Sebi plugs loopholes in share- pledging disclosures
BS REPORTER
Mumbai, 23 November
Market regulator Securities and Exchange Board of India ( Sebi) has
tweaked the share- pledging disclosure format to ensure all types of
encumbrances on shares are disclosed by companies.
A number of companies were using non- disposal undertaking ( NDU) and
other innovative methods to circumvent the mandatory disclosure
requirement. Under Sebi's takeover regulations, promotershareholding,
which has been pledged, should be reported with the stock exchanges.
UK Sinha, chairman, Sebi, said, " We found that using very innovative
methods, advised by very powerful legal firms, companies came out with
a method called NDU and various other methods of creating encumbrance.
We have not created a guideline, stating any sort of encumbrance has
to be reported." Typically, an NDU is an agreement where shares are
transferred into a new demat account for the purpose of pledging.
The beneficial ownership on the shares, however, doesn't change and
also the new entity ( transferee) can't dispose off the shares.
Market experts said some companies were forming special purpose
vehicles (SPVs) to transfer a part of their shareholding before
pledging to avoid making disclosures.
Sinha said Sebi was not asking for additional disclosures from
companies but only " trying to pull loopholes which were rampant".
Last month, Sebi had issued a circular directing companies to make
disclosures about the nature of encumbrance — pledged, lien or NDU.
The regulator had also asked companies to disclose not just promoter-
encumbered shares but also of persons acting in concert ( PAC).
Speaking on the sidelines of Artha, a capital market conference
organised by the Indian School of Business' ( ISB's), Sinha reiterated
that equities market is insulated from the ₹ 5,600 crore settlement
crisis at the Financial Technologies -promoted National Spot Exchange
Limited ( NSEL).
"I would like to clarify, the promoters of this company ( NSEL) are
also promoters of a stock exchange that Sebi regulates. Iwould like to
assure you that we are very conscious that the entity we regulate is
thoroughly ring fenced," he said.
Sinha said Sebi had taken steps to ensure good governance and
settlement process were in place at the Multi Commodities Exchange
Limited (MCX- SX).
"Since we are worried about risk management we have verified the
collaterals and other securities required for settlement," said the
Sebi chief.
Sinha also said the move to allow higher commissions to mutual fund
houses for penetration beyond the top 15 cities has shown encouraging
results.
"Already inflows from beyond 15 cities have gone up after we have
provided incentives... This has been in place since May last year and
already the inflows from top 15 cities have been doubled," Sinha said.
Last year, Sebi had allowed additional expense ratio of up to 30 basis
points for new inflows from beyond the top 15 cities.
Companies were using innovative methods to circumvent disclosure
requirement: Sinha
Sebi Chairman UK Sinha
--
CS A Rengarajan
9381011200
CS Benevolent Fund is a collective effort towards extending the much
needed financial support to the community of Company Secretaries in
times of distress Let us lend support and join for noble cause.
SHARING KNOWLEDGE SKY IS THE LIMIT
This mail and its attachments (if any) are confidential information
intended for persons to whom the email is planned for delivery by the
sender. If you have received this mail in error please notify the
sender of the error by forwarding the email and its attachments (if
any) and then deleting the mail received in error and the relevant
email trail in this connection without making any copies or taking any
prints.
------------------------------------
receive alert on mobile, subscribe to SMS Channel named "aaykarbhavan"
[COST FREE]
SEND "on aaykarbhavan" TO 9870807070 FROM YOUR MOBILE.
To receive the mails from this group send message to aaykarbhavan-subscribe@yahoogroups.comYahoo Groups Links
<*> To visit your group on the web, go to:
http://groups.yahoo.com/group/aaykarbhavan/
<*> Your email settings:
Individual Email | Traditional
<*> To change settings online go to:
http://groups.yahoo.com/group/aaykarbhavan/join
(Yahoo! ID required)
<*> To change settings via email:
aaykarbhavan-digest@yahoogroups.com
aaykarbhavan-fullfeatured@yahoogroups.com
<*> To unsubscribe from this group, send an email to:
aaykarbhavan-unsubscribe@yahoogroups.com
<*> Your use of Yahoo Groups is subject to:
http://info.yahoo.com/legal/us/yahoo/utos/terms/
No comments:
Post a Comment