Outsourcing by Intermediaries

In a recent and much welcome move, SEBI has formulated Guidelines for the Outsourcing of activities by the Intermediaries ["Guidelines" hereinafter]. In light of the fact that intermediaries were outsourcing their activities for cost efficiency, SEBI deemed it necessary to regulate the outsourcing of these activities, and hence Guidelines on Outsourcing of Activities by Intermediaries have been issued by SEBI on December 15, 2011. This was based almost entirely on the Discussion Paper on Outsourcing of Activities related to Intermediary Services. A copy of the DIscussion Paper can be found here.
These Guidelines are mandatory and have to be complied with by all intermediaries.

Consent Orders: Time for modification?

Consent orders, introduced by SEBI in 2007 was by no means a novel concept. The SEC had adopted the settlement procedures years ago and had implemented it successfully. Consent orders have come under scrutiny earlier this year by a petition filed in the Delhi High Court.

SAT Orders [Week ending 18.11.11]

This week, SAT delivered two orders which might have a precedential value.

1.      T. S. Murali vs CPIO, SEBI, Mumbai: This is an order relating to the application of the RTI. The SAT has widened the scope of RTI in relation to SEBI’s investigation operations, and reducing the scope of ‘price sensitive information’ in the process.

2.    Gujarat NRE Mineral Resources Ltd vs SEBI: This order centers around the definition of ‘Price Sensitive Information’ in relation to investment by a company.

NSE faces more trouble!

Just a couple of months after being pulled up by the Competition Commission of India for anti-competitive practices in the ETF segment, the NSE has come under the scanner once again. The Delhi High Court has asked the SEBI to investigate into allegations leveled against NSE in a PIL filed by Investors' Protection Group ('IPG'). The PIL alleges that the NSE has issued certain circulars which violate SEBI guidelines and favor intermediaries like the stock brokers.

FinMin's SEBI Woes!

[Image taken from here]

A PIL filed in the Supreme Court earlier this year only emphasizes the irregularities in the appointment of the top brass of the securities regulator, SEBI. The PIL filed by former Chief of Air Staff Mr S Krishnaswamy and retired police officer Mr Julio Ribeiro alleges that the rules for the appointment of the SEBI Chief are not fair and give the Finance Minister unbridled power. It challenges the appointment of U K Sinha as the chairman of the Board.

Reverse Mergers: SEC Tightens Listing Norms

[Image taken from IBNLive.com]

Earlier this year, the SEC had issued a warning to those investing in reverse mergers. The main cause of all concern was the fact that foreign companies decided to enter the US markets via the reverse merger route by merging with a public shell company, thereby circumventing the IPO requirements. However the SEC knew all along that warning the investors would not be enough, and had been mulling over putting in place stringent listing norms for reverse merger companies all along.

Finally, on November 9, 2011, the SEC has issued the stringent listing norms for reverse merger companies. Changing the listing norms for these reverse merger companies had been proposed by NYSE, NYSE Amex and NASDAQ in the recent past.

SAT Orders [Week ending 11-11-2011]

This post will focus on 2 recent orders of the SAT that assume some importance in the opinion of the author.
- V.T. Sumasundaram & Anr. vs Madras Stock Exchange & SEBI: This case clarifies the definition of 90% in Regulation 27(3)(d) of the Delisting Regulations, 2009. The Tribunal rejected a literal interpretation of the Clause in light with established norms of Company Law.
- Pooja Malik vs CPIO, SEBI, Mumbai: This case reiterates the application of RTI to orders of SEBI, as well as its application in relation to information obtained from foreign regulators for specific purposes.

The Rajat Gupta Files (Post 1)

[ Picture taken from hedgeco.net]

With Raj Rajaratnam slapped a record breaking fine of $ 92m to be paid to it, the SEC now focuses on Rajat Gupta, the former head McKinsey. The SEC seems to be confident of its case against the former director at Goldman Sachs and P&G. It is believed that Gupta met Rajaratnam, a hedge fund manager and the founder of Galleon Group and became good friends. It has been alleged that as they became friends, information started to flow from the Board of Goldman Sachs to Rajaratnam, who started to invest accordingly.