Nomenclature of Secretarial Audit under SEBI Circular changed to ‘Reconciliation of Share Capital Audit’

Nomenclature of Secretarial Audit under SEBI Circular changed to ‘Reconciliation of Share Capital Audit’

As you are aware, Regulation 55A of the SEBI (Depositories and Participants) Regulations, 1996 necessitate every issuer to submit audit report on a quarterly basis to the stock exchanges audited by a practicing company secretary or qualified chartered accountant, for the purpose of reconciliation of share capital held in depositories and in physical form with the issued / listed capital.

In practical parlance, the terminology used for the said audit was ’Secretarial Audit’ in the light of SEBI Circular No. D&CC/FITTC/CIR-16/2002 dated December, 31, 2002.

The term Secretarial Audit, however, encompasses a wider area pertaining to examination of corporate and secretarial records of the company and cannot be restricted to merely audit for reconciliation of share capital. Corporate Governance Voluntary Guidelines 2009 issued by the Ministry of Corporate Affairs also advises the companies to get Secretarial Audit conducted by a competent professional.

Accordingly, the matter was taken up with SEBI for changing the nomenclature of Secretarial Audit to avoid the confusion amongst corporates and professionals on the scope of Secretarial audit.

We are pleased to share with you that SEBI, vide its circular CIR/MRD/DP/30/2010 dated September 06, 2010, has modified the terminology ‘Secretarial Audit’ as mentioned in its circular dated December 31, 2002  to ‘Reconciliation of Share Capital Audit’.

A copy of the SEBI circular CIR/MRD/DP/30/2010 dated September 06, 2010 is attached for ready reference

ICDR amendments for SME Exchanges

Dear All

SEBI came with most awaited ICDR Regulations for SME exchanges, the silent provisions of the Regulations under Chapter XV are as follows

1. An issuer whose post-issue face value capital does not exceed ten crore rupees shall issue its specified securities in accordance with provisions of this Chapter.
2. An issuer, whose post issue face value capital is more than ten crore rupees and upto twenty five crore rupees, may also issue specified securities in accordance with provisions of this Chapter.
3. Other provisions of ICDR shall automatically applicable to issued under chatpter XA
4. However, provisions of sub-regulations (1), (2) and (3) of regulation 6,- 10,  25- 27 and  49 (1) of these regulations shall not apply to an issue of specified securities made under this Chapter

Read in details here

Investor Awareness

for Students of Executive and Professional Courses 
SEBI, MCA and ICSI had launched joint programme on Investor Awareness and Education.(IAE)


In view of the above, SEBI, MCA and ICSI made a separate link for IAE.


Read details here

Physical Settlement of Stock Derivatives

Physical Settlement of Stock Derivatives

In continuation of SEBI Circular No. SMDRP/DC/CIR- 7/01 dated June 20, 2001 and Circular No. SMDRP/DC/CIR- 10/01 dated November 2, 2001 regarding settlement of stock options and stock futures contracts respectively.

it has been decided to provide flexibility to Stock Exchanges to offer:

• Cash settlement (settlement by payment of differences) for both stock options and stock futures; or 
• Physical settlement (settlement by delivery of underlying stock) for both stock options and stock futures; or
• Cash settlement for stock options and physical settlement for stock futures; or
• Physical settlement for stock options and cash settlement for stock futures.
• A Stock Exchange may introduce physical settlement in a phased manner.

Read details here

Applications Supported by Blocked Amount (ASBA) facility in public issues

Dear Friends 

As you aware SEBI has been soliciting feedback from market about ASBA facility on an ongoing basis. Non-availability / limited availability of ASBA forms with Self Certified Syndicate Banks (SCSBs) has often been cited as one of the reasons for investors not being able to effectively use ASBA facility. 

In order to make ASBA form easily available to investors, SEBI has, in consultation with Stock Exchanges, made it possible for investors to download and print ASBA application form from the website of BSE or NSE. Each ASBA form, so downloaded, shall have a unique application number which is important from control and processing point of view. Therefore application made using photocopy of the downloaded form shall not be accepted.

ASBA provides an alternative mode of payment in issues whereby the application money remains in the investor’s account till finalization of basis of allotment in the issue.

ASBA process facilitates retail individual investors bidding at cut-off, with single option, to apply through Self Certified Syndicate Banks (SCSBs), in which the investors have bank accounts. SCSBs are those banks which satisfy the conditions laid by SEBI. SCSBs would accept the applications, verify the application, block the fund to the extent of bid payment amount, upload the details in the web based bidding system of NSE, unblock once basis of allotment is finalized and transfer the amount for allotted shares, to the issuer.

This would co-exist with the current procedure of investors applying through sub syndicate/ syndicate members, with cheque as a payment instrument.

The circular giving details of this facility, issued to all intermediaries is available here


ASBA at BSE
ASBA at NSE

Reporting of Lending of securities bought in the Indian Market.

Dear Students

SEBI vide its circular dated June 29, 2010 has instructed to FII to submit the daily reports pertaining to securities lent by the FIIs to entities abroad. 

It will made available for public dissemination at http://203.199.12.51/SecuritiesLentMain.html twice in a week, one on Tuesday and another on Friday.

Read in details here

Account Maintenance Charges collected upfront on annual/ half yearly basis on demat accounts

Dear Students 


SEBI came amendment in Depositories Act 1996 with the following: 

The Depository Participants (DPs) have a system of collecting account maintenance charge (AMC) from beneficial owners (BOs) towards maintenance of demat accounts for varied periodicity of collection (viz. monthly, quarterly, half yearly and annually). It has been noticed that in cases where AMC is collected on an annual upfront basis, on closure/shifting of demat account, the AMC for the balance period for which no service has been provided by the DP, is not refunded to the BO.

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Issuance of Non-Convertible Debentures (Reserve Bank) Directions, 2010

Dear Friends

As you aware Non-Convertible Debentures (NCD) are one of the important instrument in financial market and hence in order to harmonize the procedural RBI came with NCD directions.

Issuance of Non-Convertible Debentures (Reserve Bank) Directions, 2010

The Reserve Bank of India, having considered it necessary in public interest and to regulate the financial system of the country to its advantage, in exercise of its powers conferred under sections 45K, 45L and  45W of the Reserve Bank of India Act, 1934 and of all the powers enabling it in this behalf, hereby gives to the agencies dealing in securities and money market instruments, the following directions for issuance of Non-Convertible Debentures (NCDs) of original or initial maturity up to one year.

1. Short title and commencement of the directions

These directions may be called the Issuance of Non-Convertible Debentures (Reserve Bank) Directions, 2010 and they shall come into force with effect from August 02, 2010.

2. Definition

For the purposes of these Directions,

1. Non-Convertible Debenture (NCD) means a debt instrument issued by a corporate (including NBFCs) with original or initial maturity up to one year and issued by way of private placement; 
   
   
2. “Corporate” means a company as defined in the Companies Act, 1956 (including NBFCs) and a corporation established by an act of any Legislature

3.  Eligibility to issue NCDs

A corporate shall be eligible to issue NCDs if it fulfills the following criteria, namely,

1. the corporate has a tangible net worth of not less than Rs.4 crore, as per the latest audited balance sheet;
   
   
2. the corporate has been sanctioned working capital limit or term loan by bank/s or all-India financial institution/s; and
   
   
3. the borrowal account of the corporate is classified as a Standard Asset by the financing bank/s or institution/s.

4.  Rating Requirement

4.1  An eligible corporate intending to issue NCDs shall obtain credit rating for issuance of the NCDs from one of the rating agencies, viz., the Credit Rating Information Services of India Ltd. (CRISIL) or the Investment Information and Credit Rating Agency of India Ltd. (ICRA) or the Credit Analysis and Research Ltd. (CARE) or the FITCH Ratings India Pvt. Ltd or such other agencies registered with Securities and Exchange Board of India (SEBI) or such other credit rating agencies as may be specified by the Reserve Bank of India from time to time, for the purpose. 

4.2 The minimum credit rating shall be P-2 of CRISIL or such equivalent rating by other agencies.

4.3 The Corporate shall ensure at the time of issuance of NCDs that the rating so obtained is current and has not fallen due for review.

5.  Maturity 

5.1 NCDs shall not be issued for maturities of less than 90 days from the date of issue.

5.2 The exercise date of option (put/call), if any, attached to the NCDs shall not fall within the period of 90 days from the date of issue. 

5.3 The tenor of the NCDs shall not exceed the validity period of the credit rating of the instrument.

6.  Denomination 

NCDs may be issued in denominations with a minimum of Rs.5 lakh (face value) and in multiples of Rs.1 lakh.

7.  Limits and the Amount of Issue of NCDs 

7.1 The aggregate amount of NCDs issued by a corporate shall be within such limit as may be approved by the Board of Directors of the corporate or the quantum indicated by the Credit Rating Agency for the rating granted, whichever is lower.

7.2 The total amount of NCDs proposed to be issued shall be completed within a period of two weeks from the date on which the corporate opens the issue for subscription.

8.  Procedure for Issuance 

8.1 The corporate shall disclose to the prospective investors, its financial position as per the standard market practice.

8.2 The auditors of the corporate shall certify to the investors that all the eligibility conditions set forth in these directions for the issue of NCDs are met by the corporate.

8.3 The requirements of all the provisions of the Companies Act, 1956 and the Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008, or any other law, that may be applicable, shall be complied with by the corporate.

8.4 The Debenture Certificate shall be issued within the period prescribed in the Companies Act, 1956 or any other law as in force at the time of issuance.  

8.5 NCDs may be issued at face value carrying a coupon rate or at a discount to face value as zero coupon instruments as determined by the corporate.

9.  Debenture Trustee 

9.1 Every corporate issuing NCDs shall appoint a Debenture Trustee (DT) for each issuance of the NCDs.

9.2 Any entity that is registered as a DT with the SEBI under SEBI (Debenture Trustees) Regulations, 1993, shall be eligible to act as DT for issue of the NCDs only subject to compliance with the requirement of these Directions.

9.3 The DT shall submit to the Reserve Bank of India such information as required by it from time to time.

10.  Investment in NCD 

10.1 NCDs may be issued to and held by individuals, banks, Primary Dealers (PDs), other corporate bodies including insurance companies and mutual funds registered or incorporated in India and unincorporated bodies, Non-Resident Indians (NRIs) and Foreign Institutional Investors (FIIs).

10.2 Investments in NCDs by Banks/PDs shall be subject to the approval of the respective regulators.

10.3 Investments by the FIIs shall be within such limits as may be set forth in this regard from time to time by the SEBI.

11.  Preference for Dematerialisation

While option is available to both issuers and subscribers to issue/hold NCDs in dematerialised or physical form, they are encouraged to issue/ hold NCDs in dematerialised form. However, banks, FIs and PDs are required to make fresh investments in NCDs only in dematerialised form.

12.  Roles and Responsibilities

12.1 The role and responsibilities of corporates, DTs and the credit rating agencies (CRAs) are set out below:

(a) Corporates 

12.2 Corporates shall ensure that the guidelines and procedures laid down for issuance of NCD are strictly adhered to.

(b) Debenture Trustees 

12.3 The roles, responsibilities, duties and functions of the DTs shall be guided by these regulations, the Securities and Exchange Board of India (Debenture Trustees) Regulations,1993, the trust deed and offer document. 

12.4 The DTs shall report, within three days from the date of completion of the issue, the issuance details to the Chief General Manager, Financial Markets Department, Reserve Bank of India, Central Office, Fort, Mumbai-400001.

12.5 DTs should submit to the Reserve Bank of India (on a quarterly basis) a report on the outstanding amount of NCDs of maturity up to year.

12.6 In order to monitor defaults in redemption of NCDs, the DTs are advised to report immediately, on occurrence, full particulars of defaults in repayment of NCDs to the Financial Markets Department, Reserve Bank of India, Central Office, Fort, Mumbai-400001, Fax: 022-22630981/22634824.

12.7 The DTs shall report the information called for under para 12.4, 12.5 and 12.6 of these Directions as per the format notified by the Reserve Bank of India, Financial Markets Department, Central Office, Mumbai from time to time.

(c) Credit Rating Agencies (CRAs) 

12.8 Code of Conduct prescribed by the SEBI for the CRAs for undertaking rating of capital market instruments shall be applicable to them (CRAs) for rating the NCDs.

12.9 The CRA shall have the discretion to determine the validity period of the rating depending upon its perception about the strength of the issuer. Accordingly, CRA shall, at the time of rating, clearly indicate the date when the rating is due for review.

12.10 While the CRAs may decide the validity period of credit rating, they shall closely monitor the rating assigned to corporates vis-à-vis their track record at regular intervals and make their revision in the ratings public through their publications and website.

13. Documentary Procedure 

13.1 Issuers of NCDs of maturity up to one year shall follow the Disclosure Document brought out by the Fixed Income Money Market and Derivatives Association of India (FIMMDA), in consultation with the Reserve Bank of India as amended from time to time.

14. Violation of the directions will attract penalties, which would include debarring of the entity from the NCD market.

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Introduction of Index options with tenure up to 5 years

SEBI has decided to permit Stock Exchanges to introduce option contracts on Sensex and Nifty with tenure up to 5 years on following conditions:

1. There are 8 semi annual contracts of the cycle June/December in sequence to 3 serial monthly contracts and 3 quarterly contracts of the cycle March / June/ September/ December.
2. The Exchange has in place the appropriate risk management framework for such derivative contracts Read here

Disclosure of investor complaints with respect to Mutual Funds

In view to strengthen the transparency and to improve the general functioning of the market by providing investors the wherewithal to make an informed choice .

Accordingly, it has been decided that Mutual Funds shall henceforth disclose on their websites, on the AMFI website as well as in their Annual Reports, details of investor complaints received by them from all sources.

The said details should be vetted and signed off by the Trustees of the concerned Mutual Fund.Read Here the details

SEBI launched Model Listing Agreement for SME Exchanges

In order to encourage promotion of dedicated exchanges and/or dedicated platforms of the exchanges for listing and trading of securities issued by Small and Medium Enterprises (“SME”), SEBI amended its ICDR 2009  by inserting a Chapter XA on “Issue of specified securities by small and medium enterprises”, vide its notification dated April 13, 2010.


The Role of Company Secretary under the new

1. Clause 50(a) of the listing agreement authorises Practising Company Secretaries to certify that all transfers have been completed within stipulated time. 
2. Clause 52(ii) authoirses Practising Company Secretaries to certify the compliance of conditions of corporate governance.
3. Clause 50(a) further requires the companies to appoint Company Secretary of the issuer as a compliance officer and clause 54(ii) deals with the responsibilities of compliance officer.

Now, SEBI has come with Model listing agreement to facilitate listing of specified securities in the SME exchange, to be executed between the issuer and the Stock Exchange

Certain relaxations are provided to the issuers whose securities are listed on SME exchange in comparison to the listing requirements in Main Board, which inter-alia include the following:

1. Companies listed on the SME exchange may send to their shareholders, a statement containing the salient features of all the documents, as prescribed in sub-clause (iv) of clause (b) of proviso to section 219 of the Companies Act, 1956, instead of sending a full Annual Report
2. Periodical financial results may be submitted on “half yearly basis”, instead of “quarterly basis” and
3.  SMEs need not publish their financial results, as required in the Main Board and can make it available on their website.

Read here complete Model Listing Agreement

Launch of e-Voting System for Corporates

CDSL Ventures Ltd., a wholly owned subsidiary of Central Depository Services (India) Limited (CDSL), has designed an electronic voting system as an alternative to the paper-based postal ballot process, to facilitatevoting on company resolutions. This system was inaugurated on November 17, 2009 by Hon’ble  Minister Shri Salman Khurshid, Ministry of Corporate Affairs. 

e-Voting is an internet based system through which shareholders can login and register their votes on company resolutions. The system would process, record votes automatically and facilitate declaration of voting results quickly.

It is believed that e-Voting system would be relatively more efficient, convenient and cost effective. The Companies (Passing of the Resolution by Postal Ballot) Rules, 2001 issued by Central Government under Section 642 of the Companies Act, 1956, includes electronic voting. 

Source:  CDSL Ventures Ltd.

Making Annual Report of listed companies easily available

Dear friends

As you aware, SEBI vide its circular dated 16.04.2010 removed clause 51 of the listing agreement i.e. EDIFAR submission.

under clause 51 of the listing agreement, Listing entities have to upload their Annual Report with EDIFAR filing. But after amendment it was done away with.

Hence in public interest and Investors' awareness, SEBI has asked the Stock Exchanges to ensure the availability of Annual Report of the Listed entities easily under clause 31 of the listing agreement

Read entire circular here

ASBA to MF’s, Reduction of NFO Period , MF's Role in Corporate Governance, Fund of Funds Scheme

1.     ASBA to MF’s - 

SEBI had decided to extend ASBA facility to the investors subscribing to New Fund Offers (NFOs) of mutual fund schemes. It shall co-exist with the current process, wherein cheques/ demand drafts are used as a mode of payment. Mutual Funds shall ensure that adequate arrangements are made by Registrar and Transfer Agents for the implementation of ASBA. Mutual Funds/AMCs shall make all relevant disclosures in this regard in the SAI.

2.    Reduction of NFO Period

a.               In order to make NFO process efficient, it has been decided to reduce the NFO period to 15 days. 

b.              However, the NFO period in case of ELSS schemes shall continue to be governed by guidelines issued by GOI

3.    Applicability

The Mutual Funds/AMCs have to compulsorily provide ASBA facility to the investors for all NFOs launched on or after July 01, 2010

4.    Non availability of Unit Premium Reserve for dividend distribution

Unit Premium Reserve, which is part of the sales price of units that is not attributable to realized gains, cannot be used to pay dividend.

5.    Role of Mutual Funds in Corporate Governance of Public Listed Companies

The issue of the role of Mutual Funds in Corporate Governance of listed companies was considered by the Mutual Fund Advisory Committee, mutual funds should play an active role in ensuring better corporate governance of listed companies.

6.    Provision of charging of additional management fees by the Asset Management Companies in case of schemes launched on no load basis

AMC shall not collect any additional management fees referred to in Regulation 52(3) of SEBI Mutual Funds Regulation, 1996.

7.    Fund of Funds Scheme

AMCs have been entering into revenue sharing arrangements with offshore funds in respect of investments made on behalf of Fund of Fund schemes. These arrangements create conflict of interest. henceforth AMCs shall not enter into any revenue sharing  arrangement with the underlying funds

Read in details at

http://www.sebi.gov.in//circulars/2010/cir-mf182010.pdf

RBI Approval is must for Private banks in certain cases

Recently RBI come with circular mandating for private banks to obtain the prior approval of RBI before any IPO’s. 

As per the extant instructions, all banks in private sector were required to obtain approval of Reserve Bank of India (RBI) for issue of shares through Initial Public Offers (IPOs) and preferential issues. Further, while the banks were advised to follow certain prescriptions relating to pricing in respect of Initial Public Offers (IPOs), Bonus issues and Preferential issues, SEBI requirements in respect of Bonus issues have also been indicated.

In brief it will run as follows:

1. Initial Public Offers (lPOs): All banks should obtain RBI approval for IPOs. After listing on the stock exchanges, banks are free to price their subsequent issues
2. Rights issues:  RBI approval would not be required for rights issues by both listed and unlisted banks.
3. Bonus issues: Private sector banks, both listed and unlisted, need not seek RBI's approval for bonus issues, but issues would  subject to SEBI guidelines.
4. Preferential issue:  All preferential issues would require PRIOR APPROVAL of RBI.  

Pricing of preferential issues by listed banks may be as per SEBI formula, while for unlisted banks the fair value may be determined by a chartered accountant or a merchant banker.

5. Qualified Institutional Placement (QIP): Private Sector Banks need to approach RBI for prior 'in principle' approval in case of Qualified Institutional Placements

Thus in case of pricing of issues where RBI approval is not required, pricing of issues should be as per SEBI guidelines;

In cases where prior approval of RBI is required, pricing should take into account both SEBI and RBI guidelines

Enjoy reading at thin LINK

NOW ASBA also available to QIB

Hy there!

As you aware, ASBA facility was made available to all except QIB. Now SEBI has decided to extent this facility to QIB.

It means w. e. f. May 1, 2010, ASBA facility then available to QIB also.

Read further at this LINK

Reduction in time between issue closure and listing

SEBI is committed to list out for investor protection. SEBI therefor came out with another circular to reduce the listing period after Issue closing from present 22 days to 12 days only.

In consultation with market intermediaries, SEBI has decided to reduce the time

between issue closure and listing to 12 working days. In the new process, the syndicate members shall capture all data relevant for purposes of finalizing basis of allotment while uploading bid data in the electronic bidding system of the stock exchanges. In order that the data so captured is accurate, syndicate members may be permitted an additional day to amend some of the data fields entered by them in the electronic bidding system 

Read further to this link

GOLD ETF_NSE Platform

ETF, rather Exchange Traded Fund  means A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold. Because it trades like a stock, an ETF does not have its net asset value (NAV) calculated every day like a mutual fund does. 

By owning an ETF, you get the diversification of an index fund as well as the ability to sell short, buy on margin and purchase as little as one share. Another advantage is that the expense ratios for most ETFs are lower than those of the average mutual fund. When buying and selling ETFs, you have to pay the same commission to your broker that you'd pay on any regular order. One of the most widely known ETFs is called the Spider (SPDR), which tracks the S&P 500 index and trades under the symbol SPY.


Recently NSE came with GOLD ETF where Gold can be your part of portfolio, you can buy GOLD ETF and sell them to purchase normal jewellery's also. 


Attached link is self explanatory for GOLD ETF


Source NSE website

SEBI(ICDR) Amendment April 13, 2010

SEBI vide its Notification No. LAD-NRO/GN/2010-11/03/1104 amended the SEBI (ICDR) Regulations, 2009, the highlights of which are as follows:-

1. The definition of employee has been widened to include “ The employees of the holding company or subsidiary company or of that material associate(s) of the issuer whose financial statements are consolidated with the issuer’s financial statements as per Accounting Standard 21”– Regulation  2(1) (m)

2. Insertion of new Chapter XA regarding issue of specified securities by Small and Medium Enterprises:

1. The issuer is not required to file the draft offer document with SEBI
2. The issue should be 100% underwritten
3. Minimum number of allottees should not be less than 50
4. If the post issue face value of a listed issuer is less than 25 crore rupees , the issuer can migrate its specified securities to SME Exchange
5. If listed on SME exchange and post issue face value is more than 10 crore rupees  and upto 25 crore rupees  the issuer can migrate its specified securities to Main Board
6. Compulsory market making by Merchant Banker
2. Revision of  fees to be paid to SEBI in case of Rights Issue Schedule IV , Part A Clause (b)
3. Insertion of Form H, relating to additional certification to be given by Merchant banker regarding SME Exchange
4. Other amendments include correction of  drafting errors
5. Consequential amendments made in the following regulations also:-

SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992

SEBI (Merchant Banker) Regulations, 1992

SEBI (Foreign Institutional Investors) Regulations, 1995

SEBI (Venture Capital Funds) Regulations, 1996
SEBI (SAST) Regulations, 1997

Present amendment made more focus on SME compliance which will emphasis more development to this part of economy as well.

Njoy readin..........

ICDR, 2009

For CS Professional and Executive level students

As you aware, SEBI, The market Regulator, had scraped the DIP guidelines and has incorporated the provisions of the rescinded Guidelines into the ICDR Regulations

Certain changes have been made by removing the redundant provisions, modifying certain provisions on account of changes necessitated due to market design and bringing more clarity to the provisions of the rescinded Guidelines.