Securities and Exchange Board of India – Artifex.News

Infosys Settles Insider Trading Charges With Markets Regulator, To Pay…

admin — Thu, 27 Jun 2024 05:09:04 +0000

Bengaluru:

India’s No.2 IT services exporter Infosys’ CEO Salil Parekh has settled charges of violating provisions of insider trading, the country’s markets regulator said on Thursday.

Mr Parekh agreed to pay 2.5 million rupees (around $30,000) for failing to have adequate controls to prevent insider trading, the Securities and Exchange Board of India said.

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Should the recent stock market volatility be probed? | Explained

admin — Sat, 15 Jun 2024 22:15:00 +0000

Congress Rahul Gandhi shows a stock market movement chart during a press conference in New Delhi on June 6, 2024.
| Photo Credit: AP

The story so far: The Indian stock market witnessed extreme volatility right after the release of the exit poll results earlier this month and on June 4 when the results of the latest Lok Sabha election were declared. The benchmark indices, the Nifty and the Sensex, have since managed to recover the losses. The Congress alleged that Prime Minister Narendra Modi and Home Minister Amit Shah had manipulated the stock market through their statements to favour certain investors.

What is the controversy about?

The Nifty and the Sensex gained 3.2% and 3.4%, respectively, to hit all-time highs on June 3, the first day of trading after the exit poll results, which were released over the preceding weekend, suggested that the BJP would win a resounding majority in the election. The biggest gainers were stocks of companies that were seen to be close to the government, such as the Adani Group stocks, and stocks of public sector companies which were expected to benefit during Mr. Modi’s third term in power. Both the benchmark indices, however, slumped by almost 6% the very next day after the actual results failed to match exit poll predictions. The decline on June 4, which was the worst single-day fall in the stock market since March 2020 in the wake of the COVID-19 pandemic’s outbreak in India, wiped out investor wealth worth about ₹30 lakh crore. Prior to the exit poll results, the Prime Minister and the Home Minister had made statements encouraging investors to buy stocks before June 4 in order to benefit after the election results.

What is the Opposition’s allegation?

The Congress has alleged that Mr. Modi and Mr. Shah deliberately made comments exhorting retail investors to purchase stocks before the day of the election results and that this was an attempt to manipulate the market to favour certain foreign investors. To back this claim, the party’s data wing head Praveen Chakravarthy has drawn attention to the doubling of the value of stocks traded for cash in the market on May 31, the last trading day before the release of the exit poll results. The total value of stocks traded on May 31 was ₹2.3 lakh crore against ₹1.1 lakh crore the previous day. Mr. Chakravarthy has noted that more than half the buying that happened on May 31 came from foreign investors and further added that foreign investors were largely net sellers prior to May 31, when they suddenly turned net buyers of stocks. According to him, the PM’s statements encouraging investors to buy stocks before June 4 would have benefited these foreign investors who managed to load up on stocks before the exit poll results gave a sharp 3% bump to the stock market on Monday. The Opposition parties claim that these foreign investors had insider information about the exit poll results. They also add that the foreign investors managed to offload their stocks on Monday to retail investors who were not just late to the party but also suffered huge losses on Tuesday. The Opposition parties have called for a joint parliamentary committee (JPC) to probe the matter.

What do the market regulator’s rules say?

The Securities and Exchange Board of India’s Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market (FUTP) Regulations state that “planting false or misleading news which may induce sale or purchase of securities” is illegal. But there are exceptions. Comments on the overall market trend when broadcast to the wider public through mass media such as TV and newspapers, are not considered to be the same as information secretly leaked to certain investors to benefit from a coming market move. If not for such exceptions, it would be impossible for anyone to voice their opinion on the market. So, experts contend that unless, say, an investigation can prove that Mr. Modi acted in collusion with certain investors to boost the market prior to the exit poll results, there is probably nothing illegal about his statement urging investors to buy before June 4.

How has the Centre responded?

Union Minister Piyush Goyal responded to the Opposition’s accusations by arguing that foreign investors actually bought stocks at a high price and sold at a low price while Indian investors deftly used the market’s volatility to sell high and buy low. NSE data appeared to back this contention as it shows the umbrella category of ‘retail investors’ were net sellers of stocks on May 31 and June 3, when the market rose, while they were net buyers of stocks worth ₹21,179 crore on June 4, when the markets crashed. Foreign portfolio investors (FPIs), meanwhile, were net buyers on May 31 and June 3 when the markets went up and were net sellers on the day the markets crashed. Some market experts, however, point to the fact that the NSE’s ‘retail investors’ category includes not just small ordinary retail investors but also non-resident Indians (NRIs), HUFs, individual/proprietorship firms and partnership firm /Limited Liability Partnership (LLP) that encompass the investment vehicles used by ultra high net worth and high net worth individuals. These experts observe that shares worth a net amount of more than ₹21,000 crore were bought by ‘retail investors’ from FPIs and domestic mutual funds and that such heavy buying was unlikely to have been done by small ‘retail investors’ alone.

Further, while FPIs bought stocks worth ₹96,155 crore on May 31, the highest-ever in history, they also sold stocks worth ₹93,977 crore on the same day. In other words, despite the sudden rise in trading activity, foreign investors were not huge net buyers of stocks on May 31. This is, however, not to categorically say that there was no mischievous activity during the day. Data on net purchases or sales may not reflect how individual foreign investors with insider information may have benefited. Further, whether an investor group profited or lost money can also depend on exactly when during a trading session they managed to buy or exit a stock regardless of whether the indices closed higher or lower that day. Only a thorough investigation based on granular data can offer an answer to whether there was manipulation.

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Sebi makes process of securities payout directly to client’s account mandatory

admin — Wed, 05 Jun 2024 11:58:08 +0000

The Securities and Exchange Board of India. File
| Photo Credit: Reuters

To enhance operational efficiency and reduce the risk to clients’ securities, markets regulator SEBI on May 5 decided to make the process of direct payout of such securities to the client’s account mandatory.

This will become effective from October 14, the Securities and Exchange Board of India (SEBI) said in a circular. Currently, the clearing corporation credits the pay-out of securities in the pool account of the broker, who then credits the same to the respective client’s demat accounts. Further, a facility of direct delivery to investors was introduced in February 2001.

After extensive deliberations with the stock exchanges, clearing corporations (CCs) and depositories, SEBI has decided that “the securities for pay-out shall be credited directly to the respective client’s demat account by the CCs”.

Moreover, clearing corporations should provide a mechanism for trading member (TM) or clearing members (CM) to identify the unpaid securities and funded stocks under the margin trading facility.

In case of any shortages “arising due to inter se netting of positions between clients” — internal shortages — SEBI suggested TM or CM should handle such shortages through the process of auction. Moreover, in such cases, the brokers should not levy any charges on the client over and above the charges levied by the clearing corporations.

In May 2023, SEBI specified various processes for handling clients’ securities with regard to pay-in and pay-out of securities. This was to protect clients’ securities and to ensure that the stock broker segregates securities of the client or clients so that they are not vulnerable to misuse.

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SEBI’s latest framework to administer investment advisers, research analysts | Explained

admin — Thu, 16 May 2024 12:48:17 +0000

The story so far: Capital markets regulatorSecurities and Exchange Board of India (SEBI) on May 2 introduced a framework for better administration and supervision of Research Analysts (RAs) and Investment Advisers (IAs). The framework envisages that stock exchanges will form dedicated bodies to administer these two essential functions. This is to help SEBI have a thorough vision about the functioning of both RAs and IAs. The framework introduces criteria and rules about the eligibility and functions, among other things, of the two supervisory bodies, and will come into force on July 25.

Also read | Explained | What are SEBI’s concerns around crypto assets?

What is the purpose of placing two oversight bodies?

SEBI observed that, given the potential for growth in the number of investors in the country, we would see the emergence of a large number of RAs and/or IAs. Regulations for the former were first notified in December 2014. Since then, the regulator observed, the ecosystem has undergone “significant changes,” prompting a review of the regulations.

The markets regulator took note of the growth in size of the ecosystem. On March 31, 2015, 27 RAs were registered with them. As of February 20 this year, this numberhad gone up to 1,176, that is, over 40 times in under a decade.

Its counterparts in Canada and the United States have delegated the responsibility for regulating RAs to self-regulatory organisations, whilst IAs in the two countries are regulated by securities market regulators (alongside the relevant State security regulator in the U.S.). In countries like the U.K., France, Germany, Hong Kong, Singapore, Japan and Australia, the securities market regulator directly oversees the functioning of the two entities.

SEBI felt that the paradigm followed in the U.S. and Canada suffered from certain shortcomings. It observed a possible conflict of interest since the self-regulatory body is directly funded by the industry that it needs to regulate. This also prompted concerns about regulatory interests being potentially intertwined with that of the industry. The other concern relates to inadequate oversight because the self-regulator may not have the essential independence or resources to monitor and enforce necessary actions.

Thus, SEBI observed that since market institutions already possess experience and have mechanisms in place to manage disputes between investors and intermediaries (including RAs), they could provide “the highest degree of accountability,” as is expected from the body.

So, what is happening now?

The framework delegates the responsibility for last mile enforcement to a recognised stock exchange. This is to be executed by two bodies to be appointed by the exchanges themselves, that is, the Research Analyst Administration and Supervisory Body (RAASB) and the Investment Adviser Administration and Supervisory Body (IAASB). SEBI has clarified that both supervisory bodies would come under the purview of a single stock exchange.

This is to ensure “efficiency in the system and economies of scale.” However, as was agreed in its March board meeting, SEBI would explore enabling more than one stock exchange. This is to account for the progress in the industry and a rise in the number of entities in the future, and to promote competition in the ecosystem. It is pertinent to note that the BSE Administration and Supervision Ltd. (BASL), a wholly owned subsidiary of BSE Ltd., was granted recognition as an IAASB for a period of three years, starting June 2021.

As for segregating responsibility, the framework makes the stock exchange responsible for undertaking the initial scrutiny and managing everyday compliance. Thus, the exchange shall monitor compliance with regulations and circulars for RAs and IAs by SEBI; the executive controls, however, would stay with SEBI. While the exchange can take administrative action, such as imposing penalties or issuing warning letters, SEBI would be empowered to enforce these actions. It is important to note that SEBI can also take suo motu cognisance of any compliance-related issue, and retains the authority to levy penalties or initiate disciplinary action.

What are the eligibility criteria for stock exchanges to oversee RAASBs/IAASBs?

The stock exchange where these supervisory bodies would be based must have existed for at least 15 years. It must also have nation-wide terminals, an investor grievance redressal mechanism, including an online dispute resolution mechanism, and must have a net worth of at least ₹200 crores. The stock exchange must also have the capacity for investor service management. This would be assessed through their reach of Investor Service Centers (ISCs)— which must exist in at least 20 cities.

But how does one monitor the efficacy of RAASBs and IAASBs?

SEBI will monitor the performance of the said bodies through periodical reports and inspections.

The framework mandates that the two entities constitute an internal committee to oversee the activities of administration and supervision. This committee must periodically review the performance of the stock exchange as RAASB/IAASB and make recommendations to SEBI. The panel should constitute public interest directors – who shall function as the majority members of the committee, a maximum of two key management personnel of the exchange and independent external representation from RAs, IAs and proxy advisers (with a minimum of one representative for each segment).

How would the transition be facilitated?

Existing RAs and IAs registered with the markets’ regulator would be grandfathered into the RAASB and IAASB respectively. Pending applications for RAs will continue to be processed by SEBI as per the existing mandate. Once the registration is granted, the entity shall be enlisted with RAASB.

The same goes for IA applications pending with SEBI or with BASL. Successful applicants would be enlisted within the IAASB framework.

Fresh applications from July 25 must be routed through the RAASB or IAASB. Thereafter, enlistment of the entity with the concerned supervisory body shall form a pre-requisite for consideration by SEBI.

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SEBI rejects NSE’s proposal to extend trading hours

admin — Tue, 07 May 2024 12:43:19 +0000

Securities and Exchange Board of India (SEBI) (File Photo)
| Photo Credit: Reuters

Capital markets regulator SEBI has rejected a proposal by the National Stock Exchange (NSE) to extend the trading hours in the equity derivatives segment citing a lack of feedback from the stock brokers community.

“Currently, there is no plan to extend the timings as SEBI has returned our application as the stock brokers have not given the feedback that SEBI wanted. So, as of now, the extended time frame (plan) is shelved,” NSE MD and CEO Ashishkumar Chauhan said in a post-earnings analysts call.

This came after the NSE had urged SEBI to extend trading hours in the equity derivatives segment in a phased manner. This was aimed at potentially curtailing the overnight risk arising from global information flow.

The case for extend trading hours

Sriram Krishnan, chief business development officer of NSE, had told PTI in September that the bourse was planning a session from 6 p.m. to 9 p.m. after a break from the closure of the regular session from 9.15 a.m. to 3.30 p.m.

Based on the response, a gradual extension of the market timing till 11.55 p.m. was proposed on the lines of commodity derivatives.

To begin with, only index derivatives in phase 1 were proposed to be available followed by single stock options and others.

In 2018, the Securities and Exchange Board of India (SEBI) allowed stock exchanges to set their trading hours in the equity derivatives segment between 9 a.m. and 11.50 p.m.

This was similar to the trading hours for the commodity derivatives segment, which are currently fixed between 10 a.m. and 11.55 p.m.

Also Read: SEBI allows longer trading hours for SLB segment

The move was part of SEBI’s efforts to enable the integration of stocks and commodities trading on a single exchange.

NSE’s IPO plan

With regard to NSE’s IPO, Mr. Chauhan said that “situations remain as in”.

Last month, he said that NSE is awaiting approval from SEBI to kickstart the initial public offering process. The NSE’s listing plans have been on the backburner amid a SEBI probe against the exchange and some of its top officials.

During the fourth quarter ended March 2024, NSE reported a 20% year-on-year increase in consolidated net profit at ₹2,488 crore. Further, the consolidated operating revenues stood at ₹4,625 crore for the January-March quarter of the financial year 2023-24, marking a surge of 34% year-on-year.

Apart from trading, the total revenue was also supported by other revenue lines, including listing, index services, data services and co-location facility.

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FirstCry set to withdraw $500 million IPO papers after regulatory scrutiny

admin — Fri, 26 Apr 2024 06:29:16 +0000

FirstCry parent BrainBees filed papers with SEBI last December for an IPO that would have been one of the country’s biggest this year.
| Photo Credit: Special Arrangement

Retailer FirstCry is set to withdraw its papers for an up to $500 million Initial Public Offering (IPO) as early as next week, after markets regulator raised questions over key metrics it disclosed to investors, said three sources with direct knowledge of the issue.

FirstCry, backed by SoftBank, TPG and India’s Mahindra and Mahindra sells baby products, including clothes, diapers and toys, seeking to tap the market for new parents in the world’s most populous country.

FirstCry parent BrainBees filed papers with Securities and Exchange Board of India (SEBI) last December for an IPO that would have been one of the country’s biggest this year. While it filed to raise about $215 million via fresh shares, it plans to raise $300 million more via sale of existing shares, the sources said.

However in recent weeks, SEBI told the company it had not complied with Indian regulations that mandate an IPO-bound company must share all key business metrics that in its papers that it has shared with prospective investors in the last three years, the three sources said.

FirstCry and SEBI did not return requests for comment.

SEBI introduced this rule in 2022, hightening scrutiny of companies looking to list, after wide-spread criticism on the seemingly lax oversight over large loss-making companies which have commanded lofty valuations.

FirstCry’s Key Performance Indicators (KPIs), include its average order value, annual transacting customers and number of orders, its papers show.

FirstCry will now withdraw its IPO papers, make changes and refile them as early as next week, two of the sources said.

For the year ended March 31, 2023, its losses jumped six times to $57.6 million, while its total income more than doubled to $684 million, its draft papers show.

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Indian regulator finds Adani offshore investors in disclosure rules violation: Report

admin — Tue, 23 Apr 2024 09:44:33 +0000

A logo of the Adani Group
| Photo Credit: Reuters

India’s markets regulator found a dozen offshore funds invested in Adani Group companies were in violation of disclosure rules and in breach of investment limits, two people with direct knowledge of the matter said on April 22. They declined to be named as they not authorised to speak to media.

The Securities and Exchange Board of India (SEBI) and the Adani Group did not immediately respond to emailed requests for comment.

Reuters had first reported that the SEBI uncovered the violation of rules on disclosures by listed entities and limits on the holdings of offshore funds in August last year.

The regulator was also looking into Adani Group’s ties with one of the funds to determine whether it could be seen acting “in concert” with the conglomerate’s key shareholders, an accusation Adani has rejected in the past.

The regulator sent notices to a dozen Adani Group’s offshore investors outlining the charges earlier this year and asking them to explain their positions on the disclosure violations and breach of investment limits, the sources said. “The offshore funds were reporting their investment in Adani Group companies at individual fund level. Regulator wanted the disclosure of holding at offshore fund group level,” said the first of the two sources.

Eight of these offshore funds have approached the regulator via written request to settle the charges by paying a penalty without admission of guilt, the sources added.

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Vedanta ordered to pay Cairn UK 9.4 million for delayed dividends

admin — Wed, 13 Mar 2024 05:06:48 +0000

FILE PHOTO: A bird flies by the Vedanta office building in Mumbai August 16, 2010. REUTERS/Danish Siddiqui/File Photo
| Photo Credit: Reuters

March 12

Indian mining group Vedanta must pay $9.4 million) to Cairn UK Holdings for a delay in paying dividends, the Securities and Exchange Board of India (SEBI) said on March 12.

The order, which is on SEBI’s website, said that Vedanta must make the payment within 45 days or face further action.

SEBI also barred Vedanta directors including vice-chairman Navin Agarwal from India’s securities markets for two months.

The regulator in its order said that Vedanta, formerly known as Cairn India, had violated Indian law by withholding dividends that should have been paid to the British company between January 2014 and June 2017.

Vedanta did not immediately respond to a Reuters emailed query for comment.

The Indian company had said it failed to pay dividends because of asset restrictions related to a demand by the Income Tax department. However, the restrictions expired in March 2016.

Cairn UK lodged a complaint with SEBI in 2017 that, despite reminders and the lifting of the restrictions, the dividends were not paid until June 2017 and that Vedanta was liable to pay interest on the delayed dividends.

SEBI said interest should be paid to “compensate for the time value of money that … (Cairn UK) was unlawfully deprived of”.

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SEBI flags froth in small, mid-cap stocks

admin — Mon, 11 Mar 2024 07:52:26 +0000

A file photo of SEBI chairperson Madhabi Puri Buch.
| Photo Credit: PTI

There may be pockets of irrational exuberance in the Indian equity markets, markets regulator Securities and Exchange Board of India (SEBI) said on March 11, referring to concerns over stretched valuations of small- and mid-cap stocks and large inflows into mutual funds investing in these segments.

SEBI has suggested mutual fund trustees look at whether lumpsum investments into small- and mid-cap funds are appropriate. It is not appropriate to allow the froth to keep building, SEBI Chairperson Madhabi Puri Buch said on Monday.

Recently, the markets regulator directed mutual funds to disclose stress test results of small- and mid-cap funds from March 15, to assess the time taken to exit positions in times of stress.

Since the beginning of 2023, the Nifty small-cap 100 and mid-cap 100 have risen 58% and 54%, respectively, outperforming the 23% rise in the benchmark Nifty 50.

Despite concerns over elevated inflows into the segments, small-caps led the charge among equity mutual fund inflows in February, data from an industry body showed on March 8.

SEBI also said on March 11 that it has received feedback that some entities may be misusing provisions of small and medium enterprises’ listings. The regulator is collecting evidence on concerns of price manipulation in the segment.

It said an optional T+0 settlement will be introduced from the end of March, providing an opportunity for investors to settle their stock market trades on the same day. The move is aimed at ensuring markets do not lose competitiveness to any ‘grey’ market, Ms. Buch said.

(Reporting by Ira Dugal in Mumbai; Writing by Bharath Rajeswaran; Editing by Mrigank Dhaniwala)

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Paytm shares jumped 5% in the morning trade on February 26, 2024

admin — Mon, 26 Feb 2024 06:46:54 +0000

Paytm, on February 9, announced setting up of a group advisory committee to advise the company on strengthening compliance and on regulatory matters.
| Photo Credit: The Hindu

Shares of Paytm owner One97 Communications jumped 5% in the morning trade on February 26 after Reserve Bank of India (RBI) asked retail payment settlement body NPCI to examine the possibility of migrating Paytm Payments Bank customers using ‘@paytm’ UPI handle to other banks.

The stock of crisis-hit fintech company climbed 5% each to ₹428.10 and ₹427.95 apiece — also its upper circuit limit — on the NSE and BSE.

In the morning trade, the 30-share BSE Sensex benchmark slumped 288.71 points or 0.39%, while NSE Nifty fell 71.55 points to 22,141.15. On February 23, the scrip of One97 Communications rallied 5% and locked in upper circuit limit on the BSE.

In a bid to prevent any disruptions in the payment ecosystem, the RBI on Friday asked the National Payments Corporation of India (NPCI) to examine the possibility of migrating Paytm Payments Bank customers using the UPI handle ‘@paytm’ to four to five other banks.

The Central bank came out with additional steps for the benefit of customers, wallet holders and merchants who are availing banking services from Paytm Payments Bank, which has been barred from accepting deposits and credits after March 15, 2024.

“As the PPBL cannot accept further credits into its customer accounts and wallets after March 15, 2024, certain additional steps have become necessary to ensure seamless digital payments by UPI customers using ‘@paytm’ handle operated by the bank, and minimise concentration risk in the UPI system by having multiple payment app providers,” the RBI said in a statement.

“NPCI has been advised by the RBI to examine the request of One97 Communication Limted (OCL) to become a Third-Party Application Provider (TPAP) for UPI channel for continued UPI operation of the Paytm app, as per the norms,” it said.

Meanwhile, an advisory committee, set up by One97 Communications after the Reserve Bank’s action on its payments bank business, is at a stage of engagement with the company on matters related to the terms of reference for the panel.

The panel’s head and former chairman of Securities and Exchange Board of India M. Damodaran on February 25 said, “We have been engaging with the group on matters relating to the Advisory Committee’s terms of reference.” He said that the panel members are external advisors and at present Paytm is engaged in dealing with the RBI.

On January 31, the RBI asked PPBL (Paytm Payments Bank Limited) to stop further deposits, credit transactions, or top-ups in any customer accounts, prepaid instruments, wallets, FASTags, and National Common Mobility Cards, after February 29. Later, the Central bank extended the deadline till March 15.

Paytm on February 9 announced setting up of a group advisory committee headed by Damodaran. The committee was set up to advise the company on strengthening compliance and on regulatory matters. One97 Communications Ltd (OCL) holds a 49% stake in PPBL.

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