Ashish Rukhaiyar
Mumbai, 6 October 2011
Even as regulators in the developed markets deliberate on the sensitive matter of fees earned by bankers and brokers, the Indian capital market watchdog has hinted its intentions of regulating the commissions of private equity and venture capital f und managers. While the final norms are yet to be announced, various industry bodies are already opposing any such move.
In August, the Securities and Exchange Board of India (Sebi) released a concept paper on proposed alternate investment funds (AIF) regulations. Those were essentially meant to regulate venture capital funds, private equity funds, debt funds, real estate funds and PIPE (private investment in public equity) funds, among others. Further, the regulator said it “may” lay down the fee criteria as well.
“The Board (Sebi) may specify criteria for charging performance fee of the managers of AIF,” says regulation 13(1)(d) of the proposed norms. In other words, Sebi may decide the quantum of fees/commissions that a fund manager can charge from the investors.
Market participants say that any such move by the regulator would prove to be restrictive and impact the overall growth of the fund industry. They feel that since these funds deal with high net-worth individuals and other well-informed investors, negotiations on the fee count should be left to the parties involved.
The industry’s initial reaction, says Gautam Mehra, executive director (tax and regulatory services) of PwC India, has been that given that fund managers in AIFs would deal with sophisticated investors who understand the performance fee criteria. Since this is based on accepted and prevalent market practices, this may continue to be left to individual negotiations.
“This would depend on how the regulations around this are ultimately framed. If they lay down criteria that make the fee charging more restrictive than at present, it would impact the industry players,” he adds.
Interestingly, the Confederation of Indian Industry, while welcoming the proposed AIF norms, has suggested some changes. One of them is on the issue of the regulator retaining the powers to specify criteria for charging performance fees by the fund managers.
The industry body is of the view that the payment of performance fees should be market driven and based on the performance and record of the fund manager. On the other hand, the CFA Institute has suggested that part of the performance fees can be locked in for the duration of the fund.
“The popular industry view seems to be that any form of regulatory control may interfere with the commercials of the fund,” says Ashish Bhakta, partner, Advaya Legal.
“The proposed provision would empower Sebi to specify criteria for charging performance fee of the fund managers in such manner that the performance fee does not encourage excessive risk or highly speculative activities. This would negatively impact the growth of the fund management industry in India. Also the proposed provisions would restrict the ability of parties to come to a mutual understanding under a private contract between them,” he explains.
This is, however, not the first time that the 1992-formed Sebi is regulating the fee structure for the fund industry. In October last year, the regulator specified that portfolio managers should charge a performance-based fee only on the high water mark principle, that is, based on the increase in portfolio value in excess of the previously achieved high water mark.
Thursday, 22 December 2011
Sebi member selection hits CVC hurdle
Ashish Rukhaiyar
Mumbai, 4 October 2011
The Securities and Exchange Board of India (Sebi) will have to wait a little more to get two new whole-time members on board. According to people familiar with the development, the selection of at least one candidate has hit the Central Vigilance Commission (CVC) hurdle. This could delay the whole process.
According to reports, former Central Bank of India chairman and managing director, S Sridhar, and Rajeev Agrawal, a 1983-batch Indian Revenue Services (IRS) officer, have been selected for the members’ post. Industry sources, however, say Sridhar’s selection has been stuck at CVC, as the bank and the former chairman have been named in the V K Shunglu Committee report over alleged irregularities in the Commonwealth Games (CWG).
“Central Bank (of India) was the official banker for the Commonwealth Games and has been named in the report, along with Sridhar, who was at the helm when the games were organised,” said a person privy to the development. “This has led to his selection getting stuck at CVC, though he has said in the past that the allegations are baseless,” he added on the conditions of anonymity.
The Shunglu Committee has alleged in its report that Sridhar was “personally interested” in CWG contracts as a relative was posted in London and was part of the CWG Organising Committee. Sridhar, when contacted, declined to comment on the issue.
Meanwhile, the probe committee has also alleged some irregularities on the bank’s part on matters like accounting treatment of certain expenditures, purchase & distribution of free tickets and entering into sponsorship agreements without prior approval of the finance ministry. Reports, incidentally, suggest that Sridhar has refuted all these allegations, calling it “baseless” that his relative influenced any of his decisions.
The developments would come as a severe blow to Sebi, which has been functioning with only one whole-time member (WTM) since July, when M S Sahoo and K M Abraham retired. At present, Prashant Saran is the lone WTM at Sebi.
Interestingly, Agrawal’s selection has also got delayed due to these developments because, industry sources say, the government wants to notify both the names together and, therefore, is waiting for all the necessary approvals. Once the CVC clearance is received, the names will be sent to the Cabinet’s Appointments Committee, headed by Prime Minister Manmohan Singh.
Mumbai, 4 October 2011
The Securities and Exchange Board of India (Sebi) will have to wait a little more to get two new whole-time members on board. According to people familiar with the development, the selection of at least one candidate has hit the Central Vigilance Commission (CVC) hurdle. This could delay the whole process.
According to reports, former Central Bank of India chairman and managing director, S Sridhar, and Rajeev Agrawal, a 1983-batch Indian Revenue Services (IRS) officer, have been selected for the members’ post. Industry sources, however, say Sridhar’s selection has been stuck at CVC, as the bank and the former chairman have been named in the V K Shunglu Committee report over alleged irregularities in the Commonwealth Games (CWG).
“Central Bank (of India) was the official banker for the Commonwealth Games and has been named in the report, along with Sridhar, who was at the helm when the games were organised,” said a person privy to the development. “This has led to his selection getting stuck at CVC, though he has said in the past that the allegations are baseless,” he added on the conditions of anonymity.
The Shunglu Committee has alleged in its report that Sridhar was “personally interested” in CWG contracts as a relative was posted in London and was part of the CWG Organising Committee. Sridhar, when contacted, declined to comment on the issue.
Meanwhile, the probe committee has also alleged some irregularities on the bank’s part on matters like accounting treatment of certain expenditures, purchase & distribution of free tickets and entering into sponsorship agreements without prior approval of the finance ministry. Reports, incidentally, suggest that Sridhar has refuted all these allegations, calling it “baseless” that his relative influenced any of his decisions.
The developments would come as a severe blow to Sebi, which has been functioning with only one whole-time member (WTM) since July, when M S Sahoo and K M Abraham retired. At present, Prashant Saran is the lone WTM at Sebi.
Interestingly, Agrawal’s selection has also got delayed due to these developments because, industry sources say, the government wants to notify both the names together and, therefore, is waiting for all the necessary approvals. Once the CVC clearance is received, the names will be sent to the Cabinet’s Appointments Committee, headed by Prime Minister Manmohan Singh.
Monday, 19 December 2011
MFs to benefit from proposed AIF regulations
Ashish Rukhaiyar & Chandan Kishore Kant
Mumbai, 30 September 2011
Sebi proposal of minimum Rs 1-crore investment to channelise HNI money towards fund houses.
The proposed regulations for alternative investment funds (AIFs) would come as a blessing in disguise for mutual funds. Market participants say the increase in the minimum investment size is bound to channelise a lot of high net worth money towards the fund industry.
Last month, the Securities and Exchange Board of India (Sebi) released a concept paper on proposed AIF norms. These would cover venture capital funds, private equity funds, debt funds, real estate funds and PIPE (private investment in public equity) funds, among others. It has proposed a minimum investment size of Rs 1 crore. The current norms allow a high net worth individual (HNI) to participate in a portfolio management scheme with as little as Rs 5 lakh.
Market participants say MFs would be the biggest beneficiary of the proposed norms, as a lot of HNIs with an investment corpus of less than Rs 1 crore would not be able to invest in PMS or other funds that come under the purview of AIF regulations. This would make MFs their preferred investment vehicle.
Gautam Mehra, executive director, tax and regulatory services, PwC India, feels the listed companies’ universe would benefit from the proposed norms, as MFs typically invest in companies listed on the stock exchanges.
“Investors in the sub-Rs 1 crore segment may explore redeploying the capital in the listed space through the MF route,” says Mehra. “Second, the investments pooled in by portfolio managers offering standardised strategies with a ticket size in the range of Rs 5 lakh to Rs 25 lakh could also get channelised to MFs, given that the offerings of such schemes are also proposed to be covered by AIF Regulations.”
MF companies have welcomed the proposed regulations. They come at a time when the sector has not been successful in attracting significant inflows from investors. Fund managers are hopeful that with the increase in investment size from Rs 5 lakh per individual to Rs 1 crore, considerable funds will get channelised.
“Earlier, an amount of Rs 5 lakh was a reasonably big sum but now it is no more a big investment. I do expect that some of these funds could come to the fund industry,” said G Pradeepkumar, chief executive officer, Union KBC Mutual Fund.
Mehra says venture capital funds invest largely in unlisted companies and in listed companies only by way of preferential allotment. So, investors who may not have an appetite for the listed space may consider increasing their commitments and continue to invest in AIFs.
The fund industry has been trying to source inflows from tier-I and tier-II cities but have failed at a time when stock markets have falen by close to 20 per cent this year. It has been losing folios continuously.
There are currently 45 players in the domestic MF sector, with overall assets under management (AUM) of Rs 6.96 lakh crore as on August 31. In 2010-11, the industry witnessed a net outflow of Rs 49,406 crore, compared with a net inflow of Rs 83,081 crore in the previous year. The highest outflow, of Rs 13,000 crore, was in equity schemes.
Mumbai, 30 September 2011
Sebi proposal of minimum Rs 1-crore investment to channelise HNI money towards fund houses.
The proposed regulations for alternative investment funds (AIFs) would come as a blessing in disguise for mutual funds. Market participants say the increase in the minimum investment size is bound to channelise a lot of high net worth money towards the fund industry.
Last month, the Securities and Exchange Board of India (Sebi) released a concept paper on proposed AIF norms. These would cover venture capital funds, private equity funds, debt funds, real estate funds and PIPE (private investment in public equity) funds, among others. It has proposed a minimum investment size of Rs 1 crore. The current norms allow a high net worth individual (HNI) to participate in a portfolio management scheme with as little as Rs 5 lakh.
Market participants say MFs would be the biggest beneficiary of the proposed norms, as a lot of HNIs with an investment corpus of less than Rs 1 crore would not be able to invest in PMS or other funds that come under the purview of AIF regulations. This would make MFs their preferred investment vehicle.
Gautam Mehra, executive director, tax and regulatory services, PwC India, feels the listed companies’ universe would benefit from the proposed norms, as MFs typically invest in companies listed on the stock exchanges.
“Investors in the sub-Rs 1 crore segment may explore redeploying the capital in the listed space through the MF route,” says Mehra. “Second, the investments pooled in by portfolio managers offering standardised strategies with a ticket size in the range of Rs 5 lakh to Rs 25 lakh could also get channelised to MFs, given that the offerings of such schemes are also proposed to be covered by AIF Regulations.”
MF companies have welcomed the proposed regulations. They come at a time when the sector has not been successful in attracting significant inflows from investors. Fund managers are hopeful that with the increase in investment size from Rs 5 lakh per individual to Rs 1 crore, considerable funds will get channelised.
“Earlier, an amount of Rs 5 lakh was a reasonably big sum but now it is no more a big investment. I do expect that some of these funds could come to the fund industry,” said G Pradeepkumar, chief executive officer, Union KBC Mutual Fund.
Mehra says venture capital funds invest largely in unlisted companies and in listed companies only by way of preferential allotment. So, investors who may not have an appetite for the listed space may consider increasing their commitments and continue to invest in AIFs.
The fund industry has been trying to source inflows from tier-I and tier-II cities but have failed at a time when stock markets have falen by close to 20 per cent this year. It has been losing folios continuously.
There are currently 45 players in the domestic MF sector, with overall assets under management (AUM) of Rs 6.96 lakh crore as on August 31. In 2010-11, the industry witnessed a net outflow of Rs 49,406 crore, compared with a net inflow of Rs 83,081 crore in the previous year. The highest outflow, of Rs 13,000 crore, was in equity schemes.
India Inc's fund-raising seen below 2008 level
Somasroy Chakraborty & Ashish Rukhaiyar
Mumbai, 28 September 2011
Volatility in local share markets have hit India Inc's equity fund-raising plans, with the total deal value this year set to fall below the level seen in 2008. This has squeezed the fee income of investment banks in the country and triggered job losses in many of these firms.
“This year has been challenging for the primary market. Around $9 billion has been raised so far, and we don't expect much in the last (October-December) quarter,” said Sanjay Sharma, head (equity capital markets), Deutsche Bank Group, India.
In the first eight months this calendar year, Indian companies raised $9.2 billion, compared with $29.9 billion raised in 2010, according to Dealogic data. In 2008, Indian companies raised $13.8 billion through equity issuances.
The fee earned by investment banks so far this year is estimated at around euro 52 million, compared with euro 238 million last year. In 2008, investment banks earned euro98 million by managing equity issuances of domestic firms. The shrinking fee pool has also taken its toll on headcounts, with many banks shrinking their investment banking teams in the last few weeks.
“This would be the most difficult year for equity capital markets in a long time. With PE (price earnings) multiples contracting, promoters are also weary of selling equity. Foreign institutional investors have backed out from emerging markets, including India,” said Tarun Kataria, chief executive, Religare Capital Markets, India.
Bombay Stock Exchange's benchmark index, Sensex, has plunged 17.46 per cent since the beginning of this financial year, making it difficult for corporate entities to raise funds through equity issuances.
While investment banks claimed their bill rates were not affected despite a slowdown in deal flows, they plan to maximise their share in the declining fee pool by offering value-added services.
“For investment banks, the fees, as a percentage of amount raised, has not really come down over the last few years, and we see the differentiation between banks is more in terms of the quality of service offered,” Sharma said.
Deutsche Bank has the largest share of fee income from equity issuances in India so far this year. It earned euro 3.7 million, managing three deals between January and August.
“Market conditions this year have been pretty tough. The ability of Indian companies to raise equity capital in this environment has been limited. The fund flow from foreign institutional investors has remained muted and hence, primary issuances would continue to struggle,” said a senior official in charge of equity capital markets of a British bank in India.
Industry players expect companies in financial services and infrastructure sectors to lead the recovery, once the market volatility subsides.
“Today, rate-sensitive sectors like infrastructure, real estate and banking are not doing well in the secondary market and hence, these would find it difficult to raise money. However, once the market improves, these sectors would pick up first. In terms of products, I expect QIPs (qualified institutional placement) and follow-on offers to take the lead, before IPOs (initial public offers) pick up,” Sharma said.
Mumbai, 28 September 2011
Volatility in local share markets have hit India Inc's equity fund-raising plans, with the total deal value this year set to fall below the level seen in 2008. This has squeezed the fee income of investment banks in the country and triggered job losses in many of these firms.
“This year has been challenging for the primary market. Around $9 billion has been raised so far, and we don't expect much in the last (October-December) quarter,” said Sanjay Sharma, head (equity capital markets), Deutsche Bank Group, India.
In the first eight months this calendar year, Indian companies raised $9.2 billion, compared with $29.9 billion raised in 2010, according to Dealogic data. In 2008, Indian companies raised $13.8 billion through equity issuances.
The fee earned by investment banks so far this year is estimated at around euro 52 million, compared with euro 238 million last year. In 2008, investment banks earned euro98 million by managing equity issuances of domestic firms. The shrinking fee pool has also taken its toll on headcounts, with many banks shrinking their investment banking teams in the last few weeks.
“This would be the most difficult year for equity capital markets in a long time. With PE (price earnings) multiples contracting, promoters are also weary of selling equity. Foreign institutional investors have backed out from emerging markets, including India,” said Tarun Kataria, chief executive, Religare Capital Markets, India.
Bombay Stock Exchange's benchmark index, Sensex, has plunged 17.46 per cent since the beginning of this financial year, making it difficult for corporate entities to raise funds through equity issuances.
While investment banks claimed their bill rates were not affected despite a slowdown in deal flows, they plan to maximise their share in the declining fee pool by offering value-added services.
“For investment banks, the fees, as a percentage of amount raised, has not really come down over the last few years, and we see the differentiation between banks is more in terms of the quality of service offered,” Sharma said.
Deutsche Bank has the largest share of fee income from equity issuances in India so far this year. It earned euro 3.7 million, managing three deals between January and August.
“Market conditions this year have been pretty tough. The ability of Indian companies to raise equity capital in this environment has been limited. The fund flow from foreign institutional investors has remained muted and hence, primary issuances would continue to struggle,” said a senior official in charge of equity capital markets of a British bank in India.
Industry players expect companies in financial services and infrastructure sectors to lead the recovery, once the market volatility subsides.
“Today, rate-sensitive sectors like infrastructure, real estate and banking are not doing well in the secondary market and hence, these would find it difficult to raise money. However, once the market improves, these sectors would pick up first. In terms of products, I expect QIPs (qualified institutional placement) and follow-on offers to take the lead, before IPOs (initial public offers) pick up,” Sharma said.
Sebi questions USE on trade concentration
Ashish Rukhaiyar & Palak Shah
Mumbai, 27 September 2011
Allegations on Jaypee Capital alone accounting for bulk of turnover, something not permitted under the rules.
The United Stock Exchange (USE) has come under the regulatory scanner for alleged concentration of trades by a single member. The regulator has questioned the effectiveness of the exchange’s surveillance and risk mechanism measures that allowed such an occurrence.
According to reports, only a few brokers account for a majority of the volume registered on USE. More important, Gurgaon-based Jaypee Capital, also a shareholder in USE, accounts for nearly 80 per cent of the turnover. USE currently operates in the currency derivatives space and offers currency futures in all the four currency pairs permitted by the Securities and Exchange Board of India (Sebi). It is also one of the only two stock exchanges in the country to offer currency options in the dollar-rupee pair.
“This puts a big question mark on the surveillance mechanism, as there should have been alerts thrown up by the system and the exchange should have taken note of it," said an official familiar with the development. "Questions have been raised as this is something the regulator is not comfortable with. It is against the spirit of the law."
Sebi has clearly said on numerous occasions that concentration of positions with a single member will not be entertained and exchanges should have robust surveillance and risk mechanism measures to monitor such developments.
The regulator has also directed exchanges to put in place systems to monitor "position concentration, open interest across trading members... alerts on large traded quantity." Further, "exchanges were also advised to suitably warn their members against self trades," in a surveillance meet held in December 2008.
Jaypee Capital is a direct shareholder in USE. Gaurav Arora, managing director and founder of the brokerage entity, and his son, Saurav Arora, hold another one per cent each. USE chief executive officer and managing director, T S Nayaranaswami, could not be reached for comments, despite repeated attempts.
"Concentration of positions with one single entity is a clear breach of FUTP (Fraudulent and Unfair Trade Practices)," says Ameet Naik of Naik, Naik & Co. "One cannot have brokers with trading rights, as that was the whole idea behind pushing for demutualisation. Then, there are also codes and ethics followed by brokers, violation of which could have serious impact," says Naik, who specialises in securities regulations.
Data shows that while Jaypee Capital accounted for nearly 80 per cent of the turnover, some of the banks (Andhra Bank, Union Bank of India, Indian Bank, Bank of India and Bank of Baroda) were responsible for a marginal share in the volume. USE’s stakeholders include the Bombay Stock Exchange, which owns 15 per cent, along with 28 banks and three corporate houses.
Last Friday, the volume on USE dropped significantly to Rs 6,514 crore after clocking a little over Rs 12,000 crore the previous day. Interestingly, MCX Stock Exchange (MCX-SX) and the National Stock Exchange registered volumes of Rs 29,992 crore and Rs 35,393 crore, respectively.
On Monday, USE registered a turnover of Rs 8,038 crore, while MCX-SX and NSE clocked volumes of Rs 26,616 crore and Rs 19,067 crore. USE’s first-day turnover had surpassed the combined currency segment of NSE and MCX-SX. The exchange had made a big-bang debut last year, cornering a near 52 per cent market share in the currency derivatives segment. Jaypee and Union Bank, incidentally, conducted the first trade on the exchange.
REGULATOR TALK
Sebi says such practices are against the spirit of law
Surveillance, risk mechanisms should throw such alerts, the regulator asserts
Jaypee Capital accounted for nearly 80% volume on USE
Jaypee is a shareholder in USE; public sector stakeholder banks account for only a marginal share in volumes
Mumbai, 27 September 2011
Allegations on Jaypee Capital alone accounting for bulk of turnover, something not permitted under the rules.
The United Stock Exchange (USE) has come under the regulatory scanner for alleged concentration of trades by a single member. The regulator has questioned the effectiveness of the exchange’s surveillance and risk mechanism measures that allowed such an occurrence.
According to reports, only a few brokers account for a majority of the volume registered on USE. More important, Gurgaon-based Jaypee Capital, also a shareholder in USE, accounts for nearly 80 per cent of the turnover. USE currently operates in the currency derivatives space and offers currency futures in all the four currency pairs permitted by the Securities and Exchange Board of India (Sebi). It is also one of the only two stock exchanges in the country to offer currency options in the dollar-rupee pair.
“This puts a big question mark on the surveillance mechanism, as there should have been alerts thrown up by the system and the exchange should have taken note of it," said an official familiar with the development. "Questions have been raised as this is something the regulator is not comfortable with. It is against the spirit of the law."
Sebi has clearly said on numerous occasions that concentration of positions with a single member will not be entertained and exchanges should have robust surveillance and risk mechanism measures to monitor such developments.
The regulator has also directed exchanges to put in place systems to monitor "position concentration, open interest across trading members... alerts on large traded quantity." Further, "exchanges were also advised to suitably warn their members against self trades," in a surveillance meet held in December 2008.
Jaypee Capital is a direct shareholder in USE. Gaurav Arora, managing director and founder of the brokerage entity, and his son, Saurav Arora, hold another one per cent each. USE chief executive officer and managing director, T S Nayaranaswami, could not be reached for comments, despite repeated attempts.
"Concentration of positions with one single entity is a clear breach of FUTP (Fraudulent and Unfair Trade Practices)," says Ameet Naik of Naik, Naik & Co. "One cannot have brokers with trading rights, as that was the whole idea behind pushing for demutualisation. Then, there are also codes and ethics followed by brokers, violation of which could have serious impact," says Naik, who specialises in securities regulations.
Data shows that while Jaypee Capital accounted for nearly 80 per cent of the turnover, some of the banks (Andhra Bank, Union Bank of India, Indian Bank, Bank of India and Bank of Baroda) were responsible for a marginal share in the volume. USE’s stakeholders include the Bombay Stock Exchange, which owns 15 per cent, along with 28 banks and three corporate houses.
Last Friday, the volume on USE dropped significantly to Rs 6,514 crore after clocking a little over Rs 12,000 crore the previous day. Interestingly, MCX Stock Exchange (MCX-SX) and the National Stock Exchange registered volumes of Rs 29,992 crore and Rs 35,393 crore, respectively.
On Monday, USE registered a turnover of Rs 8,038 crore, while MCX-SX and NSE clocked volumes of Rs 26,616 crore and Rs 19,067 crore. USE’s first-day turnover had surpassed the combined currency segment of NSE and MCX-SX. The exchange had made a big-bang debut last year, cornering a near 52 per cent market share in the currency derivatives segment. Jaypee and Union Bank, incidentally, conducted the first trade on the exchange.
REGULATOR TALK
Sebi says such practices are against the spirit of law
Surveillance, risk mechanisms should throw such alerts, the regulator asserts
Jaypee Capital accounted for nearly 80% volume on USE
Jaypee is a shareholder in USE; public sector stakeholder banks account for only a marginal share in volumes
Sebi sees slowdown in decision-making
Ashish Rukhaiyar
Mumbai, 21 September 2011
The Securities and Exchange Board of India (Sebi) is short of senior management. Besides, recent controversies surrounding former whole-time member K M Abraham’s letter to the finance ministry had slowed down the decision-making process significantly, said market participants.
This was reflected in some of the recent meetings that the finance ministry has had with market participants, including stock exchanges. Participants in the meeting said queries from the finance ministry on progress on the separate platform for small and medium enterprises could not be addressed because Sebi was represented by a northern zone official. Similarly, the takeover code has not been notified though it had been cleared by both the finance ministry and the Sebi over a month before.
The vacancies created by the exit of two whole-time directors, M S Sahoo and K M Abraham, who completed their terms, haven’t been filled for two months. At present, there is only one whole-time director – Prashant Saran – with the market regulator.
“The working of Sebi has certainly been affected, as the work that was divided among three members is now being looked after by just one,” a Sebi official said. “The Sebi mandate encompasses a lot of segments and it is difficult for one person to look after so many verticals simultaneously,” he added, wishing not to be named.
Some reports suggest that former Central Bank of India chairman and managing director S Sridhar, along with Rajeev Agrawal, a 1983-batch Indian Revenue Services (IRS) officer, have been selected as members. A formal notification is still awaited.
Also, while three of the four executive directors (ED) — K N Vaidyanathan, J N Gupta and Pradnya Sarvade — have completed their terms, only one ED, J Ranganayakulu, was granted an extension. According to Sebi sources, the three EDs have been replaced by S Ravindran, S Raman and R K Padmanabhan.
Interestingly, there has been no formal notification about the appointments of Raman and R K Padmanabhan on the market regulator’s website. Padmanabhan, a Maharashtra cadre IPS officer, is yet to join Sebi, while the other three have assumed their new roles.
Saran, the lone whole-time member, is looking after all the verticals till the new members assume charge. According to the Sebi website, Saran is directly in-charge of collective investment schemes, foreign institutional investors and the enquiry & adjudication department. The others are handled by executive directors who report to Saran.
As a whole-time member, Sahoo was in-charge of derivatives & new products, legal affairs, enforcement and regulation & supervision of market intermediaries, while Abraham handled corporate finance, investigations, vigilance and integrated surveillance, among other things.
Even the court recently remarked in a high-profile case that the affected party should go back to Sebi for a dispassionate hearing, as a new regime was in place.
Mumbai, 21 September 2011
The Securities and Exchange Board of India (Sebi) is short of senior management. Besides, recent controversies surrounding former whole-time member K M Abraham’s letter to the finance ministry had slowed down the decision-making process significantly, said market participants.
This was reflected in some of the recent meetings that the finance ministry has had with market participants, including stock exchanges. Participants in the meeting said queries from the finance ministry on progress on the separate platform for small and medium enterprises could not be addressed because Sebi was represented by a northern zone official. Similarly, the takeover code has not been notified though it had been cleared by both the finance ministry and the Sebi over a month before.
The vacancies created by the exit of two whole-time directors, M S Sahoo and K M Abraham, who completed their terms, haven’t been filled for two months. At present, there is only one whole-time director – Prashant Saran – with the market regulator.
“The working of Sebi has certainly been affected, as the work that was divided among three members is now being looked after by just one,” a Sebi official said. “The Sebi mandate encompasses a lot of segments and it is difficult for one person to look after so many verticals simultaneously,” he added, wishing not to be named.
Some reports suggest that former Central Bank of India chairman and managing director S Sridhar, along with Rajeev Agrawal, a 1983-batch Indian Revenue Services (IRS) officer, have been selected as members. A formal notification is still awaited.
Also, while three of the four executive directors (ED) — K N Vaidyanathan, J N Gupta and Pradnya Sarvade — have completed their terms, only one ED, J Ranganayakulu, was granted an extension. According to Sebi sources, the three EDs have been replaced by S Ravindran, S Raman and R K Padmanabhan.
Interestingly, there has been no formal notification about the appointments of Raman and R K Padmanabhan on the market regulator’s website. Padmanabhan, a Maharashtra cadre IPS officer, is yet to join Sebi, while the other three have assumed their new roles.
Saran, the lone whole-time member, is looking after all the verticals till the new members assume charge. According to the Sebi website, Saran is directly in-charge of collective investment schemes, foreign institutional investors and the enquiry & adjudication department. The others are handled by executive directors who report to Saran.
As a whole-time member, Sahoo was in-charge of derivatives & new products, legal affairs, enforcement and regulation & supervision of market intermediaries, while Abraham handled corporate finance, investigations, vigilance and integrated surveillance, among other things.
Even the court recently remarked in a high-profile case that the affected party should go back to Sebi for a dispassionate hearing, as a new regime was in place.
Slump forces MFs to bargain on brokerage
Ashish Rukhaiyar & Chandan Kishore Kant
Mumbai, 20 September 2011
Mutual fund houses are looking at all possible ways to reduce costs. As the latest measure, they have started negotiating with their empanelled brokers on the quantum of brokerage to be paid for every trade. Larger fund houses have already slashed the brokerage to rein in overhead costs and falling margins in a weak market.
According to institutional traders, some top fund houses reduced the brokerage by up to 25 per cent in the recent past. A large domestic fund entity backed by a leading corporate house is believed to have slashed the same from 15 basis points (bps) to 10 bps for its largest broker. Another fund house — a joint venture between an Indian and a foreign entity — has brought it from 20 bps to 15 bps.
While market participants say the trend is a direct outcome of weak market sentiment and falling volumes, which have pushed up the cost of trading, technology advancement in the form of direct market access (DMA) has also acted as a catalyst.
“Currently, the trend is limited to some large fund houses, but it can become an industry phenomena,” said an institutional dealer who trades on behalf of some domestic fund houses. “While a 25 per cent cut in brokerage has become common, some fund houses have also started giving single-digit commission to the smaller brokerages on their panel,” he added.
Meanwhile, fund house officials say they regularly negotiate the brokerage with their panel, depending on the quantum of trades routed through various brokerages. Incidentally, the move comes close on the heels of many fund houses cutting down on the number of empanelled brokerages.
“We keep negotiating and try to keep the brokerages at a minimum,” said Ajit Menon, executive vice-president & head of sales, DSP BlackRock. In a similar context, an official from Religare Mutual Fund said “it is an ongoing process of negotiating on brokerages as a part of prudent management.”
An official from one of the largest domestic fund houses said the increased acceptance of DMA among MFs had contributed to the fall in brokerage, as that involved minimal or no efforts at the broker’s end. “The broker has absolutely no role to play when orders are routed through DMA, so the question of high brokerage does not emerge,” said the sales head of a domestic fund house.
“Many fund houses have adopted it, as it lowers the impact cost. So, the average brokerage is witnessing a fall,” he added.
DMA is a facility which allows brokers to offer clients direct access to the exchange trading system through the broker’s infrastructure, without manual intervention by the broker. The Securities and Exchange Board of India also encourages DMA, as it reduces the probability of front-running activities.
Mumbai, 20 September 2011
Mutual fund houses are looking at all possible ways to reduce costs. As the latest measure, they have started negotiating with their empanelled brokers on the quantum of brokerage to be paid for every trade. Larger fund houses have already slashed the brokerage to rein in overhead costs and falling margins in a weak market.
According to institutional traders, some top fund houses reduced the brokerage by up to 25 per cent in the recent past. A large domestic fund entity backed by a leading corporate house is believed to have slashed the same from 15 basis points (bps) to 10 bps for its largest broker. Another fund house — a joint venture between an Indian and a foreign entity — has brought it from 20 bps to 15 bps.
While market participants say the trend is a direct outcome of weak market sentiment and falling volumes, which have pushed up the cost of trading, technology advancement in the form of direct market access (DMA) has also acted as a catalyst.
“Currently, the trend is limited to some large fund houses, but it can become an industry phenomena,” said an institutional dealer who trades on behalf of some domestic fund houses. “While a 25 per cent cut in brokerage has become common, some fund houses have also started giving single-digit commission to the smaller brokerages on their panel,” he added.
Meanwhile, fund house officials say they regularly negotiate the brokerage with their panel, depending on the quantum of trades routed through various brokerages. Incidentally, the move comes close on the heels of many fund houses cutting down on the number of empanelled brokerages.
“We keep negotiating and try to keep the brokerages at a minimum,” said Ajit Menon, executive vice-president & head of sales, DSP BlackRock. In a similar context, an official from Religare Mutual Fund said “it is an ongoing process of negotiating on brokerages as a part of prudent management.”
An official from one of the largest domestic fund houses said the increased acceptance of DMA among MFs had contributed to the fall in brokerage, as that involved minimal or no efforts at the broker’s end. “The broker has absolutely no role to play when orders are routed through DMA, so the question of high brokerage does not emerge,” said the sales head of a domestic fund house.
“Many fund houses have adopted it, as it lowers the impact cost. So, the average brokerage is witnessing a fall,” he added.
DMA is a facility which allows brokers to offer clients direct access to the exchange trading system through the broker’s infrastructure, without manual intervention by the broker. The Securities and Exchange Board of India also encourages DMA, as it reduces the probability of front-running activities.
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