| | No-frills demat a/c introduced | | Sebi directs all depository participants to provide basic services demat account | | BS Reporter / Mumbai Aug 28, 2012, 00:13 IST |
| In a bid to give a push to equity investing, capital markets regulator Securities and Exchange Board of India (Sebi) on Monday introduced no-frills or basic trading accounts for small shareholders. The regulator has directed all depository participants (DPs) to provide 'basic services demat account' (BSDA), which will have substantial lower costs and will come with basic services. BSDAs will have no annual maintenance charges if the value of securities held in the account is less than Rs 50,000. If the value of securities is between Rs 50,000 and Rs 2 lakh, the investor will have to pay annual charge of Rs 100. | BOOSTING EQUITY CULTURE | - Step taken to give a push to equity investing
- Sebi directs all depository participants to provide 'basic services demat account' (BSDA) along with lower costs and basic services
- BSDAs would have no annual maintenance charges if the value of securities held in the account is less than Rs 50,000. If the value is between Rs 50,000 and Rs 2 lakh, the investor will have to pay annual charge of Rs 100
- Sebi says reduction in cost would help in achieving wider financial inclusion and will also encourage individuals to open demat accounts
| Currently, most investors have to pay about Rs 750 as annual maintenance charges to brokers irrespective value of holdings. Sebi says reduction in cost will help in achieving wider financial inclusion and will also encourage individuals to open demat accounts. As on August 25, there were about 20 million demat accounts in the country. Dinesh Thakkar, chairman and managing director, Angel Broking, said: "Growth of demat accounts is not constrained by pricing. Although it's a welcome step, demat account opening will get a big push only when market conditions improve or whenever there is a good IPO (initial public offering)." Added Prashanth Prabhakaran, president, retail broking at India Infoline: "No frills demat account will bring more individuals to the markets. This, along with other initiatives like the Rajiv Gandhi Equity Savings Scheme, will help in developing the equity culture in the country." "All individuals who have or propose to have only one demat account and where they are the sole or first holder shall be eligible to have a BSDA," Sebi said in a press release on Monday. "The value of holding shall be determined by the DPs on the basis of the daily closing price or NAV (net asset value) of the securities or units of mutual funds. If the value of holding in such BSDA exceeds the prescribed criteria at any date, the DPs may levy charges as applicable to regular accounts (non-BSDA) from that date onwards," said the release. No-frills demat account will also help investors who wish to participate in IPOs. Last week, Sebi announced several initiatives to extend the reach of IPOs across the country. Sebi said the move was taken after extensive consultation with all stakeholders with respect to cost of demat accounts especially from small individual investors. BSDA holders will get transaction statements only at the end of every quarter. If there are no transactions in any quarter, no transaction statement may be sent for that quarter. Meanwhile in regular accounts where there are no transaction or that have nil balance, only one annual statement of holding will be sent in electronic or physical form as opted by the account user. Electronic statements will be provided free of cost. In case of physical statements, the DP will provide two statements free of cost during the billing cycle. Additional physical statement may be charged at a fee not exceeding Rs 25 per statement, said Sebi.
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| | Small investors may gain from share buybacks | | Samie Modak / Mumbai Aug 28, 2012, 00:06 IST |
| Thanks to the newly-introduced 15 per cent quota in buybacks, small shareholders could have a play in disinvestments done through the buyback route. Market experts say shares of retail investors are most likely to be accepted in public sector undertaking (PSU) share buybacks in their 'small shareholder' category. Further, its likely investors will get to exit at a price much higher than the price prevailing in the market, they add. In February, capital markets regulator Securities and Exchange Board of India (Sebi) amended the buyback regulations to create a category for small shareholders. Under the new regulations, any listed company proposing to buy back its shares through the 'tender route' is required to reserve 15 per cent of the securities, which it proposes to buy back for small shareholders.  The government is considering buyback of shares in some of the cash-rich PSUs like Coal India, NTPC, SAIL, NMDC, Oil India, BHEL and MMTC to achieve the Rs 30,000-crore disinvestment target set for 2012-13. Market experts say share buyback through the disinvestment route poses an opportunity for small investors. "In most likelihood the centre will set the buyback price much higher than the current market price, as most PSUs are trading below their intrinsic value. Small shareholders can benefit by buying now and tending the shares in buyback," said an investment banker who didn't want to be identified. "Acceptance of shares of small shareholders is mostly certain due to the 15 per cent reservation," he added. The disinvestment manual of the Department of Disinvestment (DoD) also states the buyback route for disinvestment will be taken for "companies with good intrinsic value, which is not reflected in accretion to shareholder value and market price". Small shareholders are the ones whose market value of securities is less than Rs 2 lakh in a particular company, according to the Sebi definition. Most companies conduct buyback through the 'open market route' where no reservations are required to be made for retail investors. However, as promoters are not allowed to tender their shares under the open market route, the government will have to take the tender route for buybacks. "Retail investors who tender their shares in buyback will be at an advantage compared to the ones who stay back," said Jagannadham Thunuguntla, equity head, SMC Global Securities. "Under buyback the company will be depleting its cash reserves to provide exit to shareholders." Sebi has made several modifications to the tender route buyback. It has created two categories — one for smaller shareholders and the other for the 'general category' of other shareholders, including promoters. Shares tendered in buyback will now get accepted based on entitlement ratio, which will be in proportion of shares held in the company as on the record date set for the buyback. Sebi has also significantly brought down the timeline for completion of buybacks from 63-114 days to just four days. Investment bankers say the likelihood of the government taking the buyback route for disinvestment will be high if primary market conditions continue to remain weak. Last week, Coal India said it would seek shareholder nod to amend its Articles of Association to facilitate share buyback. |
| | When it's too good to be true | | Retail investors often get lured by easy money and high returns. Don't fall for such smart sales pitches | | Tania Kishore Jaleel & Priya Nair / Mumbai Aug 28, 2012, 00:39 IST |
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Imagine a bird-farming investment scheme that promises returns of over 100 per cent in two years – just the theme should make one suspicious. Yet, over 20,000 people in Tamil Nadu did exactly the opposite and lost Rs 500 crore. In Hindi, it would be called 'Murga Banaya' — literally so, in this case. The offer from the firms: Invest Rs 1.5 lakh for three pairs of Emu chicks. The firm provided facilities to rear the birds and money for maintenance. Together, returns of Rs 3.34 lakh – over 100 per cent in just two years. Six years later, all the four firms have gone bust. The promoters have absconded. The economic offences wing of the Tamil Nadu police department has registered more than 3,000 complaints against the four Emu firms. The chief minister has asked the police to take quick action against those involved in the scam.
STEPS TO FOLLOW
If you get caught in a scam: | - Lodge a complaint with consumer court/police/court
- Contact others who have been cheated by spreading the word, using the internet, etc
- Try to attend the hearings. If not, nominate someone who can attend on your behalf
- Go for settlement. You get at least some money if not the entire investment
| But, investors, who have lost money, have only themselves to blame. Financial scams have happened for years. Whether it is a ponzi scheme, pyramid scheme or multi-level marketing scheme, investors are lured into them with promises of unrealistic returns and easy money. In fact, some of the initial investors even make money. They spread the 'good word' about the scheme to friends and relatives. And then, all go down. Jehangir Gai, a consumer activist says that there are many such scams that people fall for. "These scams promise exceptional returns in a short period of time without much effort on the part of the investor," he says. The scams usually begin with huge publicity, and even rope in celebrities to earn people's goodwill. "They deliver the promised returns the first few times. This ensures that the investor does not suspect anything wrong for some time," adds Gai. Slowly but surely, these scamsters start to default on their 'promises' and eventually abscond with the money. Investors are left with no choice, but, to resort to legal battles to get their money back. Take the example of the Apple a Day – a scam which is still unfolding in Kerala which has already snared lakhs of victims from the state and abroad. The total estimated loss – Rs 1,000 crore. The company offered villas and apartments in the heart of the Kochi at attractive rates and it banked upon the goodwill it created through a couple of completed projects to attract buyers. Investors became apprehensive after it missed many deadlines for its 11 new projects and lodged formal complaints. Mathew Philip, an NRI from Dubai, is one of those who had put in money into one of the projects of Apple a Day. He is now fighting to get his money back. He had made up his mind to buy an apartment by Apple a Day as it had associations with many well known musicians (he comes from a family of musically inclined people) and had even publicised its finished projects. He paid an initial amount of Rs 8.5 lakh to the company for the apartment. The firm's director and managing director went underground after withdrawing money from all their accounts after the company allegedly went bust. So far, around 250 FIRs have been registered against the company and more investors are coming forward with complaints. The duped customers have also formed a buyers' association. They even have a Facebook page called 'Apple a day property fraud.' P Mohandas, member secretary, Kerala State Legal Services Authority (KELSA), the mediator between the Apple a Day Properties and investors, says the organisation has asked the promoters of Apple a Day to somehow raise money to pay off the investors. In a statement by KELSA, the directors of the company have agreed to complete three projects. They have also agreed to take the help of another builder to help them complete the work of three other projects. Those who want to cancel their investments can do so. Their investments will be repaid along with interest. But few scams get such redressal. So, it is not like you are left helpless, if you get caught in such scams. You can approach the consumer court or the police station to file a complaint. Filing a public interest litigation is another option. But make sure you file a complaint. Mohandas says in the Apple a Day case, not everyone who had put in money into the properties has filed complaints. That is the issue, say consumer activists. "Not many people take it up legally to get their money back. For one, legal issues in the country take a long time. And another is that it is rather tedious, especially if you are not in the same city," says Gai. Even if you are not in the same jurisdiction as the company that has cheated you, make trips to the hearings. If you are not able to go at all, then you can appoint someone on your behalf to fight your case. It is after all a matter of your money.
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| | Most directors worried about personal liability | | E&Y study shows need for laws defining roles, responsibilities | | BS Reporter / New Delhi Aug 28, 2012, 00:13 IST |
| A whopping 92 per cent of Indian respondents in a survey by global consulting firm Ernst & Young said they were concerned about personal liability for things that went wrong with the company on whose board they sat on. According to Ernst & Young's Eleventh Global Fraud Survey, 92 per cent of directors in India are concerned about their personal liability. Of them, 64 per cent say they are 'very concerned' and 28 per cent say they are 'fairly concerned'. "This may be because their personal assets are at risk and their hard-earned reputation is at stake in the corporate world," the consultancy said in the report. The concern in India was higher than the global average. Across the globe, 76 per cent of the respondents were concerned about their potential liabilities. Indian results were also higher than 87 per cent registered by respondents from the Middle East and Africa. The study had 1,409 respondents globally. The larger concern in India was attributed to the lack of distinction between independent and executive directors. "The corporate governance structure in India hinges on the independent directors, who are supposed to bring objectivity to the oversight function of the board and improve its effectiveness. Members place high expectations on them to ensure that the company is run effectively," the study said. However, the problem is that an independent director cannot play an effective role in isolation despite their commitment to ethical practices. They cannot stop a decision that is detrimental to the members individually, but if they act collectively, then they can act prudently before arriving at any such decision. "The regulatory environment in India around corporate governance is changing rapidly and those entrusted with governance, i.e., the Board of Directors and the Audit Committee are being made responsible for the prevention and detection of fraud," said Arpinder Singh, partner and national director, Fraud Investigation & Dispute Services, Ernst & Young. "The real question is, since independent directors only play a supervisory role, should they be penalised only in the event of a discrepancy that directly relates to their responsibilities?" Singh asked. In-depth interviews with experts in the field suggested that the need of the hour is for the legislature to draw a line between independent directors and executive directors by defining their roles and responsibilities, and demarcating their liabilities. "There should be a general law, which clearly defines the roles, responsibilities and liabilities of regular executive directors of the company managing day-to-day affairs of the company and non-executive directors /independent directors," said M L Bhakta, senior partner, Kanga & Co, one of the legal experts interviewed by E&Y. The Companies Act, 1956 does not make an obvious distinction between the accountability of an independent director and an executive director. Independent directors are included in the definition of an "officer in default" under Section 5. A new companies bill is pending in parliament, which contains provisions that may address some of these concerns.
| SEBI moots zero fee demat account for small investors Our Bureau Mumbai, Aug 27: To reduce cost of maintaining securities in demat accounts for retail investors, SEBI has decided to introduce a "Basic Services Demat Account" (BSDA). All depository participants have to make available a BSDA with limited services, said SEBI. Individuals opting for BSDA are eligible for one demat account across all depositories where they are the sole or the first holder. The maximum value of securities in a BSDA should not exceed Rs 2 lakh and at any point of time. Annual maintenance charges would not be levied for value of securities held in a BSDA up to Rs 50,000. Anything above Rs 50,000 and up to Rs 2 lakh would attract annual maintenance charges of Rs 100. All beneficial owners for BSDA, have to register their mobile number for availing themselves the SMS alert facility for debit transactions. They will be issued at least two delivery instruction slips (DIS) at the time of account opening. The BSDA value would be determined everyday according to the daily closing price of securities or daily closing NAV. If the value of the holding in the BSDA exceeds the prescribed criteria as on a particular date, charges applicable to a normal DP account would apply from that date. Quarterly transaction statement would be sent to the beneficial owner only if the demat account holder has transacted. Similarly holding statements would be sent once in a year to beneficial owners according to their option — in physical or electronic format. While electronic statements would be free of charge, additional physical statements would cost investors Rs 25 each. Accounts with zero balance and credit balance with nil transactions shall receive only one physical holding statement. Transaction statements shall not be provided for accounts that becomes zero balance or remains zero balance during the year. The circular comes into effect from October 1. |
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| Trying to save Rs 100 cr, did Maruti lose Rs 1,400 cr? Roudra Bhattacharya New Delhi, Aug. 27: The cost of converting 5,000 contract workers to permanent positions is expected to hike Maruti Suzuki's annual wage bill by just Rs 80-100 crore. If you compare that to a production loss of at least Rs 1,400 crore at the Manesar plant in July-August, was the trouble really worth it? Could the issue not have been resolved without the loss of a life and injuries to many, ask analysts and industry experts. If indeed under-paid and dissatisfied contract labour was the core issue, as claimed by various quarters. Put this in context, this year's closure of the Manesar facility for 27 days cost Maruti at least Rs 1,400 crore, though analysts put the figure closer to Rs 2,000 crore. Last year, it had lost Rs 2,500 crore on a strike over the demand for recognition to a union. Deepesh Rathore, MD at IHS Automotive India, says that considering Maruti has already lost a lot of revenue, changing contract workers to permanent may prove an added, but necessary expense. "If the impact is only about Rs 1,000 per car price increase, then the whole dispute was surely not worth the headache. They should have got rid of it earlier. For a company that sells a million cars a year, a Rs 100-crore increase in the wage bill can be absorbed easily," he says. Maruti has about 6,000 workers at the Gurgaon plant, half of whom are on contract. In Manesar, there are 1,028 workers now permanent (500 were recently dismissed) and 1,869 are on contract. M. M. Singh, Maruti's COO for Production, says that the move to convert contract workers to permanent was planned as the "mix was getting disturbed". Between September and March next year, the carmaker plans to make about 80 per cent of the 5,000 contract workers permanent. The rest will have temporary positions for six-nine months, though with equal pay as the permanent workers. "Earlier, we used to have only permanent workers, but this trend of contract labour came in the 1990s. We're not happy with the situation and are looking at a mix where at least 75 per cent will be permanent and rest can be moved as per market demand," he said. Other reasons? Top Maruti officials have suggested that the real reason for the workers' discontent may be something else, but over a month after the violence, answers are yet to be found as to what that could be. Says M. M. Singh, "We're still finding out the real reason, let the SIT report come in and then we will know the answer. I don't think the issue was only about contract labour." Without a true picture, various possibilities have been doing the rounds, such as the lack of proper housing, to the extent of blaming competition and ultra-Left elements for planning the July attack. Some have also pointed to the lower average age of the Manesar workers than the Gurgaon counterparts making them more susceptible to the sway of outside elements working against Maruti. Suzuki Motor Chairman Osamu Suzuki indicated that the true picture could take six more months to emerge as the special investigation team (SIT) of the Haryana police finishes its work. Whether Maruti can afford the wait is another issue.
SEBI amends procedure to surrender sub-broking ticket Our Bureau Mumbai, Aug. 27: The Securities and Exchange Board of India has said sub-brokers wishing to become authorised persons (of the same broker and the same exchange) are not required to advertise in newspaper regarding surrender of sub-broker registration. Sub-brokers have to confirm to stock exchanges in an undertaking that they would inform their clients about surrender of registration and approval as an authorised person (AP). Stock exchanges and affiliating brokers have to publish details of those sub-brokers who have surrendered their registration or re-registered as APs on their Web sites. Earlier, sub-brokers had to apply for surrender of registration to SEBI, along with a de-recognition letter from the exchange. A certificate from the affiliating broker that the sub-broker has been disabled from trading had to be enclosed. In addition, the sub-broker had to attach copies of two advertisements issued by the affiliating broker informing investors/ general public about the cancellation of his sub-brokership. The original certificate of registration and undertaking that the sub-broker would be liable for all liabilities and obligations that have taken place before the surrender was also expected to be submitted.
How Apple chipped away at Samsung's patent tactics | Turf war often degenerated into a bitter slanging match; ruling may reset competitive compass in the industry | Dan Levine & Poornima Gupta l San Francisco |  |  |
In August 2010, just a few months after Samsung Electronics launched its Galaxy smartphone, a team of Apple Inc lawyers flew to South Korea.
Apple's late co-founder, Steve Jobs, had already told Samsung executives at a meeting earlier that summer that he considered the Galaxy S, based on Google's Android operating system, an illegal copy of the iPhone. But given the extensive business ties between the two companies — Samsung is one of Apple's key component suppliers — a negotiated solution seemed most likely.
The Apple attorneys were blunt: "Android is designed to lead companies to imitate the iPhone product design and strategy," read the second slide in their presentation.
But the meeting did not go well, according to a person familiar with the case. Samsung attorneys bristled at being accused of copying, and produced a set of their own patents that they said Apple was using without permission.
The meeting brought to the fore a fundamental disagreement between the two companies, and set the stage for a bitter, multi-country patent dispute that led to Friday's US jury verdict that Samsung had violated Apple's patents. The jury awarded Apple $1.05 billion in damages, which could be tripled as the jury found Samsung acted wilfully.
Samsung could now face a costly ban on sales of key smartphone and tablet products. Shares in Samsung — the world's biggest technology firm by revenue — tumbled more than 7% on Monday, set for its biggest daily percentage drop in nearly four years, wiping $12 billion off its market value.
Samsung says it will seek to overturn the decision, and the worldwide patent battles among tech giants are hardly over. But for now at least the decision in what was widely seen as a critical case promises to re-set the competitive balance in the industry.
The vast majority of patent disputes settle before trial, particularly between competitors. In this case, though, the stakes were just too high -- and the two companies ultimately had very different views of the often murky legal issues.
Samsung believed its wireless communications patents were strong and valuable, and would serve as a counter-weight to any Apple showing of infringement, people close to the case say.
The South Korean company also didn't believe Apple could or should be allowed to claim patent protection on design elements like the form of a rectangle, or the front flat surface embodied on the iPhone.
Apple, for its part, considered its feature and design patents to be very high up on the intellectual property food chain — and demonstrating their validity was critical to a much wider war against Android.
The two companies never came close to settling their differences, according to courtroom testimony, trial evidence and interviews with several sources close to the case.
And when it came to the trial, Samsung's lawyers miscalculated in arguing that a verdict for Apple would harm competition in the marketplace. The jurors, led by a foreman who holds his own patent, were more persuaded by Apple's pleas to protect innovation. For them, it ultimately wasn't even a close call.
A spokesman for Samsung in Seoul had no immediate comment.
CORDIAL BUT ADAMANT
Apple launched the iPhone in 2007, revolutionising the mobile phone market. But later that year Google, then still an ally of Apple's, unveiled the Open Handset Alliance, with the aim of distributing its Android smartphone software to all-comers.
Google's open approach quickly caught on among manufacturers looking to compete with Apple. The strategy infuriated Jobs, and by 2009 relations between the two companies had soured and Google's then-CEO, Eric Schmidt, left Apple's board. Jobs' biographer famously quotes him as accusing Google of "grand theft" and vowing to "go to thermonuclear war" over the issue.
In January 2010, Taiwanese phone manufacturer HTC Corp launched a touch screen, Android-based smartphone that sported features very similar to the iPhone. Apple sued in March of that year, and the Android smartphone patent wars were on.
HTC, though, was a minor player compared with Samsung.
After the cordial but failed August 2010 meeting, attorneys from Apple and Samsung talked in a series of meetings both in South Korea, California and elsewhere in the United States. Apple's attorneys set to work putting a price tag on a royalty demand. By October 2010, they had concluded that Samsung should pay $24 per smartphone, and $32 per tablet. Based on Samsung's own estimation of its profits, Apple's royalty payments would effectively wipe out more than half of Samsung's margins on any phone priced less than $450.
And, Apple's offer wouldn't have covered the "unique user experience" patents Apple holds dear. "We made that clear," said Apple licensing chief Boris Teksler.
By the end of 2010, the meetings stopped as the two sides were too far apart.
VIEWED AS RIP-OFF
Apple hoped its relationship with Samsung would make filing an actual lawsuit unnecessary. Yet instead of wilting under Apple's pressure, Samsung instead pressed its own patent claims, including a critical one relating to how mobile products send and receive information over wireless networks.
Samsung eventually would request a 2.4% royalty on those patents, or $14.40 per device.
But Samsung had committed to license its wireless patents on fair terms to competitors over the years, in exchange for the technology becoming part of the industry standard. Courts have generally been reluctant to bar companies from using such "standards essential" patents, and thus they are often less valuable than other types of intellectual property.
Then, in early 2011, Samsung released the Galaxy Tab 10.1. To Apple, it was a clear rip-off of the iPad, and showed Samsung had no intention of modifying its products.
Apple sued Samsung in a San Jose, California federal court in April 2011, saying the Korean company "slavishly" copied its designs. Samsung quickly counter sued, and the dispute bled into at least 10 courts around the world, including Australia and South Korea.
Over the next year, outside law firms hired by both companies racked up thousands of billable hours around the world, but no decisive rulings threatened either side. Jobs passed away in October 2011, and Cook carried on the litigation, filed "reluctantly," he said.
Until recently it had mostly been a see-saw battle. Apple largely succeeded in thwarting HTC. But earlier this year a federal judge in Chicago threw out a case pitting Apple against Google's Motorola Mobility unit, saying neither side could prove damages.
But barring a reversal on appeal, Apple now has a clear verdict: how it values its intellectual property is more than just a theory. Reuters
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Published Date: Aug 28, 2012
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