Tag: Securities and Exchange Board

Sebi levies Rs 1.15 cr fine on Voltaire Leasing and Finance, others for fraudulent trading, BFSI News, ET BFSI

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Markets regulator Sebi has imposed total fine of Rs 1.15 crore on Voltaire Leasing and Finance Ltd, its officials, one entity and eleven individuals for fraudulent trading in the shares of the firm. They violated Prohibition of Fraudulent and Unfair Trade Practices norms.

The investigation period was between August 2014-July 2015. They had manipulated the price of the scrip and the company and its directors-Dilip Rajkumar Patodia, Amlesh Sadhu and Harivallabh Mundra – were also part of the scheme for manipulating the price in the scrip.

“By executing manipulative trades, as has been executed by these noticees in the instant matter, the price discovery system itself is affected. It also has an adverse impact on the fairness, integrity and transparency of the stock market,” Sebi said.

All the entities forming the group of off-market transferors, the group of sellers and the company and its directors in charge of its affairs at the time of the violations, have manipulated the scrip price.

The firm is facing a fine of Rs 10 lakh and the three directors are facing fine of Rs 15 lakh each.

Besides, Sebi has imposed fine of Rs 5 lakh each on others.

In another order, Sebi levied total fine of Rs 88 lakh on 12 entities for violation of several market norms.

These include Nikita Forex Pvt Ltd, Nature Infosoft, Topline Fabrics and Tushar Commodities, apart from eight individuals.

The fine has been levied in the range of Rs 6-11 lakh.

It was found that they acted as a group, orchestrated a fraudulent scheme where a false and misleading information was circulated through bulk SMSes to create artificial demand, in order to offload large number of shares of Kalpa Commercial to gullible investors.

Besides, the transactions were not in conformity with the provisions relating to spot delivery contract which require that actual delivery/ transfer of shares and the payment should be on the same day as date of contract or the next day.



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RBI wants open offer exemption for ARCs buying bad assets from banks, BFSI News, ET BFSI

Banking & Finance

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The Reserve Bank of India has sought open offer exemption from capital markets regulator Securities and Exchange Board of India (Sebi) for equity stake purchases by Asset Restructuring Companies (ARCs).

Under the current Takeover Code rules, commercial banks and public financial institutions are exempt from making an open offer if they acquire shares beyond a threshold by invoking a pledge. ARCs acquire loans that qualify as non-performing assets from banks.

Banks sell bad loans to an ARC for a lower price and cut losses. In this process, all the collateral that was pledged in favour of the bank will be transferred to ARC.

If the collateral exceeds 25% of the total equity of the company, then such pledge invocation will need the ARC to give an open offer to the minority investors.

Takeover code

Sebi’s takeover code is triggered when an entity acquires over 25% stake in a listed company. At this point, the acquirer has to declare an open offer and buy at least 26% more stake from public shareholders.

Until 2019, the open offer exemption was available to all classes of investors undertaking debt restructuring. In 2019, Sebi changed the rules because RBI dissolved all the debt restructuring schemes and instead all the liquidation was being done through the Insolvency and Bankruptcy Code (IBC).

Market participants say the open offer requirement also slows down the resolution process since a lot of minority shareholders would view it as their last chance to cash in on the shares of a company that is most probably going to be liquidated.

Revised norms

In 2018, the RBI revised norms for bad loan resolution. Until then, banks were allowed to recast the corporate debts by converting their debt into equity.

In February 2018, the central bank phased out the debt restructuring schemes and made it mandatory for banks to refer all bad loans to the IBC process after a specific timeline. This circular of RBI prompted Sebi to revise its rules.

The RBI is mulling easier rules for ARCs. Earlier this month, an expert panel led by former RBI executive director Sudarshan Sen submitted its report to the central bank aimed at simplifying regulations for these financial institutions.

What Sudarshan Sen panel says

In the interest of debt aggregation, the scope of Section 5 of the SARFAESI Act, and other related provisions, may be expanded to allow ARCs to acquire ‘financial assets’ as defined in the Act, for the purpose of reconstruction, not only from banks and ‘financial institutions’ but also from such entities as may be notified by the Reserve Bank.

Reserve Bank may consider permitting ARCs to acquire financial assets from all regulated entities, including AIFs, FPIs, AMCs making investment on behalf of MFs and all NBFCs (including HFCs) irrespective of asset size and from retail investors.

ARCs should be allowed to sponsor SEBI registered AIFs with the objective of using these entities as an additional vehicle for facilitating restructuring/ recovery of the debt acquired by them.



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Capital Small Finance Bank files DRHP papers with SEBI, BFSI News, ET BFSI

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Capital Small Finance Bankhas filed its Draft Red Herring Prospectus with market regulator Securities and Exchange Board of India. Edelweiss Financial Services Limited, Axis Capital Limited and SBI Capital Markets Limited will be the book running lead managers of the issue.

The company plans to raise its initial public offering via a fresh issue of equity shares aggregating up to Rs. 450 crores and an offer for sale of up to 3,840,087 equity shares.

The offer for sale comprises up to 337,396 equity shares by PI Ventures LLP, 604,614 equity shares by Amicus Capital Private Equity I LLP, 70,178 equity shares by Amicus Capital Partners India Fund I and 836,728 equity shares by Oman India Joint Investment Fund II and up to 1,991,171 equity shares by certain person listed in DRHP.

The company has a good asset quality, with a GNPA of 2.08% and NNPA of 1.13%, lowest among its peers. They propose to utilise net proceeds from the fresh issue towards augmentation of the bank’s tier-I capital base to meet future capital requirements.



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Dish TV rejects Yes Bank’s call for EGM, BFSI News, ET BFSI

Banking & Finance

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Dish TV India’s board on Wednesday turned down a requisition for an extraordinary general meeting (EGM) by Yes Bank on the grounds that laws do not allow it.

Yes Bank, which holds 25.6% in Dish TV, had sought appointment of new independent directors and removal of five directors including MD & director Jawahar Lal Goel. According to Dish TV, Yes Bank needs permission from Sebi and also the information & broadcasting ministry prior to placing its resolutions before the shareholders.

In a statement to the stock exchanges, Dish TV said that, owing to Yes Bank being a banking company and its shareholding “being a consequence of invocation of pledges, there are certain embargoes under the provisions of the Banking Regulation Act, 1949 read with Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, because of which the said resolutions cannot be placed before the shareholders”.

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A future yardstick or just another buzz word?, BFSI News, ET BFSI

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BY: Harsh kumar

Businesses around the world are moving towards a more actionable and measurable sustainable development approach through Environment, Social, and Governance (ESG) reporting. It seems to be an attractive proposition for investors who prefer more environmentally, socially responsible companies over just profit-making organisations. ESG, according to various reports, could potentially facilitate more corporate accountability in terms of its performance.

According to a survey by rating agency CRISIL, over 80% of issuers and institutional investors intend to integrate ESG in their decision-making.

“Investor community not just looks at investment opportunities but also considers risks associated during the recovery as well as structured exit from an investment. Sectors that lack long term sustained growth may find it difficult to secure equity and quasi-equity investments since we all know that equity is costlier to debt. New ideas and investment opportunities without long term vision will find fewer investors,”Inderjeet Singh, director at Deloitte India.

Regulatory bodies and government institutions are continuing to encourage ESG reporting, with Securities and Exchange Board of India stating that a Business Responsibility and Sustainability Report (BRSR) will be mandatory from FY23 for the top 1000 listed companies, by market capitalization. SEBI said that this would replace the existing Business Responsibility Report (BRR).

ETCFO discussed with Inderjeet Singh, about the challenges, strategies and the pivotal role technology plays in ESG investing. Here are the edited excerpts of the interview:

Q. What strategic decisions have companies made that will bring sustainability?

Investors and regulators have both worked towards mainstreaming sustainability into businesses during the past decade. A transition to sustainable business approaches is becoming visible across sectors. There are the following strategic decisions that various companies have taken:

  • Companies have started measuring their specific energy consumption, specific water consumption and environmental footprint. These are some of the most critical parameters which have a direct bearing on the long term business sustenance
  • Several businesses have introduced the “cost of carbon” into their investment evaluation processes, thereby ensuring all new investments (including business expansion) is based on the principles of decarbonization. There are companies in power generation business with decision of capacity addition only through renewable sources of energy
  • Some companies are even considering disinvestments or removing highly polluting businesses from their portfolio
  • Several medium to large businesses have embarked upon the journey of non-financial disclosures to obtain feedback from stakeholders, as such disclosures act as channels to resonate with society and its expectation
  • Environment inclusiveness has become an integral part of business continuity and the same has been appended into the corporate risk register of companies
  • SEBI (LODR amendments of 2021) have also introduced mandatory BRSR compliance from FY 2022, which will further improve sustainability and allied disclosures across the value chain

Q. Do organisations think ESG investing is the way forward for long term strategy and decision making or do they think of it as just another buzzword in the industry? If yes, please tell us major challenges which organisations and investors are facing in adopting ESG reporting.Yes. Indeed ESG performance has become a yardstick for investment decisions among the investor community. There are multiple challenges that may play out differently among specific sectors such as:

  • Highly competitive businesses operate at a thin margin wherein cost optimization is the operational ask, unless a large number of players transition out to more sustainable operations, the sector continues to operate as business as usual. Policy & regulatory interventions along with additional benefits such as subsidies, tax holidays etc. may be required to support it.
  • Investor community not just looks at investment opportunities but also considers risks associated during the recovery as well as structured exit from an investment. Sectors that lack long term sustained growth may find it difficult to secure equity and quasi-equity investments since we all know that equity is costlier to debt. New ideas and investments opportunities without long term vision will find fewer investors
  • Access to technology at a reasonable cost is also one of the key challenges in developing countries, which may hamper the economic growth in several countries. India can leverage population dividends to its advantage across sectors by further strengthening its readiness against leading ESG practices. Skipping Euro V and introducing Euro VI has resulted in access to global automotive technologies for Indian customers

Q.As one of the biggest consultancy firms, please tell us how we can leverage technology and data for ESG implementation?

Technology will be an enabler for ESG implementation. The material elements/indicators for disclosure are required to be continuously monitored by the companies making regular disclosures. It is important that a digital interface for data collection, monitoring, analysis and course correction is easily accessible to decision-makers/compliance officials within a company.

Several SaaS (Software as a Service) players are offering data capture and management solutions across the ESG value chain. Even the reporting requirements from companies to MCA require uploading of ESG performance data in xRBL format, which may help evaluate the performance of listed companies by SEBI / MCA over a period of time.

The ease of access to data, performance measurement, sector benchmarking and identification of champions; all of this is practically going to be facilitated through digitization. Digitization will remove bias and bring objectivity into the long term decision-making process.



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Kerala HC stays conclusion of Dhanlaxmi Bank’s AGM, BFSI News, ET BFSI

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KOCHI: The high court of Kerala through an interim order stayed the conclusion of the AGM of Thrissur-headquartered Dhanlaxmi Bank, which had been scheduled to be held on Wednesday.

Four stakeholders – one of them a former board member and three who expressed their interest to become board members – had filed the plea to stay the conclusion of the AGM.

The petitioners were P K Vijayakumar, former director of the bank, KM Madhusoodanan, P. Mohanan and Prakash DL.

“In the light of the discussion aforesaid, having regard to the peculiar facts of this case, I deem it appropriate to pass an interim order directing the Bank to refrain from concluding the Annual General Meeting scheduled for today. Ordered accordingly. It is made clear that this order will not preclude the Bank from transacting the businesses included in the agenda for the meeting. Needless to say that after transacting the businesses included in the agenda for the meeting, the meeting shall be adjourned to a day after one month. The Bank would be free to issue appropriate communication to the Securities and Exchange Board of India concerning the businesses transacted in the Annual General Meeting,” the High Court order said.

The petitioners had alleged that the Annual General Meeting of the Bank, scheduled to take place on 29.09.2021 and that they were informed that the Board has decided on 20.09.2021 not to place the notices issued by the petitioners under Section 160 of the Act in the ensuing Annual General Meeting of the bank or any adjournment thereof.

The Nomination and Remuneration Committee (the NRC), constituted in terms of Section 178 of the Companies Act, 2013 (the Act), after conducting due diligence, had recommended to the Board of Directors of the Bank to appoint two of the petitioners as the Directors of the Bank. And, according to the Companies Act, once the NRC of the Bank makes a recommendation, it is obligatory on the part of the Board to place the recommendation before the General Meeting of the Bank for appropriate decision. It is stated that since the Board has not acted upon the recommendation of the NRC to appoint petitioners 2 and 3 as Directors, they have given notice under Section 160 of the Act signifying their candidature as Directors of the Bank.



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Sebi deepens fund managers’ skin in the game, BFSI News, ET BFSI

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Mumbai: Mutual funds will have to pay a part of the salary to its top employees in the form of units of the schemes they oversee. The Securities and Exchange Board of India (Sebi) said on Wednesday at least 20% of the salary, perks, bonus or non- cash compensation of these executives will have to be paid in the form of units of mutual fund schemes.

The regulator said the move is aimed to align the interest of the key employees with the unit holders of the mutual fund schemes. Key officials include a fund house’s chief executive officer, chief investment officer, fund manager, research analysts, chief operation officer among others.

“Having skin in the game is looked at positively by all investors, and the basic intent seems good,” said Kaustubh Belapurkar, Director (Fund Research), Morningstar India.

The new rule comes in the wake of a forensic report commissioned by Sebi which alleged that some of the top officials of Franklin Templeton and their family members withdrew a portion of their investments from some of six stressed schemes of the fund house just before they were shut for redemptions on April 23,2020.

The Sebi circular on Wednesday said units allotted to key employees would be clawed back in the event of “fraud, gross negligence or violation of code of conduct.” The rules become effective on July 1.

The regulator has excluded exchange traded funds, index funds, overnight funds and existing close ended schemes from the new rule.

Sebi said the compensation paid in the form of units should also be proportionate to the assets under management of the schemes in which the key employee has an oversight.

In case of compensation paid in the form of employee stock options, the date of exercising such option should be considered as the date of such payment, Sebi said. The compensation should be locked- in for a minimum period of three years or tenure of the scheme whichever is less.

Mutual fund industry officials are miffed with the new regulations. While some said the move could result in a flight of talent to independent fund management, others said it was unfair on the chief executive officers of mutual funds.

“The CEO will end up putting 20% of his post tax money across a large number of schemes irrespective of his needs, and that too locked in for three years,” said the CEO at a domestic fund house.

The regulator said fund houses should not allow any redemptions of the said units during the lock- in period. Besides, redemptions of such units should also not be allowed within the lock-in period in case of resignation or retirement before attaining the age of superannuation.

“In case of retirement on attaining the superannuation age, such units shall be released from the lock-in and the key employee shall be free to redeem the units, except for the units in close ended schemes where the units shall remain locked in till the tenure of the scheme is over.”

In the case of fund managers managing only a single scheme, 50% of the compensation can be by way of units of the scheme managed by the fund manager and the remaining can could be by way of units of those schemes whose risk value is equivalent or higher than the scheme managed by the fund manager, the circular said.



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