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SEBI Current Affairs: October, 2018 (Part – I)

Relevant for SEBI Grade A 2018 Examination

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SEBI allows Bandhan Bank to offload promoters’ stake early

• In a major relief, SEBI gave exclusive


relaxations to Bandhan Bank, allowing the
microfinance-turned-banking entity to
offload promoters’ stake within 12 months
of listing.
• SEBI regulation mandates a one-year lock-
in period for promoter shareholdings after
listing on exchanges.
Bandhan was listed in
• The bank found itself in RBI’s crosshairs,
March, and promoters
which pulled up the lender for not paring
were to wait until next
promoter’s stake in line with banking March to sell shares.
regulations.

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More about the Issue
• As per RBI’s guidelines for licensing of new banks in the private sector,
when a non-banking financial company launches a private bank
through a holding company,
• it must pare down its promoter holding to 40 per cent within three
years of starting operations.
• Bandhan, which started banking operations in August 2015, was to
trim its promoter’s stake from over 82 per cent to below 40 per cent
by August 2018,
• but couldn’t, thanks to Sebi’s one-year lock-in period.
• With Sebi now giving the relaxation, it ends uncertainty surrounding
the bank.

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SEBI nod to Oman Oil Futures On BSE

• SEBI approved the launch of an Oman oil


futures contract on the Bombay Stock
Exchange (BSE).
• This marks the first Oman Crude Oil Futures
contract Sebi has allowed.
• India, the world's third-biggest oil consumer
and importer, does not buy huge volumes of
Oman oil but the grade is a benchmark for On October 1, the BSE
Middle East supplies sold to Asia. made a foray into
commodity derivatives
• Indian oil refiners use Oman oil as one of with the launch of gold and
the benchmark for making spot purchases. silver futures contracts.

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SEBI further improves transparency in MFs

• From now on, all scheme-related expenses,


including commissions, shall be paid from
the scheme only and not from the books of
the asset management company.
• SEBI also did away with upfront
commission of 1% allowed earlier and fund
houses will henceforth have to pay
commission via a full trail fee model in all SEBI announced a raft of
measures designed to improve
schemes.
transparency in investment
• All fees and expenses charged in a direct expenses while reducing
plan will not exceed the fees and expenses portfolio churning and mis-
charged under such head in a regular plan. selling in mutual fund schemes.

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Direct vs. Regular plan
• A Regular Plan is one in which the Mutual
Fund Company pays your broker back a
hidden % commission every quarter.
• This commission comes out of your
investments.
• But when you buy a Direct Plan instead, no
commissions are paid to anyone.
• Direct plans in mutual funds are good for
investors who wish to invest in mutual fund
schemes by directly dealing with AMC
without intermediary / mutual fund
brokers.
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More about reforms
• Front-loading of commissions will now be allowed only in case of
systematic investment plans (SIP)
• In case an investor does not stay the full course of the SIP, the
commission will be recovered from distributors on a pro-rata basis.
• Additional commission paid to distributors for investors from B30
(beyond top 30) cities shall be payable for investments only from
individual investors and
• this commission shall be payable in a trail mode only.
• Asset managers are also required to disclose on their Web sites
scheme returns versus benchmark returns in CAGR terms for various
periods, namely 1 year, 3 year, 5 year, 10 year and since inception.

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Sebi proposes relaxed norms for startup listing

• SEBI has proposed to tweak listing norms


for start-ups, in an attempt to make it more
attractive for companies in sectors like e-
commerce, data analytics and bio-
technology.
• It has renamed the Institutional Trading
Platform(ITP) as 'Innovators Growth
Platform'(IGP), after it failed to gain interest
since its introduction few years back. The minimum number of
allottees has also been
• Sebi has also proposed to reduce the reduced to 50 from the
minimum trading lot size to Rs 2 lakh from existing 200.
the existing Rs 10 lakh.

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Institutional Trading Platform (ITP)

• ITP framework is window on stock exchanges where e-commerce,


data analytics, bio-technology and other startups can list and trade on
their shares.
• It allows companies to list without necessarily doing an Initial Public
Offer (IPO) of equity.
• SEBI had introduced it to facilitate listing of new age companies, but
it had failed to gain any traction.
• It facilitates capital raising by small and medium enterprises (SMEs)
including start-up companies which are in their early stages of
growth.

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More about Reforms

• SEBI proposed that IGP would be designated as a main board


platform for start-ups with an option to trade under regular category
after completion of one year of listing.
• Current rules say an entity listed on ITP can migrate to the main
board after expiry of three years from the date of listing.
• Besides, it has proposed to remove minimum reservation of
allocation to any specific category of investors.
• At present, rules allow 75% of the net offer to public to be allocated
to institutional investors and the remaining 25% to non-institutional
investors.

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NPA crisis an opportunity to develop bond market: Sebi
• Sebi chairman Ajay Tyagi has said there is an
immense opportunity for development of bond
market in the backdrop of the NPA crisis in
banking sector.
• also said the corporate bond market could get a
boost if sectoral regulators of pension funds,
provident funds and insurance firms could allow
their regulated entities higher exposure in the In the medium to long
segment. term, there seems to be
no other option but to
• SEBI is also working on operationalising the shift from bank
2018-19 budget announcement which mandates financing of projects to
large corporates to raise 25 per cent of their bond funding.
financing needs from the bond market.

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Insiders using 'front entities' will be subject to more scrutiny by Sebi

• Insiders who use front entities, such as


drivers or domestic help, to benefit from
price-sensitive information could find the
going tough as the Sebi will soon introduce
more checks.
• Those who lend their names, trading
accounts or execute trades on behalf of
others will be subject to more scrutiny such The move comes in the wake
of numerous instances where
as financial background checks.
front-entities were being used
• Sebi could soon deem trades by investors to carry out transactions to
beyond their verifiable financial sources as conceal the identity of the
fraudulent. real beneficiaries.

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T K Vishwanathan Committee on fair market conduct
• The proposal to do background checks are based on the
recommendations of a high-level committee led by former law
secretary T K Vishwanathan on fair market conduct, aimed to detect,
prevent and punish such market conduct that leads to market abuse
and manipulation.
• The regulator is also planning to widen the ambit of “deemed
fraudulent activities” under Sebi’s Prohibition of Fraudulent and
Unfair Trade Practices (PFUTP) norms.
• This will include misleading information on digital media, front
running by non-intermediaries, mis-selling of securities, mis-
utilisation of client account and diversion of client funds and so on.

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Affordability Index

• Sebi is also planning to introduce so-called affordability index, which will


be on the lines of Cibil score for individuals.
• The index will be prepared based on the income or net worth of investors.
• The affordability index score will help establish whether an individual is
fit to deal in the securities market.
• The concept aims to enhance due diligence by market intermediaries in
case of trading beyond specified limits (affordability index) to prevent the
use of mule accounts.
• If the trading volume by any person is substantially higher than
affordability index, then such trading account would be suspected to be
a mule account.

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Single investment regime in the works for NRIs

• India may soon have one investment


avenue for non-resident Indians (NRIs).

• SEBI panel is set to suggest that the NRI


and portfolio investment scheme (PIS)
routes be merged with that of foreign
portfolio investors (FPIs).
The merger will help Sebi
regulate NRI investments
• The move is aimed at having a uniform in India as the regime is
regime for all foreign portfolio investors currently unregulated.

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HR Khan Panel on FPI Regulations

• Sebi recently eased norms for NRIs last month based on the Khan
panel’s recommendations.

• Sebi set up a high-powered panel under the chairmanship of former


Reserve Bank of India deputy governor HR Khan, assisted by
custodians, lawyers and chartered accountants, to review all FPI
regulations.

• The committee submitted its interim report to the regulator recently


and is also expected to submit its final report soon.

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MCQ’s

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1. SEBI regulation mandates a ______ lock-in period for promoter shareholdings after listing on exchanges.
a) One-year
b) Two-year
c) Three-year
d) None of the above

2. SEBI recently approved the launch of first Oman Crude Oil Futures contract on __________.
a) BSE
b) NSE
c) MCX
d) NCDEX

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3. According to SEBI’s recent regulations, all Mutual Fund houses will have to pay commission via:
a) Upfront model
b) Full-trail model
c) Either of the above
d) None of the above

4. Which index is being planned by SEBI on the lines of CIBIL to decide whether an individual is fit to deal in
the securities market?
a) Credibility Index
b) Affordability Index
c) Worth Index
d) None of the above

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ANSWERS
1. A
2. A
3. B
4. B

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SEBI Current Affairs - Oct. 2018

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Thank You! Happy Learning!

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