares that were wrongly pledged by the defaulter broker. The Bank has written to investors that “it is well within its legal rights to sell shares pledged by the brokerage under the loan agreements.” It further claimed that BMA had ‘expressly represented’ that it owned the shares pledged. In doing so, it washes its hands off any responsibility to evaluate the brokers’ finances and verify whether the clients had agreed to pledge the shares. 
     
    Clearly, it is the law of the jungle that operates in the capital market rather than regulation. The biggest intermediaries hire expensive lawyers and drag matters through multiple legal forums until retail investors, who have already lost money, simply give up. 
     
    Until our market regulator and all those in regulatory and fiduciary positions (clearing brokers, clearing corporations, exchanges and banks) are made accountable, this will lead to a rapid erosion of investor confidence in markets. 
     
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    COMMENTS

    s5rwav

    3 weeks ago

    As a Whistle Blower and Concerned Citizen of India & as an Investor, I Explained Mr KV Kamath and Mrs Chanda Kochhar about Reliance Power IPO Fraud, through ICICI Direct / ICICI Bank, in the #ICICIBankAGM2012. Mrs Chanda Kochhar Promised me to Take Action. I was illegally Stopped from Attending the ICICI Bank AGM of 2013 as the Company Secretary of ICICI Bank Mr Sandeep Batra Refused me Gate Pass to the AGM Hall. To Debar me from Attending the ICICI Bank AGMs, the ICICI Bank Filed Civil Court Cases in Vadodara Court just before the AGMs 2013 and 2014. Case Nos are RCS 445 of 2013 and RCS 494 of 2014. Case of 2013 was Unconditionally Withdrawn in 2017. Case of 2014 is still going on. Not even Petition Memo is Served on the Respondent Babubhai Vaghela. However, two Judicial Orders were Passed in Favour of the Respondent. Seven Magistrates have been Transferred hearing RCS 494 of 2014. Case is getting Adjourned. I Requested Mr Vikram Nath the Chief Justice of Gujarat High Court to Fix #TimeLimit to Adjudicate the Case but the Chief Justice has Refused. I am Babubhai Vaghela from Ahmedabad aged 71. Thanks. https://youtu.be/w6KPnvto5Oc

    arnaud.descamps

    3 weeks ago

    previous comment was more about Broker and Bank allowing fraud or issues by listed companies, rather than by brokers.

    arnaud.descamps

    3 weeks ago

    In a situation with shares-related complaint, it is quite painful to see Karvy (registrar) state that "there are no current investor complaint", while there are ; even though Karvy was aware of issues ; which means cover-up.

    In a situation where a tv-known board member has bought shares of a company 10 days before a buy back was publicly announced, it would be good to see Karvy (investment bank) disclose to Sebi etc. at what time the board was informed of the buy back, as per their knowledge.

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