| SEBI enacts stricter laws on CIS, front running |
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Mumbai, 12 August Market regulator Securities and Exchange Board of India ( Sebi) on Monday approved critical changes to the law to crack down on illegal money collection schemes and also to nail individuals indulging in fraudulent activities such as front running. Front running is the unethical practice of a broker trading an equity based on information from the analyst department before his or her clients have been given the information. For example, analysts and brokers who buy shares in a company just before the brokerage is about to recommend the stock as a strong buy are practicing front running. Sebi has said illegal mobilisation of money, other than those registered as collection investment schemes ( CIS), would be declared a fraudulent and unfair trade practice. Further, the regulator would also impose " deterrent adjudication penalties" on such entities. Sebi would also tweak regulations to bring front- running by individuals under the ambit of fraudulent and unfair trade practice ( FUTP) regulations. The current regulations were perceived to apply only to intermediaries after a recent Sebi order against three individuals was set aside by the Securities Appellate Tribunal ( SAT). The Sebi regulation currently mentions that intermediaries should not take positions ahead of large client orders. "... an intermediary buying or selling securities in advance of a substantial client order or whereby a futures or options position is taken about an impending transaction in the same or related futures or options contract," said the law. "The board has approved the proposal to bring a clarificatory amendment to the Sebi ( Prohibition of FUTP Practices relating to Securities Market) Regulations, 2003, to clarify that the list under regulation 4( 2) is not exhaustive and the general provisions of regulation 3will override," Sebi said in a release. Last year, SAT had overturned aSebi order on the grounds that the law only talks of front running by intermediaries and not by individuals. UK Sinha, the chairman had subsequently stated regulation would be suitably strengthened. The Sebi board also took note of the new powers it had got following amendments made to the Securities Law through an ordinance and discussed further action on its part. Experts said Sebi would have to beef up its staff strength and also devise a framework to implement its new powers, including that to attach properties and recover monetary penalties. The market regulator also accepted the recommendation and agreed on the implementation plan made by international consulting firm Oliver Wyman on organisational restructuring. |
| Govt to increase import duty on gold, luxury goods |
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New Delhi, 12 August The government is looking at increasing the import duty on gold and on non- essential, or luxury, commodities to reduce the current account deficit (CAD), Finance Minister P Chidambaram said on Monday. The government would also allow public sector financial institutions to raise dollars through quasi- sovereign bonds. For the first time, Indian subsidiaries of multinational companies would be allowed to raise funds from their parents through a relaxed external commercial borrowing ( ECB) window. Public sector oil companies would also be allowed to raise funds via ECB. The Customs notifications on import duty will be placed in Parliament on Tuesday, he said. The import duty on gold now is eight per cent. The minister announced these proposals to keep the CAD at a three- year low of 3.7 per cent of gross domestic product (GDP) in 2013- 14, bolstered by the lower trade deficit of June and July. " If the CAD is contained at $ 70 billion, it will amount to 3.7 per cent of GDP," Chidambaram said in a statement in the Lok Sabha. The CAD had touched a record 4.8 per cent in 2012- 13. In absolute terms, it was $88.2 billion. GDP is projected to be $ 1.89 trillion this financial year ( assuming the rupee at 60 against a dollar). At this rate, $70 billion works out to 3.69 per cent of GDP. If GDP falls, the CAD in percentage terms would go up. The deficit estimate has been made on the basis of projections for exports and imports and the trade deficit this year. Chidambaram said gold imports were likely to fall to 850 million tonnes this financial year from 950 million tonnes in 2012- 13. He hoped that fall in gold and oil imports would save the economy $ 1.5 billion. The government would ask public sector financial institutions Power Finance Corporation, India Infrastructure Finance Company Ltd and India Railway Finance Corporation to go for a quasi- sovereign bond to fund long- term infrastructure needs and to ask oil companies to raise ECB. He said oil PSUs and PSU financial institutions would raise $ 4 billion a year this way. The rate on dollar- denominated non- resident Indian deposits, or foreign currency nonresident deposits, is being de- regulated, the finance minister said, adding the Reserve Bank of India ( RBI) would also issue a circular to allow Indian subsidiaries of multinational companies to raise funds through ECB. The minister said liberalisation of ECB norms and non- resident deposit schemes would fetch $ 2 billion to the exchequer. As measures were taken to narrow the CAD, the finance minister said there was a need to do more to contain the deficit, reduce volatility in the currency market and to stabilise the rupee. In 2011- 12, the government had to draw foreign exchange reserves of $ 12.8 billion to finance the CAD. " Last year, we had a larger CAD at $ 88.2 billion. Nevertheless, we were able to fully and safely finance the CAD, and do even better. We added $ 3.8 billion to the reserves," he said, adding there could be a small accretion to foreign exchange reserves this year. The rupee has depreciated 12 per cent against the dollar since the beginning of this financial year. It closed at 61.28 on Monday. Turn to Page 18 > PSU financial agencies to get nod for quasi- sovereign bonds, oil firms to get ECB window REINING IN CAD (% of GDP) "CAD is as much a red line as fiscal deficit. If we can contain CAD, Measures to fetch an additional $ 11 bn to check the burgeoning CAD & arrest ₹ fall |$ 4 bn IRFC, PFC and IIFCL to be allowed to raise together through quasi- sovereign bonds for infrastructure sector needs |$ 4 bn PSU oil companies to be allowed to raise external commercial borrowings |$ 2 bn Gains expected from liberalisation of ECB norms |$ 1 bn Gains expected from liberalisation of non- resident deposit scheme |
| ick: Article continued from…Govt to increase import |
| Govt to... |
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After touching $ 17.8 billion in April and $ 20.14 billion in May, the trade deficit fell drastically to $ 12.3 billion in June and $ 12.3 billion in July. Even then, it widened to $ 62.5 billion in the first four months of the current financial year, against $59.7 billion in the corresponding period of the previous year. >FROM PAGE 1 |
Company Secretary, Chennai
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