Sebi cuts filing fees for public issues

Securities and Exchange Board of India (Sebi) has reduced the filing fees for documents of public issues, buybacks and draft letter of offer while acquiring a company.

The regulator has made amendments to the Sebi (Merchant Bankers) Regulations, 1992, Sebi (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 and Sebi (Buyback of Securities) Regulations, 1998.

Sebi will henceforth charge a flat fee of Rs 25,000 for public issues less than or equal to Rs 10 crore. For an issue more than Rs 10 crore but less than or equal to Rs 1,000 crore, Sebi will collect 0.125% of the offer. For an issue more than Rs 1,000 crore but less than or equal to Rs 5,000 crore, a fee of Rs 1.25 crore will be charged in addition to 0.03125% of the offer size in excess of Rs 1,000 crore. A flat charge of Rs 3 crore will be charged for issues more than Rs 5,000 crore.

Sebi has also amended the fees for custodians who will have to pay 0.0005% instead of 0.001%.

For mutual funds, Sebi has brought down the filing fees to 0.005% of the amount raised via a new fund offer subject to a minimum of Rs 1 lakh and a maximum of Rs 50 lakh. The regulator has also slashed the registration fees payable by mutual funds from Rs 50 lakh to Rs 25 lakh.

The regulator has also specified fees for share buybacks and rights issues. For venture capital funds, the regulator has made changes in the registration fees by bringing them down from Rs 10 lakh to Rs 5 lakh.

The amendments, which will be called Sebi (Payment of Fees)(Amendment) Regulations, 2008, came into force from April 1, 2008.

Institutional trade to have margins too

The Securities and Exchange Board of India (Sebi) on Wednesday said broking houses will have to provide for margining for all institutional trades in the cash markets with effect from April 21. The move brings institutional business on par with the retail segment.

At present, there is no margin system for institutional trades while brokers charge margins from retail customers for their trades.

“In order to provide level playing field to all the investors in the cash market as in the case of derivatives market, all institutional trades in the cash market would be subject to payment of margins as applicable to transactions of other investors,” said a Sebi circular issued on Wednesday

In the futures & options segment, there is margining system for both retail and institutional trades.

The margining decision coincides with Sebi’s decision to allow short selling, and securities lending and borrowing with effect from April 21. Brokers said the move was necessary as at present all the trades in the cash market by the institutional investors are delivery-based trades.

Following the implementation of short selling from April 21, brokers, as part of their risk mitigation exercise, need to provide for margins as the institutional trades may also be short selling in nature. Hence, the extra precaution.

The decision to impose margins for institutional trades will have a major impact on the trading volumes of small and mid-rung broking houses.

“We will have to provide for the margins ourselves to attract institutional trades,” said a head of a brokerage house. “Only big brokerage houses, which have big money, will survive in the new environment,” he said.

Sebi said to begin with, all institutional trades in the cash market would be margined on a T+1 basis with margin being collected from the custodian upon confirmation of the trade. Subsequently, with effect from June 16, 2008, the collection of margins would move to an upfront basis.

The market regulator asked stock exchanges to test the software and remove any glitches in its operation well before the commencement date to avoid any problems in the live environment.

Also, stock exchanges are required to make necessary amendments to relevant bye-laws, rules and regulations for the implementation of the new rules.

Sebi scraps entry/exit loads on bonus units

Securities and Exchange Board of India (Sebi) today scrapped loads (entry as well as exit) charged by mutual funds on bonus units and units allotted on reinvestment of dividend.

According to a circular issued by Sebi today, the new rule is as per the recommendations of the working group on standardisation of key operational areas of Association of Mutual Funds in India (Amfi).

Fund managers convert earnings from the scheme into units and distribute them as bonus units to investors. These bonus units were charged entry and exit loads. The logical argument made against charging such loads is that it is investors' money which has contributed to the earnings and that investors are not entering the scheme afresh - so charging an entry load does not make any sense. In case of the dividend reinvestment option, the investor is assigned units for dividend re-invested in the scheme.

Sandesh Kirkire, chief executive officer, Kotak Mutual Fund, said: "It is certainly a pro-investor step by Sebi. After all, it is investors' money being reinvested in case of a dividend re-investment option or even in case of bonus units being allotted. It is worthless to charge loads on these as investor is not making any new investment to get those units."

Sebi to cut time between IPO close and listing

The Securities and Exchange Board of India (Sebi) plans to reduce the time between the close of initial public offerings (IPOs) and their listing to lessen scope for price manipulation, Chairman C B Bhave told reporters following his first board meeting after taking charge.

He said the board would soon consider proposals by a committee on this issue and added that institutional investors may have to pay a higher amount of commitment money than 10 per cent currently.

The Sebi board also slashed by 80 per cent fees for stock market intermediaries on filing offer documents for public issues, rights issues and mutual funds.

The new fee structure will come into effect from April 1, 2008, Bhave said, benefiting small investors investing in mutual funds.

Meanwhile, Sebi also constituted a committee comprising independent board members to take forward investigations into an IPO scam in 2006 that saw manipulators opening thousands of demat accounts to corner share allotments.

National Securities Depositories Ltd (NSDL), which Bhave headed before taking charge at Sebi, was criticised by the market regulator for inadequate vigilance.

The committee, comprising V Leeladhar, RBI deputy governor; Anurag Goel, secretary, ministry of corporate affairs, and Mohan Gopal, director of Bhopal-based National Judicial Academy, is aimed at ring-fencing Bhave

The committee will seek advice from Maharashtra Advocate General Ravi Kadam, said a Sebi release.

The board also approved a proposal to allow members of the Madras Stock Exchange to trade on the National Stock Exchange platform, subject to adequate safeguards, said Bhave.

He said the move is aimed at helping regional stock exchanges, which are struggling for survival as most brokers trade on the National Stock Exchange and the Bombay Stock Exchange.

RBI lets FIIs short sell, lend, borrow shares

The Reserve Bank of India (RBI) today said it will permit foreign institutional investors (FIIs) registered with market regulator Securities and Exchange Board of India (Sebi) and sub-accounts of FIIs to short sell, lend and borrow equity shares from February 1.

FIIs were not allowed to engage in short selling previously and were required to take delivery of securities purchased and give delivery of securities sold.

The central bank said FII participation in short selling and borrowing or lending of equity shares will be subject to the current foreign direct investment (FDI) policy, which allows FDI ranging from 26% to 100% across different sectors. It added that FIIs will not be permitted to short sell equity shares which are in its banned list.

Borrowing of equity shares by FIIs shall only be for the purpose of delivery into short sale and the margin or collateral shall be maintained by FIIs only in the form of cash, RBI said.

Sebi waives MF entry loads from Jan 4

Securities and Exchange Board of India (Sebi) today barred mutual fund houses from charging entry load from investors who buy the schemes directly from the funds, and not through a distributor, agent or a broker.

The new rule is effective January 4, according to a Sebi circular issued today.

At present, the industry average for entry load is 2.25% of the initial investment. Asset Management Companies (AMCs) selling schemes either through the Internet, mutual fund offices or their collection centres can benefit from the new rules.

"Keeping in mind the interests of investors and to facilitate the growth of the mutual fund industry, with effect from January 4, 2008, investors making applications for investments in mutual fund schemes directly without routing through any distributor/agent/broker i.e. through Internet, submitted to AMC or collection centre/investor service centre would not be subject to entry load," said the circular.

The regulator said the waiver will also apply to additional purchases done directly by the investor under the same folio and switch-in to a scheme from other schemes if such a transaction is done directly by the investor.

A CEO of a mutual fund house said this will make life difficult for fund houses most of whom are dependent on distributors to sell their schemes. Though no figures are available, industry officials reckon only 1-2% of their business come through direct sales. This may be 2-3% for HDFC Mutual Fund and others, which have more branch network.

Sebi said the growth of the mutual fund industry in the past years and the technology available for investments has enabled investors to take informed decisions and to invest in mutual funds through Internet and other modes without availing of services of distributors/ agents/ brokers.

"There was an overwhelming response in favour of the proposal by Sebi on waiver of entry load for investors who do not route their mutual fund applications through a broker/ distributor," the regulator said explaining its decision.

The maximum entry load a fund house can charge is 6% while the maximum exit load is 4%. but AMCs cannot charge over 7% from investors when entry and exit loads are totalled.

Sebi allows mini-contracts on Sensex, Nifty

Securities and Exchange Board of India (Sebi) today introduced mini-contracts in the derivatives markets based on the Sensex and the Nifty indices to improve liquidity and increase investor participation for the index-based products.

Mini-contracts are a fraction of normal derivatives contracts, and will help individual investors hedge risks of a smaller portfolio.

Initially, the mini-contracts would be limited to index futures and options on the 30-share BSE index and the 50-share NSE index.

The Bombay Stock Exchange (BSE), in a separate release, said it would launch the mini-contracts on the Sensex from January 1. The mini Sensex contracts will have a market lot of five units.

The small size of the contract would be attractive for retail investors as there would be comparatively lower capital outlay, lower trading costs, more precise hedging and flexible trading, the BSE release said.

The security symbol for the Sensex mini-contracts would be MSX and it would be available for one, two and three months along with weekly options, BSE said.

NSE officials were not available for comments, but it is expected that the exchange would also announce the launch soon.

The recommendation to introduce mini-contracts was made by Professor M. Rammohan Rao, who headed the Derivatives Market Review Committee (DMRC) of Sebi.

The move to introduce mini-contracts follows its increasing popularity globally due to the higher liquidity and the ability to get in and out of a trade quickly with low impact cost.

5yr lock-in for RPL promoters' equity : Sebi

Securities and Exchange Board of India (Sebi) has disposed off a complaint against the initial public offering (IPO) by Anil Ambani-promoted Reliance Power (RPL) by asking the promoters to lock-in the entire 20% of their contribution to the share offer for five years from the date of the IPO.

The regulator, however, said the thrust of the argument by the complainant was with respect to shortchanging the shareholders of Reliance Energy (REL) rather than Reliance Power, and hence, the shareholders of REL could take up the matter with the Ministry of Corporate Affairs under whose jurisdiction most of the allegations fall.

The Sebi order, say merchant bankers, clears the hurdles ahead of the mega IPO of $2.5-3 billion, which is expected to hit the markets early next year.

A complaint filed with the capital markets regulator had alleged serious breach of corporate governance in the case of Reliance Energy, also promoted by Anil Dhirubhai Ambani Group (ADAG), for the transfer of high value projects such as Rosa Power, Sasan Power, Butibori, Shahpur Coal, Dadri etc to a company (RPL), which is owned 50% by Reliance Energy and the remaining 50% by the promoters of REL.

The complaint by Rajkot Saher/Jilla Grahak Surakha Mandal had alleged that the proposed IPO by Reliance Power was used by the promoters of RPL to "subvert the spirit" of the rules to gain "huge benefits using several front companies and by means of merger and amalgamation."

Sebi, which heard both the parties on December 4, said it has no jurisdiction to initiate action or conclude a finding on this front.

While asking the promoters to lock-in their contribution of 20% for a 5-year period, Sebi said: "The objective of mandatory promoters’ contribution and lock-in are to ensure commitment of the promoters of the company making IPO and stability of the issue and to ensure that investors are not deceived by fly by night operators."

Sebi nod for short selling in F&O scrips

After a wait of nearly two years, Securities and Exchange Board of India (Sebi) today gave its green signal to allow short sales - sale of a stock that a seller does not own at the time of trade - for all class of investors.

The capital market regulator also announced the broad framework for the Securities Lending and Borrowing (SLB) scheme.

Sebi said stock exchanges shall put in place a full fledged securities lending and borrowing (SLB) scheme, which, to begin with, shall be operated through clearing corporation/clearing house of stock exchanges having nationwide terminals who will be registered as Approved Intermediaries (AIs) under Securities Lending Scheme, 1997 (SLS, 1997).

"The SLB shall take place on an automated, screen-based, order-matching platform, which will be provided by the AIs. This platform shall be independent of the other trading platforms,"Sebi said in a release issued today.

All shares in the futures and options (F&O) segment will be eligible for short selling. Currently, there are 200-odd stocks available in F&O on the National Stock Exchange. Sebi said it will review the list of stocks that are eligible for short selling transactions from time to time.

The tenure of lending/borrowing shall be fixed as standardised contracts, and, to start with, contracts with tenure of seven trading days is likely to be introduced.

"The settlement cycle for SLB transactions shall be on T+1 basis. The settlement of lending and borrowing transactions shall be independent of normal market settlement.

"The settlement of the lending and borrowing transactions shall be done on a gross basis at the level of the clients i.e. no netting of transactions at any level will be permitted," the release said.

Sebi, which first invited comments from market players on short sales in January 2006, however, did not specify any date for implementation saying it will inform the date later after stock exchanges and depositories put in place fool-proof systems.

Some of the features of the short selling rules include a ban on naked short selling - meaning all investors would be required to mandatorily honour their obligation of delivering the securities at the time of settlement (using the SLB scheme). No institutional investor will be allowed to do day trading - virtually prohibiting squaring-off of their transactions intra-day.

At present, there is no prohibition on short selling by retail investors. Institutional investors, viz., foreign institutional investors, mutual funds, banks and insurance companies, are prohibited from short selling under different regulations, and are currently required to settle trades on delivery basis in the cash markets.

Short selling by institutions, which was banned in early 2001 following the Ketan Parekh-scam when stock prices plunged, is regarded by experts as an essential and desirable requirement for a vibrant securities market.

Restrictions on short-selling, according to its votaries, distorts efficient price discovery. By allowing short selling, the market will have much-needed liquidity and help corrections in over-valued stocks.

NSE warns against market-induced investments news

A day after the National Stock Exchange put a freeze on derivative contracts in 13 securities whose market-wide position limit had crossed 95 per cent, the country's leading bourse has asked investors to keep away from rumours and advertisements promising large returns.

NSE, which saw its benchmark Nifty index recorded the biggest single-day loss on Monday, asked investors to tread carefully before investing in equities.

NSE has asked investors to "do a thorough evaluation before trading in any security".

Source - Domain-b