Entries Tagged 'SEBI' ↓

Listing on SME Exchange

We have uploaded a new presentation on Listing on SME Exchange. You can view it here: http://www.slideshare.net/mehulmukati/listing-on-the-sme-exchanges

Listing on Sme Exchanges from Mehul Mukati

SCORES – SEBI’s new initiative to track complaints

SEBI’s latest initiative to live is SCORES‘ (SEBI COmplaint REdress System) to track shareholder grievances against listed companies and SEBI registered intermediaries.

SEBI intends this system to be a second level of redressal system, the first being the company / intermediary itself.

An investor needs to register with a valid email id on this website, and then can complaint against any listed company or SEBI registered intermediary, like brokers, depositories / depository participants, mutual funds, merchant bankers, etc.

The website also allows a complainant to upload pdf documents (up to 1MB size) as supporting documents.

The website also has separate sections for sending reminders and checking the status of a complaint.

This, if used, should herald a new era of investor governance and ensure listed companies and intermediaries take investor complaints more seriously.

Quarterly Communications & its Timing

In the last few days I have been thinking and debating about the timing for quarterly communications to reach existing investors. Here I am not talking about the press releases in newspapers or investor presentations sent only to institutional clients. Its also about the timeliness of the communication received by other investors – read retail investors.

What should be the ideal time for them (retail investors) to receive these newsletters or communication? I believe the ideal time is three days with one day for the printing and two for the postal communication to reach the investor. As a retail investor I don’t think it is too much to expect. We should remember that news articles and research reports are available to them by the next day, and hence I believe that any delay beyond three days does not serve the purpose of retail investor communication.

I also believe that the communication to retail investors (as compared to institutional investor communication) needs to be in easier to understand language and in a simple two page format. Anything more and the investors’ interest in reading it is lost.

When I write and design retail investor communication, I try to stick to the two-page rule with the following sections

  1. Key highlights – business and overall financial performances
  2. Segmental highlights and results
  3. Reasons for deviation from expectations of the management
  4. Management’s perception of the outlook for the rest of the fiscal and the next year

An additional page can contain the reported financial results for the investors’ ready reference.

In India, a lot of the retail investors are now web and email savvy. Corporates should start accepting requests for email communications from both investor and potential investors. I know a few corporates already do this, and this I hope catches on with the others.

To sum up, I believe and encourage all my clients to use my two-three rule, i.e. keep the communication no longer than two pages and do not delay it beyond three days.

SEBI Amends Refund Process for 15 Centres

SEBI has vide circular no. SEBI/CFD/DIL/DIP/18/2006/20/1 dated 20 January, 2006 amended the SEBI (Disclosure and Investor Protection (DIP) Guidelines, 2000 to ensure that applicants residing in 15 centres get IPO / Rights, etc to get refunds through direct credit (ECS) to their bank accounts. The details of the bank accounts would be taken directly from their depository details.

Refund orders of value Rs.1500/- or more are required to be sent by registrered post. Merchant Bankers have been adviced to change the subscription forms accordingly.

This amendment is effectively immediately and hence would be applicable to all issues where the draft offer documents are filed with SEBI on / after 20th January, 2006.

The 15 centres are: Ahmedabad, Hyderabad, Bangalore, Ahmedabad, Bangalore, Bhubneshwar, Kolkata, Chandigarh, Chennai, Guwahati, Hyderabad, Jaipur, Kanpur, Mumbai, Nagpur, New Delhi, Patna and Thiruvananthpuram.

Clarificatory Notification on ELSS (Notification 259/2005) dated 13 Dec, 2005

The CBDT has issued a clarificatory notification amending the earlier issued ‘Equity Linked Savings Scheme, 2005’.

The first part pertains to the amendment of the definition of ‘year’. A year will now refer to a year commencing from the date of allotment or holding of units (as against the earlier definition of year meaning an year commencing from 1st April)

The second part of this amendment inserts a new clause to include open-ended plans. The Unit Trust or other mutual funds can operate one open-ended equity linked saving plan, subject to the prior approval of SEBI. The intention it appears is not to restrict the equity linked saving plans to close-ended schemes only; and at the same time allow the existing open-ended schemes to continue to be operational.

Related Links:
  1. Full Text of this notification.
  2. Original postEquity Linked Saving Scheme, 2005 [Notification No 226/2005]‘.
  3. Full text of original notifiction.

Equity Linked Saving Scheme, 2005 [Notification No 226/2005]

The CBDT has vide Notification No 226/2005 dated 3rd November, 2005 notified new rules for Equity Linked Saving Schemes.

On the whole, this notification is regressive & will cause more inconvenience to the investors; rather than benefit them.

The key highlights of this scheme are:

  • Investments to be of a minimum amount of Rs.500 and in multiples of Rs.500 thereafter
This is a welcome step, since the minimum investment, either in lump-sum or through the System Investment Plan (SIP) route was Rs.5,000
  • The mutual fund to allot units not later than 31st March each year. The plan to be open for a minimum period of one month during the year 2005-06 & at least for three months in the subsequent years

This is a regression since all the ELSS’s currently available are open-ended, & hence provide the flexibility to invest and / or withdraw (reddem) at any time during the year , without being restricted to any specified time period. This also helps the investor manage his/her cash flow better, and in addition, can help time the market better
  • The mutual fund to announce the re-purchase price after one year from date of allotment & every six months thereafter for the next two years (second & third years); & subsequently the re-purchase price to be declared at a frequency of not less than one month

The currently available schemes being open-ended, give an investor the option to exit at any time based on the NAV’s declared daily. Hence, from now on the investors will face a problem due to the re-purchase price being declared only half-yearly / monthly; restricting their exit options.

  • The re-purchase price to factor in at least 50% of the unrealised gains of the plan after deducting a maximum of 5% of the average NAV as management, selling and other expenses

This causes severe concern since under the earlier regulations 100% of the unrealised appreciation was factored in the re-purchase price due the fact that NAV’s were declared on a daily basis

  • A plan can be terminated at the close of the 10th year from the year in which the allotment of units is made or, at the option of the fund, if 90% or more of the units under any plan are repurchased before completion of ten years. The outstanding units to be redeemed at the final repurchase price to be fixed by the fund

This forces the plan to be of a maximum duration of 10 years, instead of it being a open-ended plan; with the attendent benefits & pitfalls.

The following some points which need not have been specified, but nonetheless do find mention in the notification, especially since the three-year lock-in period is applicable for all investments which accrue any tax benefit to the investor:

  • Investment to be held by the investor for a minimum period of three years
  • Units issued under the plan can be transferred, assigned or pledged after three years of its issue
  • Investment to be acknowledged by certificate of investment / statement of account

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