SEBI BOARD MEETING
The SEBI Board met in New
Delhi today and took the following decisions:
I. Amendments to SEBI (Infrastructure
Investment Trusts) Regulations, 2014 and the SEBI (Real Estate Investment
Trusts) Regulations, 2014
The Board considered and
approved the following Amendments to SEBI (Infrastructure Investment Trusts)
Regulations, 2014 and the SEBI (Real Estate Investment Trusts) Regulations,
2014:
1. The minimum allotment and trading lot for
publicly issued InvITs and REITs shall be in following manner:
a. Allotment by REIT/InvIT shall be made in
the multiples of a lot, each consisting of 100 units.
b. Value of such allotment lot for InvITs
shall be Rs one lakh and for REITs shall be Rs fifty thousand.
c. After listing trading will be in multiple
of one lot.
2. The leverage limit for InvITs increased
from existing 49% to 70% of InvIT assets. The enhanced limit shall be subject
to certain additional disclosure and compliance requirements, such as,
a. The consolidated debt of the InvIT and the
project debt, have a credit rating of AAA or equivalent from a rating agency
registered with the Board;
b. The InvIT has a minimum track record of 6
distributions on a continuous basis, post listing, in the years just preceding
to the Financial Year in which the enhanced borrowings are proposed to be made.
3. A separate framework for
privately placed unlisted InvITs, which provide sufficient flexibility
to both issuers and investors shall be created. These include, inter alia the
following:
a. The minimum number of investors shall be as
determined by the issuer including the maximum holding of units by a single
investor;
b. Leverage shall be as determined by the
issuer after consultation with investor(s);
c. The underlying assets can be completed,
under construction or both;
d. The minimum investment by an investor shall
not be less than Rs 1 crore.
II. Framework for Innovators Growth Platform
The Board, in its last
meeting held on December 12, 2018, approved, in principle the proposals for the
amendments to the Regulations pertaining to the Institutional Trading Platform
(“ITP”) in the SEBI (Issue of Capital & Disclosure Requirements)
Regulations, 2018 (“ICDR Regulations”). One of the aforesaid proposals pertains
to Accredited Investors (“AIs”) for the purpose of the Innovators Growth
Platform (“IGP”). The Board has now approved the framework for the process of
accreditation of investors for the purpose of IGP. Under the framework, the
investor, having a demat account with a Depository, will make an application to
the Stock Exchanges/Depositories in the manner prescribed by them for
recognition as an AI. The Exchanges/ Depositories will grant accreditation to
investors subject to their eligibility, which shall be valid for a period of
three years.
III. Corporate Debt Restructuring
The Board approved that,
in the context of corporate debt restructuring, exemptions from applicability
of conditions for preferential issue provided in SEBI (Issue of Capital and
Disclosure Requirements) Regulations, 2018 (“ICDR Regulations) and from the
obligation of making an open offer provided in SEBI (Substantial Acquisition of
Shares and Takeovers) Regulations, 2011 (“Takeover Regulations”) will be
restricted to all scheduled commercial banks (excluding Regional Rural Banks)
and all India Financial Institutions for acquisitions in their ordinary course
of business. Such exemptions will not be available for acquisition of shares by
persons other than aforesaid lenders by way of allotment by the target company
or purchase from lenders. The Board also noted that relevant exemptions
including open offer obligations are
available under the
aforesaid SEBI Regulations for
acquisition pursuant to a resolution plan approved under Insolvency and
Bankruptcy Code. Further, Takeover Regulations provide for exemption from open
offer for any acquisition pursuant to a scheme of arrangement / reconstruction
pursuant to an order of a court or a tribunal or a competent authority under
any law or regulation, Indian or foreign. The Board has approved that the
reference to approval by “Competent Authority” in the Takeover Regulations
shall be deleted.
IV. Valuation of money market and debt
securities by Mutual Funds
1. The Board after deliberation approved,
inter-alia, the following proposals to make the existing valuation practices
more reflective of the realizable value of money market and debt securities
with residual maturity upto 60 days
a. The residual maturity limit for
amortization based valuation by Mutual Funds shall be reduced from existing 60
days to 30 days.
b. The threshold maintained between reference
price and valuation price shall be
±0.025%. Further,
reference price shall be taken as security level price given by the valuation
agencies.
2. Further, the Board also approved inter-alia
the following proposals to bring uniformity and consistency across the Mutual
Fund industry on valuation of money market and debt securities rated below
investment grade:
a. The valuation agencies appointed by
Association of Mutual Funds in India (AMFI) may provide valuation of money
market and debt securities rated below investment grade.
b. As Asset Management Companies are
responsible for fair valuation, they may deviate from the valuation provided by
the valuation agencies subject to recording of detailed rationale for such
deviations, appropriate reporting to the Board of AMC and Trustees and
appropriate disclosures to investors.
V. Participation of Institutional Investors in
Commodity Derivatives Markets in India
The Board deliberated and
approved the proposal contained in the memorandum to enable participation by
Mutual Funds and Portfolio Managers in Exchange Traded Commodity Derivatives in
India subject to certain safeguards. Further, Category – III Alternative
Investment Funds which are already permitted to participate in Commodity
derivatives, have now been permitted to deal with goods received in delivery
against physical settlement of such contracts, if any.
VI. Amendments to SEBI (Debenture Trustee)
Regulations, 1993, SEBI (Issue and Listing of Debt Securities) Regulations,
2008 and SEBI (Listing Obligations and Disclosure Requirements), 2015
In order to secure the
interests of the debenture holders and to enable Debenture Trustees (DTs) to
perform their duties effectively and promptly, SEBI Board has approved
amendments to the regulatory framework for DTs which, inter-alia, include the
following:
1. The minimum net worth requirement of a DT
shall be increased from existing Rs. 2 crore to Rs. 10 crore.
2. The requirement of calling for a meeting of
debenture holders in the event of default in payment obligation by issuer in
case of public issue of debt securities shall not be obligatory.
3. E – Voting shall be a valid option for DTs
to obtain consent of the debenture holders wherever applicable.
4. In case of delay in creation of charge in
favour of DT within the specified period, the issuer shall pay additional interest
as specified in the Trust Deed and disclosed in the Offer Document to the
debenture holders for the period of delay in creation of charge.
5. In case of issuers having both listed
equity and debt securities, the certificate from the DT as per the requirement
of Reg.52 (5) of LODR shall be submitted to the stock exchange(s) by the issuer
within 7 working days from the date of submission of financial results to the
stock exchange(s).
VII. Permitting permanent registration to
Custodians
The Board approved the
proposal to amend the SEBI (Custodian) Regulations, 1996 to grant permanent
registration to custodians instead of periodical renewal every three years.
This will facilitate ease of doing business for the custodians.
VIII. Revision of SEBI’s fee structure
SEBI has been following
the practice of calibrating the fees either upwards or downwards from time to
time so as to keep a balance between the transaction cost on Securities market
and the financial resources required to ensure regulatory efficiency. Keeping
this objective in mind and taking into consideration the projected income and
expenditure of SEBI for the next 3 financial years, the Board has decided to revise
the fee structure w.e.f. April 01, 2019, in respect of certain market
participants, which are as under:-
1. The fees payable by brokers has been
reduced by 33.33%, i.e. from Rs.15/- per crore of transactions to Rs.10/- per
crore of transactions.
2. The fees payable by brokers for
Agri-Commodity derivatives transactions has been reduced by 93.33%, i.e. from
Rs.15/- per crore of transactions to Rs.1/- per crore of transactions.
3. It has been decided to reduce the fees
payable by the issuers for one refiling of offer documents by 50% from the
current levels, if the refiling is done within one year of validity of
observation letter.
4. In order to rationalise the regulatory fee
rate payable by the stock exchanges, it has been decided to reduce this fee
rate by 80% from the current Rs. 1 cr plus Rs. 6/- per crore for the turnover
in excess of Rs. 10 Lac crore to Rs. 1 cr. Plus Rs. 1.20/- per crore for the
turnover in excess of Rs. 10 Lac crore without any upper ceiling.
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GOVT RECOVERED RS 3 TRILLION OF BAD LOANS IN 3 YEARS: RAJEEV
KUMAR, BANKING SECRETARY
The government on February
28 said that banking sector witnessed a recovery of Rs 2.98 lakh crore between
2015 and 2018. Of this, Rs 98,000 crore was recovered during the two quarters
of 2018-19. Rajeev Kumar, said that banks have improved recovery every year
with Rs 98,493 crore being recovered in FY 19 (Apr-Dec), Rs 77,563 crore being
recovered during FY18, Rs 61,930 crore being recovered during FY17 and Rs
48,999 crore being recovered during FY16. Kumar said that the provisioning
coverage ratio has also improved over the years, from 3.9 percent in FY17 to
6.1 percent in FY19 (Apr-Dec). He said that the recovery from accounts of small
and medium enterprises was Rs 21,000 crore during the period. For the last
two-three quarters, NPA curve has gone down. We have recovered close to Rs 3
lakh crore over the years, Arun Jaitley, said. He said that the reason why NPAs
were not going up was due to truthful disclosure of asset quality by all the
banks. It (fall in NPA) was because of the RBI which had asked for truthful
provisioning of the assets, no matter how bitter or painful it was, he said. The
RBI had also asked for timely classification of bad loans under it contentious
February 12 (2018) circular, where it asked banks to start resolution process
of assets, within a day, in case the account defaults on payment. The
government, banks and corporates had strongly lobbied against the order as it
could lead to increased bad loans in the books and more provisioning. Jaitley
lauded Insolvency and bankruptcy Code (IBC) specifically that led to resolution
of many large scale NPA cases. Rajnish Kumar, too said that resolution of cases
through NCLT and IBC helped to make huge recoveries. There are many cases under
NCLT, and as soon as the cases under adjudication are over, we will get more
recovery, he said. The NPAs were close to Rs 10 lakh crore at the end of March
2018, of these over Rs 9.62 lakh crore were in PSBs. NPAs, however, have shown
negative trend in FY19 and have reduced by Rs 23,860 crore between
April-September 2018.
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INDIA INC SPENDS RS 50,000 CRORE IN CSR IN FY15-18, BUT
UNSPENT AMOUNT HIGHER AT RS 60,000 CRORE: REPORT
Corporate social
responsibility (CSR) spends by companies have touched Rs 50,000 crore in the
four financial fiscals to 2018, the unspent amount is higher at Rs 60,000 crore
during the same period underlining the need to improve the framework, says a
report. The cumulative spending from FY15-FY18 has topped Rs 50,000 crore, and
includes Rs 34,000 crore by listed entities, accroding to a Crisil report
Thursday. As spending reaches meaningful proportions, there is a need to
improve the quality and the impact of all that spends on the ground, the report
said. The report noted that capping the total CSR spend at 5 percent of the
total money set aside for CSR needs to be relooked as firms have singled this
out as a factor holding them back from enhancing their own in-house CSR
capacities. Implementation entails multiple costs such as salaries of dedicated
CSR staff, administrative overheads, establishment expenses, communication
expenses, professional fees, statutory filing and related consultancy etc,
which are difficult to keep within the 5 percent limit, it explained. There is
also a case for ensuring robust due diligence before appointing an
NGO/voluntary organisation partner, it said, adding governance and impact
achieved are two areas which need assessment. An independent third-party
evaluation like grading of the NGOs/implementing agencies should be considered
to gauge a potential partners ability to drive the desired social impact, it
said. The report said a third of the 1,913 listed companies which qualify for
CSR spends did not spend the money due to multiple reasons. As much as 341 said
they were unable to spend because of reasons like a delay in identifying
projects, setting up the requisite inhouse expertise, 45 did not report CSR
activity, annual reports for fiscal 2018 were not available for 118, and 163
said they were not required to spend either because they did not meet the criteria
or were loss-making. An additional Rs 2,380 crore would have been spent last
fiscal had all the listed companies spent the stipulated 2 percent of profit,
it said, adding the total unspent amount is Rs 60,000 crore over the last four
years. The report also flagged the possibility of a shrinkage in spends due to
the recent amendments, under which a CSR would now be based on financials of
the immediately preceding financial year rather than the earlier stipulation of
any of the three preceding financial years.
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EXTENSION OF TIME FOR FURNISHING COMMENTS FOR CONSIDERATION OF
HIGH LEVEL COMMITTEE ON CORPORATE SOCIAL RESPONSIBILITY-2018
The Ministry of Corporate
Affairs (MCA) has constituted a High Level Committee on Corporate Social
Responsibility-2018 (HLC-2018) to review the existing framework and guide and
formulate a coherent policy on Corporate Social Responsibility (CSR). Comments/suggestions
are invited on the provisions of CSR in the Companies Act 2013 Companies (CSR
Policy) Rules, 2014 and Circulars issued concerning CSR. All stakeholders are
requested to furnish comments/suggestions through mails only on the following
e-mail id: Email: hlc.csr-2018@gov.in
To read Circular visit
below link...
http://www.mca.gov.in/Ministry/pdf/InvitationPublicCommentsHLC_01032019.pdf
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MSME OWNERS, HAVE YOU GEO TAGGED YOUR REGISTERED OFFICE? NEW
KYC NORMS COME INTO EFFECT
Starting Friday,
registered companies will have to geo-tag their offices as part of the
stringent Know Your Company (KYC) norms, as the government seeks to prevent
fraud by tightening regulatory systems. The move introduced by the Ministry of
Corporate Affairs (MCA) is aimed at tracking the shell companies and launch
crackdown on them. Geo-tagging detects far too many companies registered in the
same premises. 25A. Active Company Tagging Identities and Verification
(ACTIVE).-
(1) Every company
incorporated on or before the 31 December, 2017 shall file the particulars of the
company and its registered office, in e-Form ACTIVE (Active Company Tagging
Identities and Verification) on or before 25.O4.2O19, Ministry of Corporate Affairs
had said in a recent notification.
As on December 31, 2017,
11.35 lakh companies were active in the country, according to the government
data. The new e-form INC 22A-ACTIVE introduced through the amendment rules will
record the address of the registered office along with a photo of the office
with the latitude and longitude of the place where the office is situated. The
Company shall be marked as ACTlVE-non-compliant on or after 26 April, 2019 and
shall be liable for action under sub-section (9) of section 12 of the Act, the
notification also said.
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OVER RS 2 LAKH CRORE BAD LOANS SETTLED, SAYS GOVERNMENT
OFFICIAL
Over Rs 2 lakh crore worth
of loan defaults have been settled and fresh addition of non-performing assets
of financial institutions has also come down after the Insolvency and
Bankruptcy Code (IBC) came into being in 2016, said a top government official
here Friday. I do not want IBC to be the first resort, we wanted it to be the
last resort. What is the situation today is exactly that (last resort),
secretary to Ministry of Corporate Affairs Injeti Srinivas said. The Reserve
Bank report shows that the fresh addition to the NPAs has declined so has the
overall NPS, Srinivas said. For every one case settled under the National
Company Law Board Tribunal, nine cases have been settled outside the tribunal,
he said. Some businessmen used to develop 'vested interest' in failing
businesses and as a result there was no competitive spirit among the
entrepreneurs, he said. The IBC brought in competition for entrepreneurship and
capital, he said. During the pre-IBC regime, it used to take over four years
for resolution for sick companies and it cost 9 to 10 per cent insolvency cost
to manage the assets, Srinivas further said. The recovery rate then was around
25 to 26 per cent. In the last two years, this has changed, he said. The recovery
rate in 80-odd cases which have been resolved has been about 48 per cent and
the insolvency cost has been less than one per cent, he said.
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ANOTHER INSOLVENCY PETITION AGAINST BHUSHAN STEEL, DISMISSED
Bhushan Steel, first one
of the 12 large cases to be successfully resolved and taken over by Tata Steel
last year, faced yet another insolvency petition recently. An operational
creditor moved against Bhushan Steel claiming a default amount of Rs. 17.97
crores. Bamnipal Steel Limited, a wholly owned subsidiary of Tata Steel
Limited, had acquired majority shareholding in Bhushan Steel last year as part
of the takeover pursuant to the approved resolution plan. The new application
against Bhushan Steel was moved by Vistrat Real Estates Private Limited in its
capacity as an operational creditor. One of the contents of the approved
resolution plan submitted by Tata Steel pertains to a Memorandum of Lease (MoL)
entered into between Bhushan Steel and Vistrat. The MoL was entered into on May
1, 2015, and the CIRP was initiated on July 26, 2017. As per the MoL, the lease
rental to be paid by Bhushan to Vistrat was Rs. 6 crore per month. During the
course of the CIRP, an independent valuer ascertained that the rental sum of
Rs. 6 crore was much higher than the market value The independent valuer
accordingly assigned a value of Rs 5.61 crores. Further, the premises for which
the MoL was entered into, was vacated on September 10, 2018, following
completion of CIRP. Interestingly, the approved resolution plan described the
MoL as ‘value leakage’ and an ‘onerous transaction’. Additionally, the
resolution plan also provided for no liability to related parties, associates
and joint ventures. The NCLT, in this case, found that Vistrat was a related
party to Bhushan Steel (prior to the commencement of CIRP) and its erstwhile
promoters. Thus, liabilities of Bhushan Steel to such a party stand excluded in
terms of the Resolution Plan. To arrive at the conclusion that Vistrat was
related to Bhushan Steel, the NCLT noted the presence of Neeraj Singal and
Brijbhushan Singal (erstwhile promoters) as the signatories to the Memorandum
of Association of Vistrat and its initial shareholders. The NCLT further noted
the authorisation in favour of the Singals to act on behalf of Vistrat, though
they were not directors of Vistrat at that time. The NCLT also observed that
the transfer of shares to other parties, to Ritu Singal (wife of Neeraj Singal)
took place less than two years prior to the commencement of CIRP of Bhushan
Steel. Based on the above observations, the NCLT concluded that Bhushan Steel
(prior to commencement of CIRP) had substantive control over Vistrat. While Section
11 of the IBC does not prevent a creditor from filing a fresh petition post the
Approval Order, the NCLT held that ‘the only course open to the petitioner was
to file its claim before the IRP or RP’. The remedy of filing of a claim has
been exhausted and has resulted in the acceptance of Vistrat’s claim partially
by the RP, the NCLT held. While the NCLT order does not refer to the term
‘preferential transactions’, given the nature of the transaction and the timing
of the transfer of shares being within the look-back period (of two years), the
transaction can be gone into during the CIRP and deemed to be a preferential
transaction. The application was accordingly dismissed
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NCLT REJECTS INSOLVENCY PLEA AGAINST BHUSHAN STEEL
The National Company Law
Tribunal (NCLT) has dismissed a petition seeking to once again drag Bhushan
Steel, which Tata Steel took over last year, to the insolvency court to recover
unpaid dues of about Rs 18 crore. The NCLT principal bench said the petition
filed by Vistrat Real Estate, an entity operated by Neeraj Singal, was
non-maintainable. Vistrat is a related party of Bhushan Steel and its former
promoters Brijbhushan Singal and Neeraj Singal, who were also time and again
authorised to act on behalf of the company even though they were not on the
board of directors, it said. It can be safely concluded that the corporate
debtor has substantive control in the petitioner’s company, the bench observed.
Such transactions are liable to be gone into during the resolution process and
deemed to be a preferential transaction. The bench said that in any case, the
petitioner’s claim of a default is the subject matter of serious dispute.
Vistrat claimed the default on Rs 17.97 crore took place in June last year,
arising out of a property leased to Bhushan Steel in 2015 for Rs 6 crore every
month.
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NCLT REJECTS DECCAN VALUE INVESTORS’ PLEA AGAINST RESOLUTION
PROFESSIONAL OF METALYST FORGINGS
The National Company Law
Tribunal (NCLT), Mumbai, has rejected Deccan Value Investors’ (DVI) plea for
seeking direction against the resolution professional of Metalyst Forgings and
undertaking transaction and forensic audits of the company by an independent
expert, calling the plea malafide and meant to intentionally delay the approval
of its resolution plan by the tribunal. Its wish to direct the resolution
professional (RP) and committee of creditors (CoC) to furnish certain documents
such as final transaction audit and forensic audit reports, cost audit reports,
historical production data, etc., has also been turned down by the bench as not
tenable with the argument that such documents should have been summoned before
DVI submitted the resolution plan for approval with the CoC DVI is an US-based
employee-owned hedge fund sponsor. It had successfully bid for Metalyst
Forgings after the CoC approved its plan, but in December, it had filed an
application wanting the NCLT to cancel its plan as being vitiated by
misrepresentation of facts. It wanted such audits to take place to bolster its
plea to cancel the plan.
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NCLT ANNULS INGEN’S RESOLUTION PLAN FOR ORCHID PHARMA
The Chennai bench of
National Company Law Tribunal (NCLT) has annulled the approved resolution plan
by the US-based lngen Capital Group for Orchid Pharma and ordered fresh
corporate insolvency resolution process (CIRP) for the beleaguered pharma
company. The NCLT order came after Ingen failed to bring in the promised money,
even after the stipulated time and despite the bench giving it an option to pay
one-third of the amount to take the proceedings further. The NCLT bench of SV
Prakash Kumar, judicial member, and S Vijayaraghavan, member-technical, came
down heavily on Ingen for failing to comply with the procedures after a
resolution plan of the company was approved by the bench. The tribunal observed
that since there is no second resolution plan available it ordered to undergo
CIRP from the stage of invitation of expression of interest and complete it in
another 105 days. The resolution professional, who sought going in for fresh
bid process yet again, informed the NCLT that he had received e-mails from
Divis’ Laboratories, Gland Celsus Biochemicals and Fidelity Trading
Corporation. Apart from this, he submitted that he has received oral enquiries
from ART Capital, Everstone Group, Aion Capital, Piramal Capital and Finquest
group, expressing interest in proposing resolution plans in respect of Orchid
Pharma. The resolution plan by Ingen Capital Group was approved by the NCLT on
September 17, 2018, after the committee of creditors (CoC) cleared it. As per
the resolution plan, which was for `1,490 crore, Ingen was to infuse `1,060
crore within five days of the plan approval.
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IL&FS LENDERS TO CONTINUE MAKING PROVISIONS FOR LOANS TO
THE GROUP
With limited prospects for
recovery of loans to Infrastructure Leasing and Financial Services (IL&FS)
and its subsidiaries in the near term, lenders will continue to make provisions
for loans to the group. In February, the National Company Law Appellate Tribunal
(NCLAT) had ruled that lenders can’t treat loan exposures as non-performing
assets (NPAs) without the appellate body’s permission. A two-member bench,
headed by NCLAT chairman Justice (Retd) SJ Mukhopadhyay, had ruled on an
application moved by some of its lenders. The order came after the NCLAT on
February 11 said subsidiaries of IL&FS would be divided into three
categories — Green (companies that can meet all debt obligations), Amber (firms
that can meet some debt obligations) and Red (companies that can’t meet any
debt obligation). Senior public sector executives said some exposures were
already declared as NPAs for the third quarter ended December 31, 2018, before
the tribunal ruling. That status will continue. Only the current earning flows
should be used to make provisions and future cash flows should not be loaded
with the obligation to make provisions.
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SEBI SEEKS TO MAKE MUTUAL FUNDS' VALUATION PROCESS FAIRER
In a slew of reform
measures, securities market regulator Sebi's board on Friday approved changes
in its norms for open offer exemptions for corporates facing debt restructuring
as also for debt instrument valuation by mutual funds to make these processes
fairer. The Sebi board, at the same time, approved easing of norms for raising
of funds through instruments like real estate and infrastructure investment
trusts. The regulator will amend its norms for valuation of money market and
debt securities by mutual funds to make the process fairer and uniform across
the industry to safeguard investors from default like scenarios as witnessed
recently in the wake of IL&FS crisis and other defaults. The proposal seeks
to make the valuation practices more reflective of the realizable value of money
market and debt securities with residual maturity up to 60 days. Accordingly,
the residual maturity limit for amortisation based valuation by mutual funds
will be reduced from 60 days to 30 days The board also approved a proposal to
bring uniformity and consistency across the mutual fund industry on valuation
of money market and debt securities rated below investment grade, Sebi said.
The valuation agencies appointed by the Association of Mutual Funds in India
(AMFI) will provide valuation of money market and debt securities rated below
investment grade, the regulator added. As the Asset Management Companies are responsible
for fair valuation they may deviate from the valuation provided by the valuation
agencies subject to recording of detailed rationale for such deviations,
appropriate reporting to the Board of AMC and Trustees and appropriate
disclosures to investors, it noted.
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SC ANSWERS REFERENCE ON SCOPE OF DISCRETION TO IMPOSE PENALTY
UNDER SEBI ACT
A three judges' bench of
the Supreme Court headed by Chief Justice of India Ranjan Gogoi answered a
reference on the scope of discretion of adjudicating authority under Section
15J of the Securities and Exchange Board of India Act 1992 in relation to imposition
of penalties Section 15J specified the factors to be considered by the
adjudicating authority while imposing penalties. Two questions were referred to
the bench :
·
Whether the factors mentioned
in Section 15J are exhaustive or illustrative
Whether the discretion
under Section 15J is obliterated by the prescription of minimum penalty under
Sections 15A-15HA Regarding the first question, the bench held that the factors
under Section 15J are illustrative and not exhaustive we are inclined to take
the view that the provisions of clauses (a), (b) and (c) of Section 15J are
illustrative in nature and have to be taken into account whenever such
circumstances exist, observed the judgment authored by Justice Sanjiv Khanna
for the bench which also comprised Justice Deepak Gupta But this is not to say
that there can be no other circumstance(s) beyond those enumerated in clauses
(a), (b) and (c) of Section 15J that the Adjudicating Officer is precluded in
law from considering while deciding on the quantum of penalty to be imposed,
added the bench. It was noted that a narrow view would be in direct conflict
with the provisions of Section 15I(2) of the SEBI Act which vests jurisdiction
to impose such penalty as he thinks fit in accordance with the provisions of
any of those sections. The second question was referred particularly with
respect to Section 15A(a) on the ground that the provision could apply even to
technical defaults of small amounts and, therefore, prescription of minimum
mandatory penalty of Rs.1 lakh per day subject to maximum of Rs.1 crore, would make
the Section completely disproportionate and arbitrary Section 15A(a) as amended
in 2002 prescribed a penalty of one lakh rupees for each day during which such
failure continues or one crore rupees, whichever is less. As per 2014
amendment, penalty shall not be less than one lakh rupees but which may extend
to one lakh rupees for each day during which such failure continues subject to
a maximum of one crore rupees. The bench had to decide whether for the period
between 2002 to 2014, there was a mandatory minimum penalty of Rs. one lakh per
day In this regard, the Court observed : we would hold the legislative intent
was not to prescribe minimum mandatory penalty of Rs.1 lakh per day during
which the default and failure had continued. It was held We would prefer read
and interpret Section 15A(a) as it was between 25th October, 2002 and 7th
September, 2014 in line with the Amendment Act 27 of 2014 as giving discretion
to the Adjudicating Officer to impose minimum penalty of Rs.1 lakh subject to
maximum penalty of Rs.1 crore keeping in view the period of default as well as
aggravating and mitigating circumstances including those specified in Section
15J of the SEBI Act The conclusion was based on the reasoning that holding it
otherwise would obliterate the discretionary power to fix quantum of penalty
under Section 15J. Continuing offence and Repeat Offence : Difference explained
penalty as he thinks fit in accordance with the provisions of any of those
sections. The second question was referred particularly with respect to Section
15A(a) on the ground that the provision could apply even to technical defaults
of small amounts and, therefore, prescription of minimum mandatory penalty of
Rs.1 lakh per day subject to maximum of Rs.1 crore, would make the Section
completely disproportionate and arbitrary. Section 15A(a) as amended in 2002
prescribed a penalty of one lakh rupees for each day during which such failure
continues or one crore rupees, whichever is less. As per 2014 amendment,
penalty shall not be less than one lakh rupees but which may extend to one lakh
rupees for each day during which such failure continues subject to a maximum of
one crore rupees. The bench had to decide whether for the period between 2002
to 2014, there was a mandatory minimum penalty of Rs. one lakh per day. In this
regard, the Court observed : we would hold the legislative intent was not to
prescribe minimum mandatory penalty of Rs.1 lakh per day during which the
default and failure had continued. It was held We would prefer read and
interpret Section 15A(a) as it was between 25th October, 2002 and 7th
September, 2014 in line with the Amendment Act 27 of 2014 as giving discretion
to the Adjudicating Officer to impose minimum penalty of Rs.1 lakh subject to
maximum penalty of Rs.1 crore, keeping in view the period of default as well as
aggravating and mitigating circumstances including those specified in Section 15J
of the SEBI Act The conclusion was based on the reasoning that holding it
otherwise would obliterate the discretionary power to fix quantum of penalty
under Section 15J. Continuing offence and Repeat Offence : Difference explained.
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ALMOST 300 BROKER ENTITIES MAY FACE SEBI'S 'NOT
FIT-AND-PROPER' SCRUTINY
Almost all 300 broker
entities may face the 'not fit and proper' scrutiny by the Securities and
Exchange Board of India (SEBI) for allegedly following illegal practices while
doing commodity derivative business. The market regulator is said to have initiated
an inquiry against these broker entities, said sources. Four commodity broking
entities of leading non-banking financial companies -- India Infoline, Motilal
Oswal, Anand Rathi, and Geojit Financial Services -- were put in the 'not
fit-and-proper' category between February 22 and 26 by the SEBI for commodities
trading in breach of norms. But market experts say many others may fall under
this category. Sources familiar with market norms say the SEBI's order against
all the entities is in the nature of 'In Rem,' which means good against 'all
the world.'
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CROWD FUNDING PLATFORMS RUSH TO SEBI FOR ALTERNATIVE
INVESTMENT FUND TAG
Top crowd funding
platforms lined up to register themselves as alternative investment funds
(AIFs) after the Securities and Exchange Board of India (Sebi) pulled them up
for not following private placement norms All major crowd funding platforms,
including One Crowd, Let’s Venture and Angel List, have registered with Sebi as
(AIFs) in the last few months, said two people privy to the development. This
brings a major part of early start-up funding under market regulator Sebi’s
purview and places serious restrictions on the ability of these platforms. Sebi
registrations will impact the freedom of these platforms that typically cater
largely to smaller start-ups. Restrictions also apply on companies where these
platforms can invest money. As a registered AIF, crowd funding platforms can
only make investments in companies that fall under the definition of startup
prescribed by the Department of Industrial Policy and Promotion (DIPP). Also,
only those investors with proven experience in the early stage funding are
allowed to put money through such vehicles. The compliance burden on the crowd
funding platforms has also gone up as we are expected to file term sheets, pay
various registration costs, said the founder of a Mumbai-based crowd funding
platform. But we had to toe the line after Sebi sent us notices for violating
fund raising norms. In 2016-17, Sebi had sent show cause notices to several
crowdfunding platforms including technology providers such as LinkedIn, for
facilitating fund raisings that are in violation of Sebi rules. As per the
Companies Act, a company can allot securities to not more than 200 people in a
financial year through private placement. If the number crosses 200, such
issuance would be deemed as public offer and Sebi’s fund raising norms shall
have to be followed. The crowdsourcing platforms often collect money from
hundreds of angel investors but do not follow the public placement norms. The
bigger concern was that the crowdsourcing platforms facilitate and execute the
transactions and hence their activity could be construed as equivalent of a
stock exchange, said the founder cited above. In such a scenario, we will be mandated
to meet all the norms applicable for stock exchanges including minimum networth
of Rs 100 crore.
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SEBI BANS COMMEX TECHNOLOGY, FORMER DIRECTORS OVER GDR
MANIPULATION
Markets regulator Sebi has
barred Commex Technology and two of its former directors from the capital
markets in a matter related to manipulation in issuance of a global depository
receipts (GDR). Commex has been barred for five years and its former directors
-- Adi Cooper and Kishore Hegde -- for two years, as per Sebi's order dated
February 28. The regulator after conducting a probe found that the firm issued
1.91 million GDRs worth USD 9.99 million on May 25, 2009, on the Luxembourg
Stock Exchange. It was observed that the entire 1.91 million GDR were
subscribed by only one entity Vintage FZE, and Commex had not submitted the
correct list of GDR subscribers to Sebi, the regulator said. The subscription
amount was paid by Vintage after obtaining loan from European American
Investment Bank (EURAM). However, the loan paid by Vintage was secured by
pledge agreement between Commex and EURAM Bank. Besides, GDR issue would not
have been subscribed if Commex had not given such security towards the loan
taken by Vintage, Sebi said. The firm did not disclose the underlying
fraudulent arrangement of the loan and pledge agreement in the GDR issue to the
exchanges and by stating that the GDR was successfully placed, it gave a
misleading appearance of the firm in the market, the regulator noted. Regarding
the directors, Sebi said they were members of board of directors who approved
the resolution regarding GDR issue and thereby acted as parties to fraudulent
arrangement of subscription of GDR, the regulator said. By indulging in such
activities, the entities violated PFUTP (Prohibition of Fraudulent and Unfair
Trading Practices) regulations and thereby a ban was imposed on them,
Securities and Exchange Board of India (Sebi) said.
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SEBI TIGHTENS OPEN OFFER RULES, ETIHAD TO BE AFFECTED
The Securities and
Exchange Board of India, after a meeting of its board on Friday, tightened the
Takeover Code and Issue of Capital and Disclosure Requirements (ICDR) for
exemption from open offers. The exemption from making an open offer in case of
acquisition of more than 26% in a listed company will be allowed only to banks,
lenders and financial institutions. Exemption from open offer will not be
allowed to any other person except the aforesaid lenders said Sebi in a press
statement issued on Friday. Sebi also removed the ‘competent authority’ clause
for exemption from an open offer. This will make fund infusion by Etihad
Airways in Jet Airways Ltd difficult as the former was banking on an exemption
for making an open offer under this clause, based on a reference from the
aviation ministry and Directorate General of Civil Aviation (DGCA). Now an
exemption is only possible if the case is referred to the National Company Law
Tribunal (NCLT) under the Insolvency and Bankruptcy Code.
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ARUN JAITLEY ADDRESSES SEBI BOARD, APPRISED OF MARKET
DEVELOPMENTS
Finance Minister Arun
Jaitley on Friday addressed regulator Sebi’s board members and senior officials
and took stock of recent developments in the Indian securities market. Jaitley appreciated
various initiatives taken by the Securities and Exchange Board of India (Sebi),
the regulator said in a statement. Sebi Chairman Ajay Tyagi apprised Jaitley of
the recent developments in the Indian capital market after the finance
minister’s customary post-Union Budget address to the board of the regulatory
authority.
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RBI INTRODUCES SCHEME TO ENCOURAGE FPIS INVESTMENT IN DEBT
SEGMENT
As announced in the
Statement on Development and Regulatory Policies in the Monetary Policy Statement
dated 5 October 2018, the RBI has introduced a separate scheme called 'Voluntary
Retention Route' (VRR) to encourage Foreign Portfolio Investors (FPIs) to
undertake long-term investments in Indian debt markets. Under this scheme, FPIs
have been given greater operational flexibility in terms of instrument choices
besides exemptions from certain regulatory requirements. A discussion paper on
the VRR scheme was placed on the Reserve Bank's website for public
consultation. Based on the feedback from the public and in consultation with
Government of India, the scheme has been finalized and has been notified today,
vide, A.P (DIR Series) Circular No. 21 dated 1 March 2019. Investment under the
VRR scheme shall be open for allotment from 11 March 2019. The details are as
under:
·
The aggregate investment
limit shall be Rs 40000 crore for VRR-Govt and Rs 35000 crore for VRR-Corp.
·
The minimum retention
period shall be three years. During this period, FPIs shall maintain a minimum
of 75% of the allocated amount in India.
·
Investment limits shall be
available on tap for investments and shall be allotted by Clearing Corporation
of India Ltd. (CCIL) on 'first come first served' basis.
·
The investment limits
under the current tranche shall be kept open till the limits are exhausted or
till April 30, 2019 whichever is earlier.
·
FPIs desirous of investing
may apply online to CCIL through their respective custodians.
·
CCIL will separately
notify the operational details of application and allotment.
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RBI INKS $75-BILLION BILATERAL SWAP ARRANGEMENT WITH BANK OF
JAPAN
The Reserve Bank of India
(RBI) and Bank of Japan have signed a bilateral swap arrangement (BSA) for an
amount up to $75 billion, effective on Thursday. The bilateral swap facility
was approved by the Cabinet in mid-January in order to allow India to manage
its exchange rates better. The facility will allow India to have additional
resources to manage exchange rate fluctuations, and will give Indian companies
better negotiating power overseas when the exchange rate remains stable. The
authorities of both countries believe that, by enhancing financial cooperation,
the BSA will contribute to the stability of financial markets, thereby further
developing the economic and trade ties between the two countries, a statement
by the RBI said.
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JET AIRWAYS CRISIS: ETIHAD NOT TO INFUSE FUNDS TILL RESOLUTION
APPROVAL
Etihad Airways is unwilling
to infuse any funds in the interim in Jet Airways. Sources said the Abu
Dhabi-based airline, which has a 24% stake in Jet, has decided to infuse funds
only after a bank-led resolution plan (BLRP), which is being piloted by State
Bank of India, is finalised and approved. Meanwhile, Jet Airways founder Naresh
Goyal has agreed to step down as chairman of the airline’s board. Since the
BLRP’s finalisation and approval from all the concerned stakeholders will take
time, the airline needed funds in the interim to pay its pilots, vendors and
aircraft leasing firms. The BLRP needs to be approved by the consortium of
lenders, the overseeing committee of the Indian Bankers’ Association, the board
of directors of Etihad Airways, and the promoter of Jet Airways. It would also
require the approval of the Securities and Exchange Board of India (Sebi),
ministry of civil aviation, and the Competition Commission of India. Once
approved by all the required sections, lenders led by SBI would become the
largest stakeholders in the airline. The stake of Goyal would come down to
around 20-22% from the current 51%.
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BELIEVE IN INDIAN JUDICIAL PROCESS, HOPEFUL OF A POSITIVE OUTCOME
IN SC: IHH MD&CEO TAN SEE LENG
IHH and Fortis are not
involved in the dispute between Daiichi and the Singh brothers and are hopeful
of a positive outcome on the status quo on the open offer in the next hearing
in the Supreme Court scheduled on March 14, a top Malaysian firm official said
Friday. We firmly believe in the Indian judicial process and will respect any
decision made by the Supreme Court of India. IHH will seek advice from our
legal counsel and explore all options available to us, Tan See Leng told. We
hope that India will support foreign investors and that minority shareholders
in Fortis will have their chance to realise the value of their investment
through this open offer opportunity, which has been delayed, See Leng said. We
have also put around Rs 3,400 crore in an escrow account in a local Indian
bank. This total of around Rs 7,400 crore is we believe the largest foreign
direct investment in hospital and healthcare in India, he added.
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RBI APPROVES AMALGAMATION OF DBS BANK
The Reserve Bank Thursday
said it has approved the amalgamation of 'DBS Bank, India' with 'DBS Bank
India', the entity which has been granted permission to operate as a wholly
owned subsidiary (WOS) of the Singaporean lender. It can be noted that DBS used
to operate in the 'branch model' and is among the first foreign lenders to come
forward and operate as a WOS. In a press release, the RBI said the scheme of
amalgamation between the two entities has been sanctioned under the provisions
of the Banking Regulation Act, 1949. The scheme will come into force with
effect from March 01 and all the branches of DBS Bank in India will function as
branches of DBS Bank India, it added.
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AFTER MARKET: INVESTORS RICHER BY RS 1.4 LAKH CRORE
Headline indices Sensex
and Nifty reversed the losing run of three sessions on Friday, spurred by
healthy gains in bank, financial, IT and auto stocks, as investors cheered
de-escalation of tensions between India and Pakistan. Speculators raised their
bets across sectors on the first day of March futures and options contracts. A
rally in emerging markets also influenced mood. Chinese stocks jumped after
MSCI raised their weight in its global benchmarks. Concerns over weak
macroeconomic data eased as investors saw a silver lining in subdued GDP and
infrastructure output numbers. They hoped that the signs of slowdown in the
economy may push RBI to cut interest rate at its next meet. The Sensex jumped
196 points, or 0.55 per cent, to close the day at 36,063.81. IndusInd bank
stole the show, advancing 2.94 per cent, followed by Yes Bank and Vedanta.
NSE's Nifty50 settled higher 71 points, or 0.66 per cent, at 10,863.50.
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FOREX RESERVES UP BY $944 MN TO $399.21 BN AS FOREIGN CURRENCY
ASSETS SWELL
The country's foreign
exchange reserves increased by USD 944.7 million to USD 399.217 billion in the
week to February 22, due to increase in foreign currency assets according to
the RBI data. In the reporting week, foreign currency assets, a major component
of the overall reserves, rose by USD 928.6 million to USD 371.99 billion. Gold
reserves remained unchanged at USD 22.764 billion in the reporting week, the
data showed. The special drawing rights with the International Monetary Fund
(IMF) rose by USD 5.3 million to USD 1.460 billion. The country's reserve
position with the IMF increased by USD 10.8 million to USD 2.993 billion, the
apex bank said.
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BARING, L&T LEAD BIDDERS FOR STAKE BUY IN MINDTREE
Larsen & Toubro
Infotech Ltd. and Baring Private Equity Asia are the leading bidders for a major
stake in Mindtree Ltd., as the Indian tech services and consulting firms largest
shareholder seeks to sell his holding according to people familiar with the
matter. Larsen & Toubro and Baring are both offering ₹
950 to 1,000 a share and a decision may come as soon as next week, one of the
people said, asking not to be identified because the matter is private. V.G.
Siddhartha, the largest shareholder in Mindtree, is selling a stake of about 20
percent that he holds through Coffee Day Enterprises and affiliated entities. The
deal would be valued at about ₹3,400 crore ($480 million) at the top of the price range. Other
suitors including private equity firm KKR & Co. remain interested, the
people said. No final decision has been made and the companies could still
decide against pursuing a deal.
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TATA STEEL BETS BIG ON DOWNSTREAM AFTER BHUSHAN STEEL, USHA
MARTIN TAKEOVER
Buoyed by the recent
acquisitions of Bhushan Steel and Usha Martin, Tata Steel has set targets to
achieve at least 30 per cent volume sales from downstream products by 2025.
Stepping up downstream sales is part of Tata Steel's deft strategy to counter
the vagaries of a cyclical steel business. By 2025, Tata Steel is looking to
ramp up its India crude steel capacity to 30 million tonnes per annum (mtpa),
from 18.6 mtpa currently. The steel maker has been diversifying its portfolio
with differentiated product and service offerings. Close to 70 per cent of its
product mix (as on September 30, 2018) was made up of enriched and value added
products. Besides Bhushan Steel and Usha Martin's speciality steel plants, Tata
Steel's brownfield expansion at Kalinganagar will see the commissioning of a
cold-rolled complex with a thrust on servicing downstream industries,
especially automotive. In the second phase, the rated capacity of the
Kalinganagar mill in Odisha is being scaled up to eight mtpa with an investment
of Rs 23,500 crore.
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EX-FINANCE SECRETARY HASMUKH ADHIA APPOINTED NON-EXECUTIVE
CHAIRMAN OF BOB
Former Finance Secretary
Hasmukh Adhia was appointed as non-executive chairman of Bank of Baroda on
Friday, according to a Personnel Ministry order. The Appointments Committee of
the Cabinet has approved his appointment as part-time non-official director as
well as non-executive chairman on the board of Bank of Baroda for a period of
three years, it said.
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I AM WILLING TO MAKE ANY SACRIFICE, NARESH GOYAL TELLS JET
EMPLOYEES
Jet Airways Chairman
Naresh Goyal has told employees he was willing to make any sacrifice for the
viability and prosperity of the airline and assured them of detailed update on
the resolution by March 18. This is the second communication from Goyal in a
week and follows a joint statement he issued with Etihad Airways Chief
Executive Officer (CEO) Tony Douglas. Jet has delayed salaries and vendor
payments and had to ground 21 planes due to non-payment of lease rents. A
resolution plan is being finalised to restore the stressed airline but
differences have emerged between the airline partners and lenders on issues
related to equity infusion, debt guarantees, concessions and waivers. I assure
you that I am personally working (to ease) this situation as rapidly as
possible. I do not, never have and never shall take your patience (for)
granted. In the last 25 years, I have given my life for this company and its
employees, and today more than ever I am willing to do whatever it takes to
ensure that our Jet not only survives but also thrives and dominates and
remains the first choice of customers as before, Goyal wrote in the letter. He
has also sought continued support from employees and expects the situation to
gently ease for the airline within 20 days. He also assured them that the
airline CEO Vinay Dube would update them on resolution by March 18.
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RAVNEET GILL TAKES CHARGE AS YES BANK MD & CEO, SUCCEEDS
RANA KAPOOR
Ravneet Gill took charge
as managing director (MD) and chief executive officer (CEO) of YES Bank on
Friday for a three-year term, subject to shareholder approval. A career banker
with a long innings at Deutsche Bank, Gill comes in place of Rana Kapoor, the
bank’s co-promoter and former MD and CEO. For the near term, Gill will have to improve
relations with the Reserve Bank of India (RBI), which have been strained in
recent times. He will also need to strengthen the bank's asset quality and
improve governance standards and internal processes. Gill can lean on the
bank’s steady growth in share of low-cost deposits, healthy track record in
raising capital and robust operating performance, which will all help him chart
a sustainable future course for the private sector lender.
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FACEBOOK, APPLE, TWITTER FACE EU PROBES FOR VIOLATING GDPR
Facebook is facing 10
probes for violating the European Union's (EU) new General Data Protection
Regulation (GDPR) over data breaches and users' privacy across its platforms.
In its first annual report after GDPR came into practice on May 25, 2018, the
Irish Data Protection Commission (DPC) opened 15 statutory inquiries
(investigations) in relation to multinational technology companies' compliance
with the GDPR. Facebook faces seven inquiries while its WhatsApp platform two
and Instagram one. Other US tech giants like Apple and Twitter face two
statutory inquiries each and Microsoft-owned LinkedIn faces one. All these
inquiries should reach the decision and adjudication stage later this year.
It's our intention that the analysis and conclusions in the context of those
inquiries will provide precedents for better implementation of the principles
of the GDPR across key aspects of internet and ad tech services, said the DPC
report. There are undoubtedly areas of risk to be examined in sectors beyond
the free internet services but initial complaints and breaches have focused the
DPC in this area and warrant attention in light of the hundreds of millions of
users implicated, it added. Ireland's DPC is the lead regulator for the EU.
Apple is being investigated for transparency issues while LinkedIn is being
probed for profiling its users and targeted ads.
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UKIBC SUPPORTS INDIA'S STANCE ON DATA LOCALISATION BUT SEEKS
CLARITY ON SENSITIVE DATA
The UK India Business
Council (UKIBC) on Friday said it supports India's position on data
localisation in-principle but believes clarification is needed on areas such as
definition of sensitive data. We are absolutely positive and convinced
absolutely supportive of the direction in which (personal data protection) Bill
is going. We are comfortable in-principle with localisation but clarity has to
be given around the definition, and questions have to be answered around
regulatory environment etc, Richard Heald OBE told. He added that the body will
submit its report on the draft Bill to the Indian government next week. The
draft personal data protection Bill, introduced last year, has drawn mixed
response from the industry. On data localisation, Heald pointed out that some
form of localisation operates in most jurisdictions, and the concept of
mandating that personal data is stored within the country is already
established. He said resources and expertise should also be committed to
ensuring speedy resolution of disputes between data principals and data
fiduciaries. Heald pointed out that there is also a scope of creating a joint
'Data Garage' where Indian and UK businesses, academia and authorities can work
together for developing solutions based on new-age technologies like artificial
intelligence.
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PARLIAMENTARY PANEL SUMMONS TWITTER CEO TO APPEAR BEFORE IT ON
FEBRUARY 25
The Parliamentary panel on
information technology Monday summoned the CEO of microblogging site Twitter to
appear before it on February 25, according to the committee's chairman. Sources
said the panel members took a serious note about the Twitter head not appearing
before it on Monday. Representatives from the India office of Twitter had
reached the Parliament annex to attend the panel's scheduled meeting but they
were not called into the meeting.
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GOOGLE, FACEBOOK, TWITTER FAILED TO CURB FAKE NEWS: EUROPEAN
COMMISSION
Google, Facebook and
Twitter have fallen short of their pledges to combat fake news, three months
before key European elections, the European Commission said on Thursday. The
tech companies and trade bodies representing the advertising industry signed up
to a voluntary code of conduct in October to tackle the spread of fake news, aiming
to stave off more heavy-handed legislation Brussels is keen to address the
threat of fake news or foreign interference during campaigning for the European
Parliament elections in May and also for national elections in Belgium,
Denmark, Estonia, Finland, Greece, Poland, Portugal and Ukraine in the coming
months. Europe’s Security Commissioner Julian King criticised the lack of
progress on cracking down on fake news made by the three companies based on
their monthly reports. Sadly they have fallen further behind. They need to live
up to the standards we are asking of them, and that they signed up to, King
said in a tweet. Facebook has not provided details of its actions against
political ads in January nor the number of fake accounts deleted due to
malicious activities targeting the European Union, the Commission said. The
Commission also found that Google’s measures on political ads were not specific
enough nor did the company clarify the extent to which its actions were taken
to address fake news or other reasons. It did not provide concrete evidence to
show that it had carried out its policies in January, the Commission said.
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WHATSAPP NOW FACES AN IDENTITY CRISIS
Against the backdrop of increasing
government oversight and inadequate monetisation plans WhatsApp is staring at
an identity crisis. And as the company saunters into its 11th year, the dilemma
it faces could very well rock the foundation it was built on. More than a
decade ago, WhatsApp took India, where SMS was mainstream, by storm. Powered by
unlimited real-time exchange of messages, it quickly built a 250 million user
base. It is easy to use. Over the years, it has slowly built a list of features
and has seen good adoption, said Gaurav Mendiratta. But now WhatsApp faces a
dilemma: should it say yes/accede to the government’s proposed changes/demands
including traceability of messages and compromise on its encryption policy? In
many ways, it is ironic that the issue has cropped up after five years. It was
in 2013 that Blackberry, after many years of constant jabbing with the Indian
government, relented and allowed it to intercept data sent over its devices.
However, WhatsApp works on different devices. The end-to-end encryption it
offers by default means only the sender and the recipient can see the messages.
It is in this context that many in the industry question whether such
traceability is possible, technology-wise, while also considering that the
Indian Constitution states that privacy is a fundamental right. It may not be
possible for them to comply with this regulation without breaking the
encryption which would have major impact on privacy of an individual, said
Siddharth Mahajan. In other words, if WhatsApp relents and agrees to the
government’s demand, it will lose the trust of people. If it does not, it risks
losing access to the biggest market where there are 550 million internet users
and smartphone usage is bursting at the seams. So far, the company seems to
have stuck to its guns. When WhatsApp co-founder Brian Acton, left Facebook,
the disagreement was reportedly over how to monetise the ‘anti-ads’ messaging
platform.
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FACEBOOK, OTHER INTERNET PLATFORMS PLAN TO LAUNCH NEW
CRYPTOCURRENCIES
Some of the world’s
biggest internet messaging companies are hoping to succeed where cryptocurrency
startups have failed by introducing mainstream consumers to the alternative
world of digital coins. The internet outfits, including Facebook, Telegram and
Signal, are planning to roll out new cryptocurrencies over the next year that
are meant to allow users to send money to contacts on their messaging systems,
like a Venmo or PayPal that can move across international borders. The most
anticipated but secretive project is underway at Facebook. The company is working
on a coin that users of WhatsApp, which Facebook owns, could send to friends
and family instantly, said five people briefed on the effort who spoke on the
condition of anonymity because of confidentiality agreements. The Facebook
project is far enough along that the social networking giant has held
conversations with cryptocurrency exchanges about selling the Facebook coin to
consumers, said four people briefed on the negotiations. Telegram, which has an
estimated 300 million users worldwide, is also working on a digital coin. Signal,
an encrypted messaging service that is popular among technologists and privacy
advocates, has its own coin in the works. And so do the biggest messaging
applications in Korea and Japan, Kakao and Line. The messaging companies have a
reach that dwarfs the backers of earlier cryptocurrencies. Facebook and
Telegram can make the digital wallets used for cryptocurrencies available, in
an instant, to hundreds of millions of users. All of the new projects are going
after a market that has already proved popular with consumers. Venmo has taken
off in the United States by making it easier to send payments by phone. And in
China, many consumers use the payment system that operates inside the hugely
popular WeChat messaging system. Facebook is looking at pegging the value of
its coin to a basket of different foreign currencies, rather than just the dollar,
three people briefed on the plans said. Facebook could guarantee the value of
the coin by backing every coin with a set number of dollars, euros and other
national currencies held in Facebook bank accounts.
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ESSAR STEEL CASE: NCLT REJECTS PLEA FROM 8 OPERATIONAL
CREDITORS
The Ahmedabad Bench of the
National Company Law Tribunal (NCLT) on Thursday rejected the petitions by
eight of the operational creditors of distressed Essar Steel India (ESIL) who
sought to consider ESIL promoters’ offer to settle entire debt over the
resolution plan submitted by ArcelorMittal. Passing an oral judgement, the
adjudicating authority comprising Justice Harihar Prakash Chaturvedi and
Justice Manorama Kumari, passed a common order rejecting the interlocutory
applications (IAs) of the OCs. The pleas by the listed eight OCs are dismissed
and disposed off. Principal observations would be available in the detailed
order which will follow later, said the Bench. In a joint application filed by
many other OCs including the aforementioned eight had objected to the
ArcelorMittal’s Rs 42,000-crore resolution plan seeking to direct ESIL’s
Committee of Creditors (CoC) to ensure full and equitable payment at par with
financial creditors. In its resolution plan, ArcelorMittal had offered to
settle total Rs 214 crore (mainly of the MSMEs), from the overall admitted
claims of Rs 4,995 crore of the OCs. This would mean sizeable loss for the OCs.
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SEBI URGES GOVT RETHINK ON RBI REPRESENTATION ON ITS BOARD,
CITES ITS WORK
Capital markets watchdog
Sebi wants the government to end the practice of Reserve Bank of India nominating
a member, or alternatively provide for a cross-representation of the two
regulators on each other's boards. Officials said the Securities and Exchange
Board of India (Sebi) first proposed that the finance minister amend the Sebi
Act to discontinue RBI's representation on its board, as it already has
adequate presence of the government nominees and in its over 25 years of
existence the regulator has evolved as an effective and one of the best in the
world. Besides, the boards of other regulators such as IRDAI for insurance and
PFRFA for pension do not have nominees from other regulators, while there is no
corresponding representation of other regulators on the RBI's board, Sebi has
contended. However, the Finance Ministry said the RBI's role (Reserve Bank of
India) in the financial sector cannot be discounted and that the RBI presence
helps in bringing overall economic view and valuable inputs to the Sebi board. The
capital markets regulator, however, feels that the inputs of the RBI on policy
issues can be taken through formal discussions and correspondence between the
two regulatory bodies, the officials said. Besides, Sebi feels there is also
the FSDC (Financial Stability and Development Council), an apex level body
comprising of members from the government and various regulators, that has been
set up to deal with inter-regulatory issues and overlap of regulatory
jurisdiction. Following the reservations expressed by the Finance Ministry on
its original proposal and after taking into account the fact that certain
securities are under the purview of both Sebi and RBI that are traded on stock
exchanges, the capital markets regulator has now made alternative suggestion to
provide for cross-representation of the two regulators on each other's boards. The
alternative proposal is likely to be discussed by Sebi's board in its next
meeting on Friday and will be subsequently sent to the Finance Ministry for
further action. Under the Sebi Act, the regulator's board should consist of a
Chairman; two nominees from the Ministry of the Central Government dealing with
Finance and administration of the Companies Act; one nominee member from the
RBI; and five other members to be appointed by the government of whom at least
three should be whole-time members. In another proposal, Sebi has also
suggested changes in the law to allow it to promote and regulate first-level
regulatory bodies for regulating a segment of intermediaries. Currently, the
law allows Sebi to promote and regulate self-regulatory organisations (SROs),
which typically regulate their respective members. However, Sebi is of the view
that it may not be prudent for certain categories of intermediaries and persons
associated with the securities markets, such as distributors of mutual fund
products, to self-regulate. They should be instead regulated by a front-line
regulatory body registered by Sebi and such a body should have expertise in
regulation and supervision like stock exchanges and depositories, Sebi has
suggested. The capital markets regulator has also sought powers to promote a
company besides a trust or society, to promote and support activities like
investor awareness and education and also training of intermediaries. The Sebi
Act mandates the regulator to promote investors' education, training of
intermediaries and conduct research for the benefit of the securities market. For
this, Sebi has promoted the National Institute of Securities Markets (NISM),
which has been registered as a public trust and also as a society. Recently,
Sebi also approved creation of National Centre for Financial Education (NCFE)
as a company to be co-promoted along with the RBI, IRDAI and PFRDA. The RBI
Act, however, allows the banking regulator to promote a company as a subsidiary
or otherwise and therefore the securities markets watchdog also wants the
government to make similar provisions for it. Officials said the Finance
Ministry is of the view that any such powers should be with the central
government but Sebi is of the opinion that an express provision should be made
in the Sebi Act to empower it to promote a company or other kinds of entities
(trusts/society etc) only for the purposes of achieving the objectives of the
Act.
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RBI FORMS TASK FORCE ON OFFSHORE RUPEE MARKET
The Reserve Bank of India
has constituted a task force on offshore rupee market to find ways to move
non-resident Indian to the domestic market and improve liquidity to promote
on-shore hedging activity. The task force will examine offshore rupee markets
in depth and recommend appropriate policy measures that also factor in the
requirement of ensuring the stability of the external value of the rupee. The
panel will be chaired by former deputy governor of the RBI Usha Thorat. The
panel will also have nominees from the government, Sebi and the RBI.
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JEYPORE SUGAR COMES UNDER INSOLVENCY ACTION
The Chennai Bench of
National Company Law Tribunal (NCLT) has directed initiation of insolvency
proceedings against The Jeypore Sugar Company Ltd. The petition was filed by
IDBI Bank Ltd. for non-payment of dues to the tune of Rs. 183.75 crore as on
October 1, 2018. According to the petition, the company availed loans to the
tune of Rs. 165.37 crore from the bank in the form of working capital and rupee
term loans, among others. As per the petition, the company had offered a
one-time settlement proposal, which did not materialise. The company argued
that the petition should be dismissed on grounds that the debt claim was barred
by limitation as the default occurred on June 30, 2015 and whereas the petition
was filed on October 24, 2018. NCLT rejected the argument and ordered the
initiation of insolvency proceedings. It had appointed V. Venkata Sivakumar as
interim insolvency professional and also declared a moratorium.
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REGULATORY ECOSYSTEM IN INDIAN COMMODITIES ON PAR WITH
DEVELOPED MARKETS: SEBI
Regulatory ecosystem in
Indian commodity derivatives markets is no less than developed markets S K
Mohanty, said. As a result, risk management, margin system, and enhanced &
most stringent norms for Settlement Guarantee Fund (SGF), positional limits,
surveillance measures - all of these areas are completely overhauled and
whatever you had seen in the erstwhile regulator days, is no longer there, he
said. We are very conservative, he added. Mohanty said mutual fund
participation in this market would be a game changer
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MFS, PMS TO BE GET TO PLAY IN COMMODITY DERIVATIVES SOON: SEBI
Commodity markets
regulator Sebi Thursday said mutual funds and portfolio management services
(PMS) will be allowed into commodity derivatives soon This is going to open the
gateway for several other products like ETFs among others, Sebi whole-time
member SK Mohanty told. Mohanty noted that the presence of financial
institutions in commodity derivatives will not only provide the investing
public more avenues for safe financial investments through commodities, but
also make the commodity derivatives market more robust and inclusive by providing
liquidity and rich information based on world-class market research
capabilities. He said Sebi will shortly approve commodity indices. Enhanced
liquidity and presence of diverse participation groups including hedgers and
financial institutions would strengthen the price discovery mechanism and make
risk management on exchange platforms more efficient and cost effective to the
stakeholders by lowering the impact cost of trade, he said.
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SEBI MULLS 'REGULATORY SANDBOX' FOR ADOPTING AI, BLOCKCHAIN IN
SECURITIES MARKETS
To make best use of latest
technologies, regulator Sebi is considering a 'regulatory sandbox' approach to
allow greater but well-regulated use of new innovations such as blockchain and
artificial intelligence in the securities markets. Globally, regulators in
major financial markets have established regulatory 'sandbox' or testing
environment for furthering financial technology and adoption of the same. Officials
said the Securities and Exchange Board of India (Sebi) is of the view that innovation
in financial technologies like blockchain for settlement, artificial
intelligence including robo-advisory, e-wallets, security systems for
intermediaries and market infrastructure institutions, resolution of
complaints, outsourcing and development of new technology can be better done
through a 'sandbox' mechanism. Such a mechanism will allow the regulator to
assess and test the module and grant specific exemptions from the applicable
laws for a specified time period, subject to necessary conditions in the
interest of markets and investors. Jurisdictions like the UK and Australia
provide for regulatory sandbox while granting exemptions from rules for a
specified period, which is maximum two years in case of the UK and maximum 12
months by Australia. According to a proposal, which will be first presented
before the Sebi's board and then sent to the Finance Ministry, the Sebi Act
needs to be amended to enable Sebi to lay down a platform for a regulatory sandbox
in India, which will enable adoption of newer technologies with all necessary
safeguards towards protecting the integrity of the markets and the investors. Officials
said the Finance Ministry is broadly in agreement with the proposal. The
proposed conditions include an applicant clearly defining the scope and phases
of trial, types of customers, services, timing and termination of the trial. For
the exemptions, the product, service or solution has to be innovative and must
improve provision of services in the market, enhance the efficiency and
effectiveness of risk management and also open up new opportunities. Also, the
applicant will need to have resources to support the testing and a realistic
business plan to deploy it on a commercial scale in India after the exemption
period. Also, the applicant will have to be led and managed by persons who are
fit and proper to meet regulatory guidelines and they would need to put in
place appropriate procedures to select and service customers. The exposure of
an investor, which is not a qualified institutional investor or a registered
market intermediary, cannot exceed Rs 1 lakh while the applicant would also
need to put in place necessary risk management controls. The proposal is likely
to be discussed by the Sebi board in its next meeting along with a score of
other proposals, including easing of norms for startups and REITs, higher
penalty against violations and allowing mutual funds, portfolio managers and
certain alternative investment funds in commodity derivatives market. Besides,
the Sebi will also consider new norms for valuation of money market and debt
securities by mutual funds in the wake of recent liquidity concerns due to
defaults on debt obligations by some entities. The proposals also include provision
for permanent registration for custodians and a review of regulatory framework
for debenture trustees. The Sebi has also prepared a memorandum of proposals to
amend various laws --- Sebi Act, 1992, Securities Contracts (Regulation) Act,
1956, Depositories Act, 1996, Companies Act, 2013 and Economic Offences
(Inapplicability of Limitation) Act, 1974 to streamline various rules and
regulations and do away with certain age-old terms and phrases that are no more
relevant. After approval from its board, the Sebi will submit this memorandum
to the Finance Ministry for further action. Apart from proposing higher penalty
under the Sebi Act, the regulator wants changes in the SCRA to amend the
definition of 'commodity derivative' in order to enable launch of new products
like option contracts, officials said. Another proposal to change the
definition of term 'securities' to include units issued by pooled investment
vehicles registered.
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SEBI IMPOSES RS 1 CRORE FINE ON 13 ENTITIES FOR MANIPULATIVE
TRADE IN BSE STOCK OPTION
Markets regulator Sebi
Thursday slapped a total penalty of Rs 1.11 crore on 13 entities for executing
fraudulent trades in the illiquid stock option segment on BSE. After observing
a large-scale reversal of trades in the bourse's stock options segment, Sebi
conducted a probe into the trading activity in illiquid stock options on the
BSE from April 2014 to September 2015. By indulging in such execution of
non-genuine trades, the entities created a misleading impression of trading in
stock option contracts in a fraudulent manner, thereby violating PFUTP
(Prohibition of Fraudulent and Unfair Trade Practices) norms, the regulator
said.
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GOVT KEEN ON AMALGAMATION OF PSBS TO CREATE GLOBALLY
COMPETITIVE, HEALTHY LARGE BANKS: ARUN JAITLEY
The government is
following the policy of amalgamating public sector banks to create healthy
large banks which are globally competitive, Arun Jaitley said Thursday. He said
the NPA situation of PSU banks has improved in the last 2-3 quarters and the
NDA government has ended the practice of phone banking and has maintained arm's
length by not interfering in the functioning of lenders. In order to make them
(banks) sound, whether it is legislative steps or important steps like creating
healthy large banks, which can be globally competitive, the government is also
gradually following the policy of amalgamation, Jaitley said.
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JAITLEY HOPES MORE BANKS WILL EXIT RBI'S PCA FRAMEWORK WITH
GOVT FUNDING SUPPORT
Arun Jaitley Thursday
assured government funding support to public sector banks and hoped that the 6
lenders which remain under the RBI's prompt corrective action framework will soon
come out of it. He said that the Insolvency and Bankruptcy Code (IBC) has been
a success story and the government has maintained arm's length distance from
the processes being followed. The government has lived up to its word of
continuing to fund you in terms of capital. I am glad that several banks have
recently come out of the PCA norms and I'm sure the others who remain within
will also try and improve their measures with the government commitment of
support to them so that we can see much healthier banking in years to come,
Jaitley said. Jaitley said the norms of banking have changed and now decisions
are based on merit and professionalism. I'm conscious of the fact that you
(public sector banks) are working in a competitive environment and you are
still bound by certain restriction. Your public and social responsibility is
much higher than your private sector competitors. In matters of hiring talent
you don't enjoy the same level of freedom that they do. Private sector banks go
for campus recruitment and you can't. And despite these obvious restraints,
(you remain) competitive, large, and occupy a lion's share of lending, he said.
He also asked the public sector lenders to consider themselves independent
while discharging their professional and commercial functions. It's a
discipline which both government and banks have to now accept. The Prime
Minister in January 2015 had said that you (banks) won't get any pressure from
the government as far your functional independence with regard to commercial
decisions. The government has lived up to its words and in this changed
environment, I can see the difference in functioning, Jaitley said. The
minister said any instance of interference from the government in the process
would discredit the whole process and bring a bad name to the wonderful reform.
IBC everybody concedes has been a success story and it helped bring back Rs
2.85 lakh crore into the banking system. In an evolving society there is desire
to become more ethical. Of course, the carrot part also worked that you can't
be a fugitive and get away with it. There is a law dealing with them. The black
money law made life very difficult. It is no longer safe to keep assets outside
the country and now that more and more countries in 2019 are coming into the
transparency and disclosure norms, I think many sins of the past are going to
be disclosed, Jaitley said. Stating that the worst is behind us with regard to
the problems faced by the banking sector, he said the last 5 years will go down
in history as the turning point in the evolution of India as a ethical society.
Therefore, the earlier regime, if I would say was a great earning experience
and for all of them this one is a great learning experience. So, each one of
them will have to adjust to these new norms, Jaitley said. He said the
government had to follow the carrot and stick policy to bring those who thought
can live in violations in perpetuity into a discipline. In the banking sector
the whole idea that if you don't pay back you can get away with it, then it is
banker's headache and when you get money from banks you manufacture your own
equity out of that money, round-trip it and base your investment on that basis
-- this cant be the new normal and that's why you have to breakaway from
system, Jaitley added.
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FRAUD-HIT PNB RANKS HIGHEST IN IMPLEMENTATION OF 'REFORMS
AGENDA' IN 2018: STUDY
Fraud-hit Punjab National
Bank has been ranked first among public sector banks in the implementation of
'reforms agenda', followed by Bank of Baroda and State Bank of India, said a
report Thursday. The BCG-IBA report – EASE Reforms for Public Sector Banks - measures
performance of each PSB on 140 objective metrics across 6 themes including
customer responsiveness, credit off-take and digitalisation. PNB with a score
of 78.4 out of 100 has been ranked first in the EASE (Enhanced Access &
Service Excellence)-index, followed by BoB (77.8), SBI (74.6), Oriental Bank of
Commerce (69), Canara Bank (67.5) and Syndicate Bank (67.1). PNB has shown
strong performance in the parameters like customer responsiveness, responsible
banking, credit off-take and financial inclusion. Arun Jaitley said such
rankings brings about competitiveness and encourages banks to perform better
than peers. Complimenting PNB, Jaitley said: The bank, which suffered both in
terms of finance and transiently, in terms of reputation because of a fraud
practice and in 9 months had to set aside Rs 14,000 crore for bad assets,
rapidly transformed itself into an evolving institution and after a period of 9
months in last quarter declared a profit. It then emerged as the best
performing bank (in EASE reform ranking). The six PSU banks, which continue to
be under the RBI's prompt corrective action (PCA) framework, too have been
ranked in the report. Every year it (EASE Reforms ranking) has to be presented
and therefore the reforms agenda is getting institutionalised. It is huge
system reboot in which the credit-debtor relationship has changed because of
transformative reforms. We are confident we will create globally competitive
banks through this process, Kumar said. EASE Index makes first ever independent
and objective measurement of each PSBs on 140 metrics across 6 themes.
Responsive, Responsible, Clean and customer friendly banking to be the new
normal, Kumar tweeted.
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AUDIT PANEL TO SEEK EXTERNAL EXPERT'S HELP ON COGNIZANT
BRIBERY CASE, SAYS L&T
Larsen and Toubro Ltd
(L&T) on Friday said the company's audit committee will seek the assistance
of an external expert to look into the bribery allegations related to American
IT firm Cognizant's campus in India. Last month, Cognizant Technology Solutions
Corp (CTS) said it would pay $25 million to the US Security and Exchange
Commission (SEC) to settle its India bribery charges. It was alleged in a US
SEC complaint that in 2014, a senior Tamil Nadu official demanded a $2-million
bribe from the construction firm responsible for building Cognizant's
2.7-million-sq-ft campus in Chennai. Gordon Coburn and ex-chief legal officer
Steven E Schwartz had authorised the contractor to pay the bribe and directed
their subordinates to conceal the bribe by doctoring the contractor's change
orders. The SEC also alleged that Cognizant authorised the construction firm to
make two additional bribes totalling more than $1.6 million. Reports alleged
that L&T was the contractor involved in the matter. In a regulatory filing
late Thursday, L&T said the management had presented all details of its
construction contracts with Cognizant at the audit committee meeting on 27
February. The filing said the audit committee was also briefed on the
management-initiated investigation conducted by leading law firms in the US and
India with the help of forensic experts from Hong Kong in 2017.
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INFOSYS FINES KIRAN MAZUMDAR-SHAW FOR BREACH OF INSIDER
TRADING NORMS
The country’s
second-largest information technology (IT) services company, Infosys, has
imposed a penalty of Rs 9.5 lakh on its lead independent director, Kiran
Mazumdar-Shaw, for inadvertently selling 1,600 shares of the company during
open trading window period without prior permission to execute such a trade. In
a filing to the exchanges, the IT firm said even though the trade was carried
out by the portfolio manager without the knowledge of Mazumdar-Shaw, there was
violation of the company’s Insider Trading Policy and the Sebi (Prohibition of
Insider Trading) Regulations, 2015. The audit committee came to the conclusion
that the trade was an inadvertent one without any intention to violate the
insider trading norms. However, the committee penalised its lead independent
director for breach of regulations. The penalty collected from Mazumdar-Shaw
will be donated to a charitable organisation of her choice. According to
corporate governance experts, key management personnel and directors have to
take prior permission from the company before executing any trade in its shares
during market hours. Directors have to submit a trading plan to the company and
take prior permission before executing such trade. In this case, the move is to
self-censure and give a message that the company is in compliance with all
regulations, said Shriram Subramanian, founder of corporate governance advisory
firm InGovern.
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MUTUAL FUNDS REDUCE EXPOSURE TO PROMOTERS’ SHARES
The Securities and
Exchange Board of India (Sebi) may tighten disclosure norms for asset
management companies (AMCs) to curb lending to company promoters against
pledged shares, two people with direct knowledge of the matter said. Mutual
funds, under increased scrutiny from regulators, have already cut their
exposure to such schemes. Prime Database shows that such exposure has come down
by 10% at the end of January from September end. Data also showed that mutual
fund lending to promoters against pledged shares has fallen steadily over the
last three quarters. At the end of January, mutual funds had ₹51,506
crore in such schemes compared with ₹57,408 crore in October.
The figures include pledge of listed and unlisted shares. Loan against shares
of promoters of little-known companies has, however, been rising for the past
seven years. According to Prime Database’s analysis of Nifty 500 companies,
mutual funds accounted for 3.45% of all pledged shares by value at the end of
December, down from the all-time high of 4.01% at the end of September.
Promoters’ pledged shares to mutual funds had seen a rise from the September
quarter of 2015. This was expected as the prices were correcting in some
instances, and there was a sharp fall in share prices, which brought some
promoters on the brink of defaulting on their debt obligations. Moreover, Sebi
expressed concern that whether such products have adequate disclosures and
whether the risk management of fund houses is adequate to handle systemic
concerns, a debt fund manager said, requesting anonymity. The exposure has
reduced because of three reasons—valuation of shares correcting, fulfilling
debt obligations, and fund houses selling pledged shares. In January, the BSE
Sensex gained 0.52% and Nifty fell 0.29%, while the Nifty 500 shed 1.81%.
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FROM $6 BILLION TO $1.8 BILLION: GOVT REVISES DOWN FDI INFLOWS
INTO CHEMICALS DRASTICALLY
The government has sharply
revised down foreign direct investment (FDI) inflows into the chemicals sector
other than fertiliser, which had surprisingly emerged as the biggest puller of
such investments in the first three quarters of this fiscal, beating larger
segments like services, telecommunications and trading, and raising eye-brows.
So FDI (in equity) inflows into chemicals have been trimmed to just $1.82
billion for the April-December 2018 period from as much as $6.06 billion,
showed the latest data released by the department for promotion of industry and
internal trade. Interestingly, the chemicals sector had attracted just $1.31
billion in the entire FY18 and $1.61 billion in the first two quarters of this
fiscal. However, overall FDI inflows have been kept the same as reported
earlier — at $33.49 billion in the first three quarters of this fiscal, down 7%
from a year before. Consequently, inflows into financial and other services
have been revised up to $6.59 billion from $5.92 billion; those into computer
software and hardware have been raised to $5 billion from $4.75 billion and in
trading from $2.34 billion to $3.04 billion and automobiles from $1.81 billion
to $2.08 billion. Even inflows of FDI from various nations have been retained.
India’s total FDI inflows into equity, which had shot up by 23% in the first
quarter, lost pace subsequently and dropped 7% between April and December 2018.
The inflows are poised to record a fall in FY19 — the first such annual decline
during the current NDA regime — unless the last quarter records a massive
rebound. The latest revisions will add to the discomfiture of analysts, some of
whom view the FDI data with as much scepticism as the GDP data.
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TO COMPETE WITH RELIANCE JIO, BHARTI AIRTEL TO BUILD RS 32,000
CRORE WAR CHEST
Bharti Airtel has finalised
a fund-raising plan of up to Rs 32,000 crore through a combination of Rs
25,000-crore rights issue and a Rs 7,000-crore perpetual bonds float to build a
war chest to reduce debt and increase 4G network coverage to compete with
Reliance Jio. In a stock exchange filing on Thursday, Bharti said the company’s
board of directors has considered the recommendations of the special committee
of directors for fund-raising and thereby approved the same. The board approved
the issuance of fully paid-up equity shares of the company for an amount
aggregating up to Rs 25,000 crore by way of a rights issue to eligible equity
shareholders of the company as on the record date (to be notified
subsequently), the firm said in its filing. It added: And perpetual bond of up
to $1 billion (Rs 7,000 crore) denominated in foreign currency subject to
price, market conditions and other terms and conditions as acceptable, and with
conditions allowing for full accounting equity credit and subject to all
applicable laws including under ECB Regulations, the company said in a stock
exchange filing. The company’s rights issue price has been set at Rs 220 per
fully paid equity share, which is at a near 31% discount to the Thursday’s closing
price of Rs 317.95, on BSE, which was down 0.63%. The fundraise plan was
announced after close of trading hours.
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MOST BEARISH RUPEE FORECASTER SEES SLIDE TO 80 PER DOLLAR
The rupee may weaken to 80
per dollar by September as a dovish turn by the central bank lowers the
currency’s yield appeal, said Sue Trinh. The prediction is way more bearish
than the 71.25 median forecast in a Bloomberg survey, and implies a drop of
more than 11% from current levels. Reserve Bank of India’s new chief
Shaktikanta Das cut interest rates last month to support the economy, and kept
the door open for more easing citing growth concerns. Data on Thursday showed
expansion in the three months ended December slowed to the weakest pace in five
quarters, just as the outlook gets clouded by growing tensions with Pakistan.
The combination of consumer inflation undershoots and dovish policy bias of
Governor Das suggests big rate cuts could be around the corner, Trinh said. The
challenge of funding the widening budget deficit will also weigh on the
currency, she said. The rupee is already the worst performer this year in Asia
ex-Japan amid the uncertainty surrounding the upcoming elections, where Prime
Minister Narendra Modi is seen facing a tight contest. It is not specific to
India, but everywhere you look there are potential flashpoints that can flare
up at the drop of a dime in the context of slowing global growth, massive
levels of debt and increasingly desperate governments, Trinh said. This risk is
being under-priced by markets, she said.
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RELIANCE JIO BLAMES RIVALS OF ‘KILLING’ COMPETITION
Reliance Jio Infocomm has dismissed
Vodafone Group CEO Nick Read’s allegation that it was the sole beneficiary of
the telecom regulator’s decisions as fake news and blamed the UK company’s
India unit and Bharti Airtel for killing the competition even before it started
services in September 2016. Jio president Mathew Oommen took a pot shot at
Bharti Airtel chairman Sunil Mittal’s comments on forming an optic fibre JV
with Vodafone Idea, telling, If one company is not able to execute, now two
companies coming together may not be able to execute. It is about outcome and
deliverables, and not about coming together. He noted that Jio has more fibre
connectivity than its rivals combined. However, the Mukesh Ambani owned telco
backed its rivals in calling for lower 5G spectrum prices, a rare instance of a
united stand on any subject, especially against the Telecom Regulatory Authority
of India. He claimed that Bharti Airtel and Vodafone – now Vodafone Idea – had
destroyed the Indian telecom ecosystem even before Jio started services,
benefiting from high interconnect usage charges (IUC) and denying it adequate
points of interconnection (PoIs). Trai more than halved the IUC charge to 6
paise per minute from October 1, 2017, and scrapped it for local calls starting
January 1, 2020, a move lauded by Jio and decried by its rivals. There were
12-15 operators that disappeared. When we launched services in 2016, how many
operators were stable? There was Airtel and there was Vodafone that were
reasonably stable and they were killing every other operator, Oommen said. That
is not going to happen. That is collusion. One needs to do tariffs in meeting
customer’s expectations and it cannot be telcos getting together, Oommen said.
He said about 400 million people in India still need to be connected to the
internet, signalling that the price war was far from over. These people have an
affordability metric. I don’t think this is the time to change the tariff
model, he said, adding that it has to be an obligation and commitment from
telcos to connect the unconnected. Low tariffs have helped Jio garner over 280
million subscribers by December and a revenue market share of 29.7%, closing in
on market leader Vodafone Idea’s 387.2 million users and 31.4% share and Bharti
Airtel’s 284.2 million subscribers and 30% share. However, in a rare instance
of unanimity, Jio joined Airtel and Vodafone Idea in calling for a lower base
price in the planned 5G spectrum auction. In Jio’s first official comments on
the pricing of airwaves, Oommen said the starting prices for 5G spectrum, which
will likely be auctioned this year, were significantly higher in India than elsewhere
globally and would hurt the deployment of the next-generation wireless
broadband technology. Trai set a base price of Rs 492 crore per unit for 5G
airwaves in the 3300-3600 MHz bands, seven and a half times higher than Rs 65
crore per unit at a recent 5G auction in South Korea. There is a room for
improvement in spectrum prices because the cost of spectrum in India is
significantly higher than globally. So, if you put your capex and capital into
spectrum, then obviously, you would have less capital to play with (for
deployments), Oommen said. He said each telco needs a 100 MHz block of airwaves
for good quality 5G services, thereby making it essential for the government to
reduce prices.
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85% INDIAN STARTUPS NOT FOCUSING ON PROFITABILITY IN 2019,
SAYS REPORT
Profitability doesn’t seem
to be the priority for Indian startups even as investors have been showing a
preference for those having clear visibility on churning profits. In a survey
of 100 early-to-growth stage startups, 85% of respondents said that growth will
be their primary focus this year while profitability is expected in a period of
one to four years. The bias for growth among startups has risen from 53% and
56% in 2017 and 2018 respectively, said InnoVen Startup Outlook report. On the
other hand, 46% of startups believed that the fundraising environment will be
tough in 2019 after a favourable 2018 for 74% respondents. The report also
highlights the rising share of Chinese and Japanese investments into Indian
startups as more than 50% early and growth-stage startups are in talks with
investors from two countries apart from traditional venture capital investors.
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
JET AIRWAYS FOUNDER NARESH GOYAL AGREES TO STEP DOWN AS CHAIRMAN:
SOURCE
Jet Airways' founder
Naresh Goyal has agreed to step down as chairman of the airline's board, a
source with direct knowledge of the matter told Reuters on Thursday, as the
cash-strapped Indian carrier inches closer to securing a rescue deal. Eithad,
which owns a 24 percent stake in Jet Airways, is however reticent to provide
interim funding of about 7 billion rupees ($99 million) to Jet Airways, the
source said.
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‘POOR DECISIONS HARMING AVIATION’
Ajay Singh said on
Wednesday that the aviation sector was reeling under high costs because of poor
leadership and decision making. The issue we had when we started SpiceJet in
2005 seems to be the same we had in 2018. Clearly, this needs to change. We
have this bad habit of shooting ourselves in the foot, this needs to stop. We
need to take quick decisions, Mr. Singh said. He cited the delay in getting
aviation turbine fuel under the GST regime as an example. We struggled with
that forever, he added. Our civil aviation policy says that its objective is to
reduce cost, we are actually going on adding costs. I think this is a mindset
issue. People, politicians and bureaucrats, still believe mistakenly that this
is something airlines can afford I think we our shooting ourselves in the foot,
Mr. Singh said. He said that ‘very little’ was being done to ‘encourage
airlines to grow profitably’ and this needed to be addressed. It can’t be that
you have to wait 18 years for a simple little reform. It just shows poor
leadership and low priority given to the [aviation] sector.
#For Source of Information copy and paste the heading in google.
Thanks & Regards,
CS Meetesh Shiroya
Thanks & Regards,
CS Meetesh Shiroya
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