India

Posted By Steve On Friday, October 16th, 2009 With 0 Comments

Disclosure Requirements
Shareholdings in this market may be required to be disclosed by the beneficial owner, particularly when such shareholdings reach or exceed prescribed disclosure limits. Investors must ensure that they comply in full by reporting such holdings to the appropriate organizations, within the specified time-frame. If you have any questions regarding this issue we encourage you to consult your legal counsel.

Failure to comply with the reporting requirements in this market may attract penalties and / or other sanctions.

SEBI (Insider Trading) (Amendment) Regulations, 2002: any person acquiring 5% of the equity capital or voting rights in any listed company must disclose to the company, the number of shares or voting rights held, within four working days of the receipt of notification of allotment of shares, or the acquisition of shares or voting rights, as the case may be.

Additionally, any subsequent change of 2% (plus or minus) over the previously reported shareholding ratio will also need to be reported to the company, within the same time-frame mentioned above.

SEBI (Substantial Acquisition of Shares & Takeovers) Regulations, 1997: as per these regulations, an acquirer (with persons acting in concert*) of shares or voting rights who acquires shares or voting interest of 5%, 10%, 14%, 54% or 74% is required to disclose at every stage the aggregate of his shareholding or voting rights to the company and to the Stock Exchange where the company is listed with in two days of :

* the receipt of intimation of allotment of shares, or
* the acquisition of shares or voting rights, as the case may be.

For acquirers (with persons acting in concert) holding shares or voting rights, every 2% change (plus or minus) in shareholding (over the previously reporting holding) along with the residual shareholding must be reported with in two days to the company and Stock Exchanges on which the company is listed.

The Regulations define Persons Acting in Concert to include FIIs with sub-accounts; therefore, the reporting is required to be made at an FII level (consolidated across sub-accounts).

An acquirer (with persons acting in concert) who holds more than 15% percent of shares or voting rights in a company, must, within 21 days from the financial year ending March 31, make yearly disclosures to the company, in respect of holdings as on March 31.

An acquirer (with persons acting in concert) who holds more than 15% of the voting rights is required to make an open offer to acquire an additional 20% of the equity capital. Such acquirers must also make yearly disclosures to the company, within 21 days of the close of the financial year (31 March).

*The regulations define FIIs with sub-accounts as persons acting in concert. Therefore, holdings across sub-accounts need to be consolidated in respect of compliance with these regulations.

Buy-Ins
The exchange will buy-in securities on T+3, where a seller fails to deliver shares on the scheduled pay-in day. If the buy-in is not successful the exchange will pay the purchaser cash in lieu of securities.

For the normal segment, the close-out price is the highest price prevailing from the first day of the relevant trading period until the day of closing out, or 20% above the official closing price on the auction day, whichever is higher.

For the Trade to Trade segment on BSE, the close-out price is the highest price prevailing from the first day of the relevant trading period till the day of closing out or 10% above the official closing price on the auction day, whichever is higher.

For the Trade to Trade segment on NSE, market shortages are directly closed out (cash paid to the buyer instead of securities) instead of conducting a market auction to acquire shortages. The close-out price is 20% above the traded price for the transaction.

Penalties: In addition to the buy-in costs the following penalties are applied to the defaulting member.

On BSE, the penalty amounts to 1% of the value of the failed transaction value, computed on the basis of the closing price of the security on the trade date.

NSCCL operates a penalty points system, under which each default attracts penalty points, depending on the nature of default. Monetary penalties are levied, based on the number of points accumulated by a member in a period of one month. The points are reset to zero at the end of each month.

Compensation Fund
BSE Trade Guarantee Fund and the NSCCL Settlement Guarantee Fund

NSCCL and BOISL act as a central counter-party to every transaction. The Settlement Guarantee funds enable settlement of trades in case a member fails to honour his obligations.

Anti-Money Laundering
RBI has prescribed anti-money laundering measures for banks operating in India

SEBI has mandated all market participants to adopt AML guidelines as per the Prevention of Money Laundering Act (PMLA) 2002. The guidelines, inter-alia, require the intermediaries to appoint of a principal officer and intimate the details to FIU (Financial Intelligence Unit). The principal officer is required to ensure compliance of PMLA 2002, which includes monitoring and reporting of Suspicious Transactions to FIU.

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