Wednesday, December 16, 2009



ISSUE DATED 18.12.2009

Volume 152 Part 7






<.>Trust has locus standi to file petition u/s 397/398 if its name is found in register of members or share certificate issued in its name : Vijay Kumar Bhartia Family Trust v. Ranken and Co. P. Ltd. p. 722

<.>CLB cannot entertain application for refund of excess interest paid on deposit :
K. Suresh v. Associates India Finance Services Ltd. p.725

<.>Application not maintainable where registered office of company not situated within territorial jurisdiction of Bench of CLB :
K. Suresh v. Associates India Finance Services Ltd. p. 725



<.>Where company party to illegal conduct which formed basis of its claim for damages for auditors' failure to detect fraud, the auditors could rely on the defence of ex turpi causa to debar company's claim :
Stone and Rolls Ltd. (in liquidation) v. Moore Stephens (a firm) p. 729



Circulars :
RBI Circulars

<.>Credit Information Companies (Regulation) (Removal of Difficulties) Order, 2008-RPCD.CO RRB. No. 32/03.05.33/2009-10, dated 20th October, 2009 :
P. 92

<.>Requirement for obtaining prior approval of RBI in cases of acquisition/transfer of control of NBFCs accepting deposits-DNBS(PD) CC. No. 160/03.10.001/2009-10, dated 17th September, 2009 :
P. 94

SBI Circulars

<.>Dealings between a client and a stock broker (trading members included)-MIRSD/SE/Cir-19/2009, dated 3rd December, 2009 :
P. 79

<.>Establishment of connectivity with both depositories NSDL and CDSL-Companies eligible for shifting from Trade for Trade Settlement (TFTS) to normal rolling settlement-SEBI/MRD/DoP/SE/Cir-17/2009, dated 30th November, 2009 :
P. 77

<.>Limitation period for filing of arbitration reference-MRD/DSA/SE/CIR-18/2009, dated 2nd December, 2009 :
P. 78

<.>Preservation of records-MRD/DoP/DEP/Cir-20/2009, dated 9th December, 2009 :
P. 84

<.>Preservation of records-MRD/DoP/SE/Cir-21/2009, dated 9th December, 2009 :
P. 85

<.>Simplified Debt Listing Agreement for Debt Securities-Amendments-SEBI/IMD/DOF-1/BOND/Cir-5/2009, dated 26th November, 2009 :
P. 86


F Non-Banking Financial Companies (Deposit Accepting) (Approval of Acquisition or Transfer of Control) Directions, 2009 :
P. 93


<.>Guidelines for Corporate Social Responsibility :
P. 95


<.>Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) (Third Amendment) Regulations, 2009 :
P. 99

<.>Foreign Exchange Management (Remittance of Assets) (Amendment) Regulations, 2009 :
P. 100


<.>Expert Committee for winding up of sick companies

The Government has constituted an Expert Committee for giving recommendations for better efficiency in the conduct of liquidation and winding up proceedings of companies including sick companies in the company courts. Giving this information in the Rajya Sabha today in a written reply the Minister of Corporate Affairs, said that the Committee is mandated to suggest suitable amendments to the Companies (Court) Rules, 1959, towards reducing the time frame for time consuming procedures for winding up matters. The Committee is likely to submit its report by February, 2010. The Minister also informed the House that Winding up a sick entity involves multiple regulations. [
Source : dated December 7, 2009]

<.> Bourses to prune papers for minimum five years

To ensure assistance to enforcement agencies during company investigations, the Securities and Exchange Board of India (SEBI) has asked exchanges and brokers to preserve original records for a period ranging from two to five years.

The market regulator has said stock exchanges and its members are required to maintain and preserve the specified books of account and documents for as long as five years.

"The originals of such documents maintained either in physical or in electronic form or in both would be required by such enforcement agencies during trial of the case also," said SEBI.

Further, stock brokers and sub-brokers will have to preserve the specified books of account and other records for a minimum of five years.

"If a copy is taken by such enforcement agency either from physical or electronic record, then the respective original is to be maintained till the trial or investigation proceedings have concluded," said SEBI.

If such documents are maintained in electronic form, provisions of the Information Technology Act, 2000, in this regard are to be complied with, added the note from the market regulator. [
Source : dated December 10, 2009]

<.> SEBI extends ASBA to HNIs, corporates

Wealthy and corporate investors will soon be able to use the application supported by blocked amount or the ASBA facility-where a public issue applicant's money leaves his bank account only after the share allotment. In a circular, the market regulator SEBI said the system, which has been available only to retail investors since its introduction in May 2008, will also be accessible to these investor segments too, barring qualified institutional buyers (QIB), starting January 1.

SEBI has abolished restrictions in the existing ASBA facility, which do not allow revised bids, accept more than one bid and accept application only at the cut-off price in a public issue.

The move is part of SEBI's attempts to reduce the time between the closure of a public issue and its listing. In a recent interview the SEBI chairman had indicated the possibility of reducing this period to seven days from 20 days, currently.

"100 per cent. payment for institutions needs to be done. Two things have to be put in place before that. One, the ASBA facility should be available for institutional investors, and two, the time taken to list from the day of issue closure has to be reduced. Institutional amounts are huge, and if you keep them blocked for a considerable period of time, there will be issues," he said. [
Source : dated December 11, 2009]

<.> Voting rights sought by "fit and proper" persons in private banks

A proposal to amend the Banking Regulation Act, 1949, is under consideration of the Government. The proposed amendment, inter alia, provides for addition of a new section 12B to provide prior approval of Reserve Bank of India for acquisition of 5 per cent. or more of shares or voting rights in a banking company by any person and empowering Reserve Bank of India to impose such conditions as it deems fit in this regard in order to satisfy itself that the acquisition of shares of a banking company is by a person considered "fit and proper" and that the applicant continues to be "fit and proper" to hold the shares or voting rights. [
Source : dated December 11, 2009]

SEBI curbs on incomplete MF documentation

In a move to make the mutual fund (MF) industry more transparent, the Securities and Exchange Board of India (SEBI) has asked asset management companies (AMCs) to stop paying commissions to intermediaries, including banks and other distributors, who did not keep proper documents of their clients.

The documents relate to know-your-client (KYC) and power of attorney (PoA) norms for the industry.

"All documents related to investors, including KYC, PoA, in respect of transactions or requests made through some mutual fund distributors are not available with AMCs and registrar and transfer agents. The same are to be maintained by the distributors," it said.

The regulator has also asked fund houses to set up a separate customer service, mechanism for queries and grievances of unit holders. [
Source : dated December 12, 2009]

<.> Investors free to shift without AMCs' nod

The Securities and Exchange Board of India (SEBI) has asked asset management companies (AMCs) not to compel investors to get no-objection certificates (NoCs) from their existing distributors for shifting their investments.

This is a reiteration of the Association of Mutual Funds of India (AMFI) advice to AMCs to allow investors to change their distributor on the basis of a letter from them.

However, "it appears that this mandate is not being followed by the mutual fund industry," it said. "Some AMCs are insisting on the investor procuring an NoC from the existing distributor for this switch over, despite the guideline from AMFI," said SEBI. [
Source : dated December 12, 2009]

<.> Bank-financing to prop up stake-sales in PSUs

The Finance Ministry will request the Reserve Bank of India (RBI) to ease the norms for bank financing of initial public offers to ensure a good response to its proposed stake-sales in public sector companies and the simultaneous follow-on offers from many of them.

The Government may also informally ask public sector banks to bring down the margin requirements on IPO financing to 40 per cent. of the application money from 50 per cent. now, a senior Finance Ministry official said.

Share sales of public sector companies along with the auction of third generation, or 3G, spectrum will help the Government partly bridge its fiscal deficit. For Financial Year 2010, the Government has projected a fiscal deficit of 6.8 per cent. of the gross domestic product or GDP.

Many high net worth individuals use borrowed funds to apply for a large chunk of shares. In the current system of proportionate allotment, it helps them garner a larger number of shares and, thereby, boost the prospects of gains on listing. The Government is also looking at prescribing a lock-in for retail investors who are allotted shares at 5 to 10 per cent. discount. Under the current norms banks are not allowed to finance the funding of shares with a lock-in period.

However, a senior RBI official said that the RBI is yet to receive these proposals from the Government and going by the current regulations these exemptions can be granted only on a case-to-case basis.

IPO financiers, however, feel that easing financing norms for public offerings will not make a difference given the raft of large-sized offerings expected to be launched.

"The chances of multi-fold oversubscription in forthcoming IPOs and FPOs remains flimsy although the benchmark indices are close to the calendar year high", said the head of a leading Mumbai-based brokerage house. IPO financing is best suited in small, oversubscribed offers, he added. [
Source : dated December 10, 2009]



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