19 May, 2015 C. No. 25 / Capital Market 2 / 2015-16 To: All Members Dear Sir, Re: MCCI Capital Market Newsletter for April 2015. Please find attached the MCCI Capital Market Newsletter for April 2015. It has been produced by Shri Ashok Pareek, Chairman, Standing Committee on Capital Market, MCCI. If you have any suggestions, please let us know. Thanking you, Encl: Attached below Yours faithfully, Rajiv Mukerji (Deputy Secretary)
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19 May, 2015
C. No. 25 / Capital Market 2 / 2015-16
To: All Members
Dear Sir,
Re: MCCI Capital Market Newsletter for April 2015.
Please find attached the MCCI Capital Market Newsletter for April 2015. It has been produced by Shri Ashok Pareek, Chairman, Standing Committee on Capital Market, MCCI. If you have any suggestions, please let us know.
Thanking you,
Encl: Attached below
Yours faithfully,
Rajiv Mukerji (Deputy Secretary)
MCCI
CAPITAL MARKET
NEWSLETTER
VOLUME: IV APRIL 2015
TABLE OF CONTENT
SL TOPIC PAGE
1 Securities and Exchange Market of India (SEBI) 1 – 8
2 Reserve Bank of India (RBI) 8 – 11
3 Press Releases 11 – 12
PRESIDENTS MESSAGE
15 May 2015
Dear Sir / Madam,
I am happy to release the April 2015 issue of MCCI Capital Market
Newsletter. Like the previous issues, this issue also focuses on
relevant and germane topics pertaining to the capital markets.
I would like to express my thanks to Shri Ashok Pareek, Chairman,
Standing Committee on Capital Market, MCCI for bringing out this
newsletter. I am sure that you will find it to be useful.
Warm regards,
Arun Kumar Saraf
India's taxmen sent a raft of notices to FPIs on minimum alternate
tax (MAT) supposedly owed in the recent past. MAT can't be levied
from this financial year on FPIs.
The broader argument that MAT must not be levied on entities
that don't have a balance sheet in India hasn't cut ice with taxmen,
who have cited a verdict by the Authority of Advance Rulings (AAR)
to support their tax claims. Tax experts and FPIs say even AAR is
not a sufficient justification. Their argument is a nutshell: AAR
rulings on MAT and FPIs are not uniform and taxmen have cherry
picked rulings that allow them slap retrospective notices.
A 2012 AAR verdict on Castleton Investment Ltd (CIL) held that
MAT is applicable to foreign companies even if they do not have a
permanent establishment in the country.
But FPIs say there are AAR verdicts that contradict this finding.
They point to, among other verdicts, an AAR 2010 ruling in the
Bank of Tokyo-Mitsubishi UFJ case in 2010. That ruling held MAT
can only be levied on domestic companies and not on foreign
companies with no balance sheet in India.
These contradictory AAR verdicts are the source of trouble FPIs and
tax experts say, adding that taxmen often resort to issuing
competitive tax demands to look good to their bosses. AAR rulings
are company specific, FPIs say. So, if taxmen are taking the
Castleton ruling as a basis for wide-ranging retrospective tax
demands, the question is why the Bank of Tokyo ruling is not taken
as the basic ruling.
WHY FPIs ARE ANGRY
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MCC Chamber of Commerce & Industry
DISCUSSION PAPER ON ISSUES PERTAINING TO OFFER
FOR SALE OF SHARES (OFS) THROUGH STOCK
EXCHANGE MECHANISM
Securities and Exchange Board of India (SEBI) had
released a discussion paper on 6th April, 2015 to solicit
the comments/ views from market participants on
suggestions pertaining to sale of shares using Offer for
Sale through stock exchange mechanism.
In order to provide additional method of achieving
minimum level of public shareholding and to ensure
transparency, wider participation and quicker
settlement, SEBI Board had approved sale of shares
through secondary market i.e. Offer for Sale through
Stock Exchange mechanism as an additional method of
achieving minimum level of public shareholding in listed
companies on January 3, 2012. Till date 117 companies
have utilized OFS mechanism to offload promoter’s
shares in the market.
Suggestions have been received by SEBI from market
participants on following issues:
Reduce OFS notice from T-2 days to T-1 day
Impose price bands on T-1 day along with OFS notice
on stocks going for OFS
Trading halt or suspension of trading of OFS stocks in
the secondary market on the date of OFS
Keeping OFS on Saturday
Option to bid at cut-off price by retail investors
In order to take into consideration views of various
stakeholders in the OFS process, Public comments had
been sought on the following issues till April 18, 2015:
1. Appropriate notice period for OFS keeping in mind
interest of investors as well as sellers.
2. Need for imposing price band on stock on the day
prior to OFS day.
3. Need for halt / suspension of trading in concerned
stocks on the date of OFS.
4. Whether OFS should be held on Saturday.
5. Need for providing option to retail investors to bid
at cut-off price in all OFS.
FINE STRUCTURE FOR NON-COMPLIANCE WITH THE
REQUIREMENT OF CLAUSE 49(II)(A)(1) OF LISTING
AGREEMENT
SEBI had vide Circular dated April 17, 2014, amended
the provisions of Clause 49 of Listing Agreement relating
to Corporate Governance, mandating, inter-alia, that
the Board of Directors of listed entities shall have an
optimum combination of executive and non-executive
directors with at least one woman director. Further,
vide Circular dated September 15, 2014; the timeline to
comply with the aforesaid requirement was extended to
March 31, 2015.
SEBI had also, vide Circular dated September 30, 2013,
prescribed the uniform fine structure for non-
compliance with certain provisions of Listing Agreement
including Clause 49. In continuation to the circular dated
September 30, 2013, the Stock Exchanges have been
advised vide this circular ref no. CIR/CFD/CMD/1/2015
dated April 08, 2015 to impose the fine as stated in the
said circular on listed entities for non- compliance with
the requirement of Clause 49(II)(A)(1) of Listing
Agreement.
The circular issued on April 08, 2015 mandates that all
listed entities which have not yet complied with the
norm but manage to do so by June 30, 2015 will be
levied a fine of Rs. 50,000, listed entities complying
between July 1 2015 and September 30 2015, will be
levied a fine of Rs. 50,000 and an additional fine of Rs.
1,000 per day till the date of compliance and listed
entities complying with the norms after October 1, 2015
will be levied a fine of Rs. 1,42,000/- and an additional
fine of Rs. 5000/- per day from till the date of
compliance
Moreover for any non-compliance with the requirement
of Clause 49(II)(A)(1) of Listing Agreement by listed
entities beyond September 30, 2015, in addition to the
fine stated above, SEBI may take any other action,
against the non-compliant entities, their promoters
and/or directors or issue such directions in accordance
with law, as may be deemed appropriate.
SECURITIES AND EXCHANGE BOARD OF INDIA (PUBLIC
OFFER AND LISTING OF SECURITISED DEBT
INSTRUMENTS) (AMENDMENT) REGULATIONS, 2015
SEBI has on 9th April, 2015 amended the Regulations
pertaining to public offer and listing of securitised debt
instruments vide Securities Exchange Board of India
(Public Offer and Listing of Securitised Debt
Instruments) (Amendment) Regulations, 2015
(“Amendment Regulations”).
SECTION I: SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)
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MCC Chamber of Commerce & Industry
In order to further develop the securitisation market,
the SEBI Board had in its meeting held on January 22,
2015 approved amendments in the Securities and
Exchange Board of India (Public offer and Listing of
Securitised Debt Instruments) Regulations, 2008. The
Amendment Regulations rationalize and clarify the role
and responsibilities of trustee and prescribe for
registration of trustees with certain exemptions and
their code of conduct, allows banks and public financial
institutions to act as trustee without obtaining
registration, terms of appointment and capital
requirement for trustee, and provides for summary
term sheet. The term sheet inter-alia includes
disclosures on originators, Issuer, trustee, transaction
structure, etc., key pool features, credit enhancement,
etc. to enhance disclosure requirements for Securitised
Debt Instruments. The above measures are expected to
enhance the confidence of investors in securitisation
transactions.
The summary changes introduced vide the Amendment
Regulation are as below:
a) A scheduled commercial bank other than a regional
rural bank and a public financial Institution as defined
under section 2(72) of the Companies Act, 2013 have
been exempted from obtaining registration to act as
trustees
b) An applicant seeking registration as a trustee shall
require (i) net worth of at least Rs. 2 crores; (ii) have in
its employment minimum of 2 persons who between
them have atleast 5 years of experience in activities
relating to securitisation and atleast one among them
shall have a professional qualification in law from any
university or institution recognised by the Central
Government or any State Government or a foreign
university. The above requirements will not be
applicable on the National Housing Bank established
by the National Housing Bank Act, 1987 and National
Bank for Agriculture and Rural Development
established by the National Bank for Agriculture and
Rural Development Act, 1981
c) The main obligations of trustees would now also
include:
Creation, monitoring, protection and enforcement of
security interests;
Grievance redressal for protection of investors
interests;
Ensure on a continuous basis that the trust property
is available at all times to pay the securitised debt
instruments holders;
Exercise due diligence to ensure compliance by the
originators;
Take appropriate measures for protecting the
interest of the investors including informing SEBI
about any action, legal proceeding, etc., initiated
against it in respect of any material breach or
noncompliance by it, of any law, rules, regulations,
directions of SEBI or of any other regulatory body;
Ensure that the securitised debt instruments have
been repaid or redeemed in accordance with the
provisions and conditions under which they were
offered to the investors;
Monitoring asset cover at all times which includes
calling for periodic reports from originator call for
periodic reports regarding the performance of the
underlying asset pool, atleast on quarterly basis;
Communicate to the investors regarding the
compliance by the servicer and the actions taken
thereof, atleast on quarterly basis;
Maintain the net worth on a continuous basis and in
case of any shortfall in the net worth take necessary
corrective action to restore the net worth within a
period of six months;
Not relinquish responsibility as trustee in respect of
the issue, unless and until another trustee is
appointed in its place;
Have necessary infrastructure to discharge its duties;
Appoint a compliance officer for performing duties
including monitoring the compliance of the acts,
rules and regulations, notifications, guidelines,
instructions, etc., issued by SEBI, Central
Government and State Government(s) and Redressal
of investors’ grievances
d) The Code of Conduct for the Trustees have been
broadened to include :
Fulfilment of its obligations in a prompt, ethical and
professional manner;
Not divulge to anybody either orally or in writing,
directly or indirectly, any confidential information
about its investors which has come to its knowledge,
without taking prior permission of its investors,
except where such disclosures are required to be
made in compliance with any law for the time being
in force;
Shall not either through its account or through
associates or family members, relatives or friends
indulge in any insider trading;
Have internal control procedures and financial and
operational capabilities which can be reasonably
expected to protect its operations, its investors and
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MCC Chamber of Commerce & Industry
other registered entities from financial loss arising
from theft, fraud, and other dishonest acts,
professional misconduct or omissions;
Ensure that good corporate policies and corporate
governance is in place and shall develop internal
code of conduct for governing its internal operations
and laying down standards of appropriate conduct
for its employees for carrying out their duties;
Not be a party to
i. creation of false market;
ii. Price rigging or manipulation.
e) The Standardised term sheet would inter alia include
the various disclosures on originators, Issuer, trustee,
transaction structure, etc. as highlighted below :
Disclosures on originators, Issuer, trustee,
transaction structure by which investors would get a
brief idea about the peoples or organizations in
which they would be investing their money;
Key pool features;
Credit enhancement, which would help investors to
identify the risk for the default on Securitised debt
instrument including subordination, insurance, letter
of credit, over-collateralisation, undertakings and
guarantees;
MECHANISM FOR ACQUISITION OF SHARES THROUGH
STOCK EXCHANGE PURSUANT TO TENDER-OFFERS
UNDER TAKEOVERS, BUY BACK AND DELISTING
Vide notification dated March 24, 2015, SEBI had
amended the SEBI (Buy Back of Securities) Regulations,
1998 (“Buy Back Regulations”), SEBI (Substantial
Acquisition of Shares and Takeovers) Regulations, 2011
("Takeover Regulations") and SEBI (Delisting of Equity