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

Relevant for SEBI Grade A 2018 Examination

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 Changes Proposed to Consent Settlement Rules

• Under consent proceedings,

parties involved in disputes with
the Securities and Exchange Board
of India (SEBI) can settle them
without admission of guilt.

• It is also a speedy alternate

arrangement that ensures financial
markets function uninterrupted
without the delays typical of
courtroom battles.
India’s capital markets regulator has
proposed changes to the country’s
consent settlement rules, according
to a review panel report, as it tries
to reduce recourse to the courts.

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 Proposed Changes by panel setup by SEBI
• Panel proposed a number of changes to the current framework,
including broadening the ambit of securities laws and increasing the
settlement amount if an application is filed after 60 days.
• Panel recommended that companies should be barred from re-
applying for resolution of the same dispute if their first application is
rejected.
• The system could also be used in cases of alleged serious fraud -
including insider trading, front-running and mis-statements in offer
documents - depending on the merits of each case.
• Courts, tribunals and adjudicatory authorities have to be spared
from adjudicating on issues which could be resolved by facilitating a
settlement process ensuring speedy and efficient resolution of
disputes.

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 SEBI to Review Mutual Funds Expense Ratio

• Securities and Exchange Board of

India (SEBI) might soon review the
expense ratio limits for mutual
funds to address concerns related to
concentration of profits among a
few large fund houses.

• Large AMCs have a fairly high

market share of the total AUM,
revenues and profits for the industry
as a whole, indicating need to review
expense ratio for MFs.
Hinting that the regulator might take a
relook at the norms, SEBI chairman
said that a review would serve to
encourage healthy competition.

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 What is expense ratio in Mutual Funds ?
• Expense ratio, which broadly ranges
between 0.75% to 2.5%, is the fee that
fund houses charge investors to manage
all the expenses of the fund house.

• It measures how much of a fund's assets

are used for administrative and other
operating expenses.

• The largest component of operating

expenses is the fee paid to a fund's
investment manager or advisor.
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 NSE Co-location Case

• NSE recently said it has initiated

fresh talks with markets
regulator Sebi to settle a probe
into the co-location issue
through consent mechanism.

• NSE is seeking a settlement with

the regulator in connection with
a probe relating to allegations of
unfair access to its high
frequency trading systems to
some brokers.
A consent settlement allows
entities to settle charges by
paying a penalty without
admission or denial of guilt.

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 Co-location Facility Case
• SEBI has been probing the alleged lapses in high-frequency trading
offered through NSE's co-location facility.

• It was also investigating whether some brokers had unfair access to

the exchange's co-location facility.

• NSE's co-location facility allows low latency and fast execution to

trading members.

• This setup of server gives a 10:1 speed advantage in comparison to

other brokers.

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 SEBI fines entities for Fraud Trade

• Markets regulator Sebi slapped a

fine totalling Rs 55 lakh on five
entities for indulging in irregular
trading in shares.

• The entities violated PFUTP Sebi during the period from April
(Prohibition of Fraudulent and 2010 to August 2011 examined
Unfair Trade Practices) the alleged violations by the
entities regarding the irregular
regulations by indulging in such trading in shares of CAT
transactions. Technologies.

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 SEBI PFUTP regulations, 2003

• No person shall directly or indirectly buy, sell or otherwise deal in

securities in a fraudulent manner.
• No person shall indulge in a fraudulent or an unfair trade practice in
securities.
• Dealing in securities shall be deemed to be a fraudulent or an unfair
trade practice if it involves fraud and
• involves indulging in an act which creates false or misleading
appearance of trading in the securities market.
• SEBI has wide powers to take required actions in such cases.

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 Sebi cuts listing time for public issue of debt securities
• Sebi today has cut the timeline for
listing of debt securities to six
days from 12 days at present,
• in order to make the existing
process of issuance of such
securities simpler and cost
effective.
• Besides, SEBI has made ASBA
(Application Supported by The new rule would be
Blocked Amount) mandatory for applicable for all public
all the investors for making issues of debt securities
payment while applying in a public from October 1, 2018.
issue of debt securities.

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 ASBA - “Applications Supported by Blocked Amount”.
• ASBA is an application containing an authorization to block the
application money in the bank account, for subscribing to an issue.

• If an investor is applying through ASBA, his application money shall

be debited from the bank account

• only if his/her application is selected for allotment after the basis of

allotment is finalized, or the issue is withdrawn/failed.

• ASBA has been developed by the India's Stock Market Regulator

SEBI for applying to IPO.

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 Sebi extends deadline for FPIs to provide list of beneficial owners

• In a relief to FPIs, Sebi has

extended the deadline by two
months till December for providing
a list of beneficial owners, and

• Assured them that issues raised

will be looked into by an expert
panel.
• BO is the natural person, who
ultimately owns or controls an FPI.
Besides, the regulator said that a
working group headed by H.R.
Khan, former deputy governor of
Reserve Bank of India (RBI), will
now look into the various issues
raised by FPIs.

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 SEBI regulations on FPIs
• In a major revamp, Sebi in 2014 had released norms that had clubbed
different categories of foreign investors into a new class called FPIs.

• Under the regime, FPIs have been divided into three categories as
per their risk profile and the KYC (know your client) requirements,

• while other registration procedures have been made simpler for

them.

• SEBI had recently asked Category II and III FPIs to provide list of their
beneficial owner (BO) in a prescribed format within six months.
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 Sebi to stipulate framework for timely disclosure of loan default

• Sebi is looking to stipulate a

framework for timely and detailed
disclosures of loan defaults by listed
entities to enhance transparency.

• Tightening of the disclosure norms

is aimed at helping banks to
recognise their stressed assets as
non-performing more uniformly and
enhance transparency in the
securities market.
Several companies and rating
agencies have come under the
regulatory scanner for failing to
make timely disclosure about the
loan default risks.

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 Need for Tightening

• The proposal may mandate listed companies to disclose to the stock

exchanges about their loan defaults, within one working day of
missing a repayment.

• Once implemented, the move would help investors take an informed

decision at the earliest in cases of loan defaults by listed companies.

• The proposal gains attention amid the loan fraud of Rs 14,000 crore
at state-run Punjab National Bank remaining undetected for years.

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 Sebi to expand scope of cybersecurity initiatives for MIIs

• Regulator Sebi is planning to broaden

the scope of cybersecurity initiatives
for the market infrastructure
institutions (MIIs) and

• look into the operational modalities of

their implementation in order to deal
with the cyber challenges.
• Enhancement of cybersecurity has
been one of the priorities of the SEBI.
Financial Market Infrastructure
(FMI) refers to critically important
institutions responsible for
providing clearing, settlement and
recording of monetary and other
financial transactions.

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 Investors can hold shares in physical form even after Dec 5

• Markets regulator Sebi recently said

its new guidelines do not bar
investors from holding shares in the
physical form even after December 5.

• Besides, the regulator said that any

investor who is desirous of
transferring shares, which are held in
physical form, after December 5 can
do so only after the shares are
dematerialised.
The regulator, in July, had said
that transfer of shares of listed
companies has to essentially be
in dematerialised mode from
December 5.

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 Dematerialisation of Shares
Holding share certificates in physical format carried risks like certificate forgeries,
loss of important share certificates. Dematerialization eliminates these hassles by
allowing customers to convert their physical certificates into electronic format.

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Sebi developing interoperability framework for clearing corporations

• Sebi is in the process of putting

in place a framework for
interoperability among clearing
corporations - a move that will
reduce trading cost.

• At present, different bourses

A clearing corporation is an
have their own clearing organization associated with an
corporations, which handle exchange to handle the
settlement of trades on the confirmation, settlement and
respective stock exchanges. delivery of transactions.

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 SEBI Norms on interoperability

• In August 2015, the Securities and Exchange Board of India (Sebi) had
decided to hold public consultations on a new set of norms to
enable interoperability of clearing corporations.
• An expert committee chaired by eminent banker K V Kamath had
suggested about interoperability among clearing corporations.
• The interoperability would permit trading members to clear trades
through a firm of their choice instead of going through the clearing
corporation owned by the bourse on which the trade was executed.
• This will ensure cost advantages for members in the form of
enhanced margin utilisation, opportunities of best execution across
trading platforms as well as savings on cost.

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 MCQ’s

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1. Consent settlement mechanism of SEBI allows entities to:
a) settle charges by admission or denial of guilt without paying any penalty
b) settle charges by paying a penalty without admission or denial of guilt
c) settle charges by referring the matter to arbitral tribunal
d) None of the above

2. _______ is the fee that fund houses charge investors to manage all the expenses of the fund
house.
a) Expense ratio
b) Cost ratio
c) Income ratio
d) None of the above

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3. ______ facility of stock exchange allows low latency and fast execution to trading members.
a) Co-location facility
b) In-house facility
c) Co-house facility
d) None of the above

4. ____________ is an application containing an authorization to block the application money in the bank
account, for subscribing to an issue.
a) SPAN
b) ASBA
c) DEMAT
d) ALGO

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

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SEBI Current Affairs - August 2018

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Thank You! Happy Learning!

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