CIR/MRD/DP/03/2013 dated January 24, 2013

To

All Stock Exchanges and Clearing Corporations

1. The market for debt securities differs from equity markets in several ways such as risk, returns, liquidity, type of participants and method of trading. While publicly issued debt securities are listed, traded and settled in a manner similar to equity, privately placed debt is usually traded between institutional investors on ‘Over the Counter’ (OTC) basis. Such OTC transactions are mandatorily reported on reporting platforms at FIMMDA, BSE and NSE. The settlement for such transactions is different from that in equity markets or publicly issued debt securities.

2. Whereas the equity markets in India offer trading infrastructure comparable to the best available globally, the debt markets lack such infrastructure. In order to cater to the unique characteristics of debt markets, it has been decided to provide dedicated a debt segment on the stock exchanges.

3. The debt segment shall offer separate trading, clearing, settlement, reporting facilities and membership to deal in:

(i) “debt securities” as defined in Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008;

(ii) Government Securities, Treasury Bills, State Government loans, SLR and Non-SLR Bonds issued by Financial Institutions, municipal bonds, single bond repos, basket repos and CBLO kind of products subject to RBI approval, where required;

(iii) Securitized debt instruments as defined in SEBI (Public Offer and Listing of Securitised Debt Instruments) Regulations, 2008;

(iv) any other debt instruments as may be specified from time to time by the competent authority.

4. An existing stock exchange or new stock exchange desirous of setting up debt segment may make an application to SEBI, providing operational, regulatory and any other necessary details.

5. The broad framework /features for debt segment shall be as under-

(A) Listing:

This segment shall list all the securities and debt instruments mentioned at para 3 above.

(B) Trading:

(i) The debt segment shall offer electronic, screen based trading providing for order matching, request for quote, negotiated trades etc.

(ii) The trading facility may be provided using exchange network including using access methods such as internet trading, mobile trading or any other methods specified by SEBI.

(iii) The debt segment shall provide separate platforms for the markets described below-

a. Retail market – which shall be a market for listing of and trading in publicly-issued debt instruments and where participation by registered trading members can be on their own account or for execution of orders placed their clients.

b. Institutional market – which shall be a market for non-publicly-issued debt instruments with a market lot size of minimum Rs 1 crore.

(iv) In addition to institutional investors, Direct Market Access (DMA) facility shall be extended to other investors to participate in Institutional market of debt segment. In this regard, the provisions as stipulated in SEBI circular MRD/ DoP/SE/Cir- 7 /2008 dated April 03, 2008, MRD/DoP/SE/Cir- 03 /2009 dated February 20, 2009 and CIR/MRD/DP/ 20 /2012 August 02, 2012 and modifications thereto shall be applicable.

(C) Trading Rules:

(i) The trading hours shall be from 9:00 hours to 17:00 hours to be in alignment with trading hours of government securities as issued by RBI.

(ii) The day count convention of Actual/Actual shall be followed for calculating interest rates.

(iii) The stock exchange shall facilitate availability of price quotes on clean price, dirty price and yield.

(iv) There shall be no shut period during which trades/ transfers are restricted for payment of interest or part redemptions. For other corporate actions such as redemptions/ put-call options, issuers may choose to specify a shut period.

(v) The record date shall be fixed not more than 15 days prior to date of corporate action which shall be displayed on trading terminal by stock exchanges.

(vi) In case of negotiated trades by members of the debt segment, the trades shall be reported to stock exchange within 30 minutes of the trade.

(D) Clearing and Settlement:

(i) All trades shall be cleared and settled through a clearing corporation. For this purpose, all trading members shall be self clearing members or may clear through a clearing member.

(ii) The settlement shall depend on the market type, as given below:

a) For institutional market: All trades shall be settled on T+1 rolling settlement on DVP-I basis using RBI RTGS account. Stock exchanges/clearing corporation may opt to provide clearing and settlement on DVP-II or DVP-III basis for this market in future and shall put in place appropriate risk management framework for the same.

b) For retail market: The trades shall be settled on T+2 rolling settlement on DVP-III basis with settlement guarantee.

(E) Risk management framework:

(i) For retail market, a uniform margin rate of 10% shall be applicable on debt instruments with rating of AA or above (or with similar rating nomenclature) by recognised credit rating agencies and 25% for all other debt instruments. Further, in case of shortages, there shall be compulsory close-out with a mark up of 5% in case of debt instruments which are assigned a credit rating of AA and above and 10% in case of other debt instruments.

(ii) For institutional market, as and when settlement is done on DVP-II or DVP-III basis, appropriate margins may be prescribed after approval by SEBI.

(iii) The clearing corporation shall specify appropriate risk management framework for each market, wherein it shall, inter-alia, provide for computation and collection of margins, capital adequacy norms and collateral requirements for the clearing members, settlement guarantee fund as applicable. This shall be approved by SEBI.

(F) Trade repository:

With an objective to have centralised repository for trades in debt instruments, the stock exchanges shall report trade information to a common trade repository as may be specified by SEBI.

(G) Membership:

(i) Any entity desirous of becoming trading member, self clearing member and/or clearing member of debt segment shall seek registration under SEBI (Stock Broker and Sub-Broker) Regulations, 1992.

(ii) Institutions such as scheduled commercial banks, primary dealers, pension funds, provident funds, insurance companies, mutual funds and any other investors as may be specified by sectoral regulators from time to time, can trade on the debt segment either as clients of registered trading members or directly as trading member on proprietary basis only (i.e own-account trades only). Such institutions desirous of trading on own account only shall be given trading membership under SEBI (Stock Broker and Sub-Broker) Regulations, 1992 as proprietary trading member.

(iii) For an interim period of six months from the date of this circular or till the application for registration as per amended SEBI (Stock Broker and Sub-Broker) Regulations,1992 is refused by the Board or till cessation of membership, whichever is earlier, the transitional provisions shall be –

a. Institutional market of debt segment: Any existing registered trading member and/or clearing member/self clearing member in derivative segment or currency derivatives segment desirous of trading or clearing trades in debt segment shall be permitted to trade or clear trades.

b. Retail market of debt segment: Any existing registered stock broker/trading member and /or clearing member/self clearing desirous of trading or clearing trades in debt segment shall be permitted to trade or clear trades.

(iv) The trading member, proprietary trading member, clearing member and self clearing member of debt segment shall have net worth and deposit as prescribed in SEBI (Stock Broker and Sub-broker) Regulations, 1992.

(v) The Base Minimum Capital for stock broker/trading member shall be in line with SEBI circular dated December 19, 2012.

(vi) The stock exchanges and clearing corporation may specify additional membership criteria for trading member/proprietary trading member and clearing member/self clearing member respectively.

(H) Market Making:

With the view to infuse liquidity in the market, market makers shall be permitted in the debt segment. Market making may be provided by merchant bankers, issuers through brokers or any other entity as may be specified. The rules for market making shall be specified by the stock exchanges with approval of SEBI.

6. The stock exchanges and clearing corporations desirous of introducing debt segment are advised to –

(i) Incorporate /frame separate Bye Laws, Rules and Regulations on debt segment in consonance with aforesaid guidelines

(ii) Make necessary amendment to their existing byelaws, rules and/or regulations , if required

(iii) Send duly completed application for introducing debt segment to SEBI, along with necessary byelaws and rules.

7. This circular is being issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

Click here to download the above Circular in PDF Format.

Source: Securities and Exchange Board of India.

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CIRCULAR, CIR/MIRSD/2/2013, dated January 24, 2013

SEBI Registered Intermediaries:

1. Stock Brokers through Recognized Stock Exchanges

2. Depository Participants (DPs) through Depositories

3. Mutual Funds (MFs)

4. Association of Mutual Funds in India (AMFI)

5. Portfolio Managers (PMs)

6. KYC Registration Agencies (KRAs)

7. Alternate Investment Funds (AIFs)

8. Collective Investment Schemes (CIS)

9. Investment Advisers (IAs)

1. SEBI Master Circular No. CIR/ISD/AML/3/2010 dated December 31, 2010 has mandated all registered intermediaries to obtain, as part of their Client Due Diligence policy, sufficient information from their clients in order to identify and verify the identity of persons who beneficially own or control the securities account. The beneficial owner has been defined in the circular as the natural person or persons who ultimately own, control or influence a client and/or persons on whose behalf a transaction is being conducted, and includes a person who exercises ultimate effective control over a legal person or arrangement.

2. SEBI has also prescribed uniform Know Your Client (KYC) requirements for the securities markets vide circular nos. CIR/MIRSD/16/2011 dated August 22, 2011 and MIRSD/SE/Cir-21/2011 dated October 5, 2011. The SEBI KYC Registration Agency (KRA) Regulations, 2011 have been notified and guidelines have been issued under these regulations from time to time.

3. Further, the Prevention of Money Laundering Rules, 2005 also require that every banking company, financial institution and intermediary, as the case may be, shall identify the beneficial owner and take all reasonable steps to verify his identity. The Government of India in consultation with the regulators has now specified a uniform approach to be followed towards determination of beneficial ownership. Accordingly, the intermediaries shall comply with the following guidelines.

A. For clients other than individuals or trusts:

4. Where the client is a person other than an individual or trust, viz., company, partnership or unincorporated association/body of individuals, the intermediary shall identify the beneficial owners of the client and take reasonable measures to verify the identity of such persons, through the following information:

a. The identity of the natural person, who, whether acting alone or together, or through one or more juridical person, exercises control through ownership or who ultimately has a controlling ownership interest.

Explanation: Controlling ownership interest means ownership of/entitlement to:

i. more than 25% of shares or capital or profits of the juridical person, where the juridical person is a company;

ii. more than 15% of the capital or profits of the juridical person, where the juridical person is a partnership; or

iii. more than 15% of the property or capital or profits of the juridical person, where the juridical person is an unincorporated association or body of individuals.

b. In cases where there exists doubt under clause 4 (a) above as to whether the person with the controlling ownership interest is the beneficial owner or where no natural person exerts control through ownership interests, the identity of the natural person exercising control over the juridical person through other means.

Explanation: Control through other means can be exercised through voting rights, agreement, arrangements or in any other manner.

c. Where no natural person is identified under clauses 4 (a) or 4 (b) above, the identity of the relevant natural person who holds the position of senior managing official.

B. For client which is a trust:

5. Where the client is a trust, the intermediary shall identify the beneficial owners of the client and take reasonable measures to verify the identity of such persons, through the identity of the settler of the trust, the trustee, the protector, the beneficiaries with 15% or more interest in the trust and any other natural person exercising ultimate effective control over the trust through a chain of control or ownership.

C. Exemption in case of listed companies:

6. Where the client or the owner of the controlling interest is a company listed on a stock exchange, or is a majority-owned subsidiary of such a company, it is not necessary to identify and verify the identity of any shareholder or beneficial owner of such companies.

D. Applicability for foreign investors:

7. Intermediaries dealing with foreign investors’ viz., Foreign Institutional Investors, Sub Accounts and Qualified Foreign Investors, may be guided by the clarifications issued vide SEBI circular CIR/MIRSD/11/2012 dated September 5, 2012, for the purpose of identification of beneficial ownership of the client.

E. Implementation:

8. The provisions of this circular shall come into force with immediate effect. Intermediaries are directed to review their Know Your Client (KYC) and Anti-Money Laundering (AML) policies accordingly.

9. The Stock Exchanges and Depositories are directed to:

a. bring the provisions of this circular to the notice of the Stock Brokers and Depository Participants, as the case may be, and also disseminate the same on their websites;

b. make amendments to the relevant bye-laws, rules and regulations for the implementation of the above decision in co-ordination with one another, as considered necessary;

c. monitor the compliance of this circular through half-yearly internal audits and inspections; and

d. communicate to SEBI, the status of the implementation of the provisions of this circular.

10. In case of mutual funds, compliance of this circular shall be monitored by the Boards of the Asset Management Companies and the Trustees and in case of other intermediaries, by their Board of Directors.

11. This circular is issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities markets.

Click here to download the above Circular in PDF Format.

Source: Securities and Exchange Board of India.


Application Supported by Blocked Amount (ASBA) Facility

CIR/CFD/DIL/ 4 /2013 dated January 23, 2013

To

To All Stock Exchanges

To All Registered Merchant Bankers

To All Registered Registrars to an Issue

To All Registered Bankers to an Issue

To All Registered Stock Brokers

1. SEBI, vide Circular No. CIR/CFD/DIL/8/2010 dated October 12, 2010, enabled the syndicate /sub-syndicate members to procure ASBA forms (hereinafter referred as “Syndicate ASBA”) from the investors, upload the relevant details in the bidding platform and forward the forms to the SCSBs for signature verification, blocking of funds, etc., and thereafter, for forwarding the forms to the registrar to the issue.

2. Pursuant to the above, SEBI, vide Circular No. CIR/CFD/DIL/1/2011 date April 29, 2011, enabled the ASBA facility through syndicate / sub syndicate members from 12 bidding centers and advised all the SCSBs which are providing ASBA facility in any of these 12 centers, to name atleast one branch where syndicate / sub-syndicate members can submit the ASBA forms.

3. Further, SEBI, vide Circular No. CIR/CFD/14/2012 dated October 04, 2012 introduced an additional mechanism for investors to submit application forms in public issues using the stock broker (“broker”) network of Stock Exchanges, who may not be syndicate members in an issue. The said Circular envisages enabling the facility to submit the application forms in more than 1000 locations which are part of the nationwide broker network of the Stock Exchanges, by March 1, 2013.

4. In partial modification of the Circular No. CIR/CFD/DIL/1/2011 date April 29, 2011 and in order to facilitate syndicate / sub-syndicate members/ non-syndicate members to accept ASBA forms from investors in the locations:

a. All the SCSBs having a branch in the location of broker centers of stock exchanges, notified in terms of clause 6 of Circular dated October 4, 2012, are required to name at least one branch before March 1, 2012, where syndicate / sub-syndicate members/ non-syndicate members can submit the ASBA forms.

b. The Stock Exchanges shall ensure that the details of the locations of their broker centers, be disclosed on their websites and are regularly updated in terms of Circular dated October 4, 2012.

5. Merchant Bankers shall ensure that appropriate disclosures are made in the offer document in this regard.

6. All intermediaries are directed to comply with the instructions contained in this circular.

7. This circular shall be applicable for Red Herring Prospectus/ Prospectus / Letter of Offer filed with Registrar of Companies/ Stock Exchanges, as the case may be, on or after March 1, 2013.

8. This circular is issued in exercise of the powers conferred under Section 11 read with Section 11A of the Securities and Exchange Board of India Act, 1992.

9. This circular is available on SEBI website at www.sebi.gov.in under the categories “Legal Framework” and “Circulars”.

Click here to download the complete text of the above Circular in PDF Format.

Source: Securities and Exchange Board of India.


CCI Issues Cease and Desist Order against Northern India Motion Pictures Association

The Competition Commission of India passed its final order today against Northern India Motion Pictures Association (NIMPA) directing it to cease and desist from indulging in anti-competitive conduct. The order has been issued in a case filed by M/s Shri Ashtavinayak Cine Vision Limited against NIMPA and other film associations alleging inter alia contravention of the provisions of sections 3 (anti-competitive agreements)of the Competition Act, 2002.

The Commission found NIMPA’s practices of pressurizing the distributors to settle the monetary disputes with its members to be in contravention of the provisions of Competition Act. Accordingly, the Commission also directed NIMPA to file an undertaking regarding compliance of its order within a period of 30 days from the receipt of the order.

As NIMPA was already directed by the Commission in earlier cases to suitably modify its Articles of Association, rules and regulations and remove the condition of compulsory registration of films as a pre-condition for release of any film, the Commission did not find it necessary to pass similar directions again in the present case. The Commission also did not find it appropriate to impose any penalty upon NIMPA in light of the facts and circumstances of the present case.

The order of Commission has been passed in Case No. 71 of 2011 and a copy of the order has been uploaded on the website of CCI at www.cci.gov.in.

Source: Press Information Bureau.


Establishment of Connectivity with both depositories NSDL and CDSL- Companies eligible for shifting from Trade for Trade Settlement (TFTS) to Normal Rolling Settlement

CIRCULAR, CIR/MRD/DP/ 01 /2013, dated January 21, 2013

To,

All Stock Exchanges

1. It is observed from the information provided by the depositories that the companies listed in Annexure ‘A’ have established connectivity with both the depositories.

2. The stock exchanges may consider shifting the trading in these securities to normal Rolling Settlement subject to the following:

a) At least 50% of other than promoter holdings as per clause 35 of Listing Agreement are in dematerialized mode before shifting the trading in the securities of the company from TFTS to normal Rolling Settlement. For this purpose, the listed companies shall obtain a certificate from its Registrar and Transfer Agent (RTA) and submit the same to the stock exchange/s. However, if an issuer-company does not have a separate RTA, it may obtain a certificate in this regard from a practicing company Secretary/Chartered Accountant and submit the same to the stock exchange/s.

b) There are no other grounds/reasons for continuation of the trading in TFTS.

3. The Stock Exchanges are advised to report to SEBI, the action taken in this regard in the Monthly/Quarterly Development Report.

                                                                        Annexure A

Sr. No.

Name of the Company

ISIN

1.

Elder Projects Limited INE975E01017

2.

Risa International Limited INE001O01011

3.

Mapro Industries Limited INE848M01019

4.

Surya Industrial Corporation Limited INE060N01019

5.

Croitre Industries Limited INE987M01015

6.

The Anandam Rubber Company Limited INE618N01014

Click here to download the above Circular in PDF Format.

Source: Securities and Exchange Board of India.