Applause!! A standing ovation!! SEBI indeed deserves all the accolades it can have today. Without bending to the market pressures, SEBI has done what it is always supposed to do – protect the interest of the investors.
The much awaited meeting of SEBI on the controversial participatory notes (PN) issue was finally over and it was a relief to know that SEBI is doing what is conducive to the betterment of the market and the country. Bringing in more transparency, the new norms announced by SEBI will go a long way in making it easier for the authorities to keep a track over the source of funds.
The new norms would come into effect from 26th October 2007. A quick look at what has been announced:
The proposal to disallow P-Notes with underlying as derivatives has been cleared.
Sub-accounts of Foreign Institutional Investors (FIIs) should immediately stop issuing P-Notes.
FIIs have to wind up P-notes for investing in derivatives within 18 months.
P-Notes can only be issued to regulated entities.
Pension funds, charities and endowments can register, even if not regulated, and they will be treated as separate category.
Proprietary and corporate sub-accounts can continue their business until they get registration.
Some sub-accounts that applied with SEBI for conversion to FIIs have been cleared, while others are still to be approved.
The date for the calculation of Asset Under Custody (AUC) will be September 30, 2007.
Broad-based sub-accounts must have at least 20 investors and they cannot have a single person holding over 49% of AUC.
FIIs who have issued P-notes, less than 40 per cent of their assets under custody, can issue additional instruments at the rate of five per cent of their assets.
FIIs who have issued P-notes, of more than 40 per cent, of their assets, could issue such instruments only if they cancel, redeem, or close their existing PNs.
P-notes cannot be issued for more than 40 per cent of their assets under custody.
The final regulation of SEBI is more or less on the draft proposal except for shifting date to September 30th for AUC calculation. Also, inclusion of Pension funds, societies and charities, even though unregulated, has enlarged the list of FIIs. Even composition of broadbased sub-account now must have 20 investors with singe investor not having more than 49% stake. Also, track record of 1 year gets applied to the fund manager and not to the fund, which would be a big relief for new funds to get registered as FII, immediately. No dilution in KYC norms has been made. Proprietory Sub Account and Corporate Sub Account can continue to do business in transition period, pending registration of applications.
It is likely that these regulations would have far reaching positive impacts on regulating foreign flows into the Indian Capital Markets and not restricting them in any manner. Market would become healthy, as regulated money would flow in, hereafter.
The much awaited meeting of SEBI on the controversial participatory notes (PN) issue was finally over and it was a relief to know that SEBI is doing what is conducive to the betterment of the market and the country. Bringing in more transparency, the new norms announced by SEBI will go a long way in making it easier for the authorities to keep a track over the source of funds.
The new norms would come into effect from 26th October 2007. A quick look at what has been announced:
The proposal to disallow P-Notes with underlying as derivatives has been cleared.
Sub-accounts of Foreign Institutional Investors (FIIs) should immediately stop issuing P-Notes.
FIIs have to wind up P-notes for investing in derivatives within 18 months.
P-Notes can only be issued to regulated entities.
Pension funds, charities and endowments can register, even if not regulated, and they will be treated as separate category.
Proprietary and corporate sub-accounts can continue their business until they get registration.
Some sub-accounts that applied with SEBI for conversion to FIIs have been cleared, while others are still to be approved.
The date for the calculation of Asset Under Custody (AUC) will be September 30, 2007.
Broad-based sub-accounts must have at least 20 investors and they cannot have a single person holding over 49% of AUC.
FIIs who have issued P-notes, less than 40 per cent of their assets under custody, can issue additional instruments at the rate of five per cent of their assets.
FIIs who have issued P-notes, of more than 40 per cent, of their assets, could issue such instruments only if they cancel, redeem, or close their existing PNs.
P-notes cannot be issued for more than 40 per cent of their assets under custody.
The final regulation of SEBI is more or less on the draft proposal except for shifting date to September 30th for AUC calculation. Also, inclusion of Pension funds, societies and charities, even though unregulated, has enlarged the list of FIIs. Even composition of broadbased sub-account now must have 20 investors with singe investor not having more than 49% stake. Also, track record of 1 year gets applied to the fund manager and not to the fund, which would be a big relief for new funds to get registered as FII, immediately. No dilution in KYC norms has been made. Proprietory Sub Account and Corporate Sub Account can continue to do business in transition period, pending registration of applications.
It is likely that these regulations would have far reaching positive impacts on regulating foreign flows into the Indian Capital Markets and not restricting them in any manner. Market would become healthy, as regulated money would flow in, hereafter.
Source:sptulsian.com
