Securities Exchange Board Of India Research Articles

Environmental Reporting of Market Leaders: An Analysis

In the light of global warming and environmental concerns across the globe, environmental accounting and reporting has now become an emerging reality and necessity of the corporate world. Considering the same, the present paper is based on an exploratory study carried out to have an understanding of the nature and extent of environmental reporting practices followed by the market leaders (MLs). An attempt has been made to analyse the annual reports of the selected companies in order to examine their environmental disclosure practices with reference to the type of the disclosure, section where such disclosure is made and the extent of mandatory and voluntary disclosures made. An index of environmental disclosure, listing 23 items of information, was constructed after surveying the literature to find out the nature of disclosure practices in these companies. This index was further sub-divided into three groups to find out the thrust of environmental disclosures by the sample companies. It was found that majority of the MLs reported the mandatory environmental information in the ‘Director's Report’, whereas the voluntary information was disclosed either in the ‘Highlights’ or in the ‘Dedicated Section’ of the annual report, followed by the ‘Management Discussion Analysis’ and the ‘Corporate Governance Report’ sections. A growing trend of reporting environmental information voluntarily was observed. Almost all the MLs have had environmental management systems in place by 2013. All except one ML prepared the business responsibility report, as mandated by the Securities Exchange Board of India. Further, neither the firm nor the governance characteristics had any significant impact on the environmental performance of the MLs. Hence, it was concluded that steps taken by the MLs towards environmental conservation was independent of board independence, size, leverage or profitability and that MLs were committed to the cause of environmental sustainability.

Is the Institution of Independent Directors Irrelevant?: A Critical Inquiry into Why the Institution Has Failed to Lead to Better Corporate Governance

Post-Enron in 2000, the pressure on corporates to improve the corporate governance increased dramatically. Indian law makers and regulators also took measured steps to improve the governance of Indian corporates. Securities Exchange Board Of India (SEBI), the capital market regulator has been very proactive in moving ahead with a number of regulatory measures which they incorporated into the listing agreement of the companies with the respective stock exchanges where the company’s shares get listed in the form of Clause 49 of the listing agreement. The Clause 49 was implemented in phases starting 2002 (having insisted on compliance by bigger companies mandated by certain parameters relating to size) and SEBI made it mandatory for all listed companies to meet the requirements latest by December 31,2005. EBI made it mandatory even for the public sector undertakings (PSUs) which were listed on stock exchanges. Clause 49 also insists lot of changes in board and governance structure. One of the strong pillars of the modern corporate governance laws and regulations anywhere in the world is the institution called the Independent Directors (IDs). Majority of the board-structure related reforms in corporate governance revolve around this very institution. Having been in legitimate existence for more than a decade at least in developed nations like the US and UK, and almost seven years in India, a number of studies have already been conducted to ascertain the contribution and relevance of independent directors in corporate performance and governance practices. A number of corporate governance experts and watchers have written on the subjects and some of them provide evidences for the lack of any improvement in corporate performance and also in the governance practices and processes. This paper, from a conceptual framework, tries to look into the arguments and/or reasons as to why the independent directors, supposed to be the backbone of the new age governance practices and processes, have failed to make any impact leading to a general feeling that they are irrelevant and hence the laws or regulations making them mandatory on boards may be abolished and what needs to be done to resurrect the respectability that was expected from this institution. While examples from across the globe might be referred to in the process, the study basically concerns with examples and practices followed in the Indian context. This paper tries to assert that: - The concept of Independent Directors is inherently & fundamentally strong. - To advocate that it’s irrelevant will be like throwing the baby with the bathwater. The paper tries to establish that the concept failed to show impact mainly due to: - The flawed assumption about why Corporate Governance is required. - IDs not exercising their power on the board. - The Company Performance & It’s Relationship to Presence of IDs. - IDs & Commitment of Time. - IDs and Conflicts of Interests. - Real Independence & Stock ownership. - CEOs/WTDs not restrained by their boards on outside membership. - Short period used to make assessment. Based on the analysis of the reasons, it is felt that in order to strengthen the institution of Independent Directors: - IDs must exercise their power to see that the interests of the company as a separate entity are protected. - IDs shall be really independent; they should resist the temptation to compromise and must even go beyond regulations. - IDs must restrict their directorships to a very limited few.

Offshore Derivative Instruments: Focusing on Participatory Notes

In India, generally stated, investments by non-residents under the Portfolio Investment Scheme (i.e., through the stock exchange) are permitted only as foreign institutional investments. For purposes of eligibility for investment under this route, a non-resident has to register with the Securities & Exchange Board of India (SEBI) as a Foreign Institutional Investor (FII) or as a sub-account of an existing FII.P-Notes on derivatives allow unrecognised investors to not invest in Indian equities, but also carry out hedging and speculative trading. This gives them not only the benefit to earn a wholesome when the market is showing a positive trend, but also an opportunity to make the most of the rising value of the Indian rupees. It further casts a threat on the Indian economy as these inflows are extremely short-term in nature, and may be reversed abruptly by an investor, causing immense volatility in the financial market.

A Review of Indian IPO Process

This paper is a review of the Initial public offering process made by a process called ‘Book-Building’ in the Indian capital market. Main reasons to produce a detailed document are as follows: In the open market economy best and cheapest source of finance is popularly known as the ‘Issue of share capital’. Also, the efficient way to mobilize money into an economy is the ‘Issue of Share Capital’. Therefore issue of share capital is vital in an efficient economy. Thus to understand the issuing process of the shares is of immense importance. In the empirical researches many times process has been explained but to understand it properly we need to know each and every step at one place in detail. In this research paper issue process is explained in detail. Methodology adopted for this paper is secondary sources of data available from the websites of SEBI (Securities exchange board of India, regulatory authority), NSE, BSE, Company’s own websites, prospectuses, auditor’s reports, legal advisor’s reports, etc. Thus theoretical and practical framework is used to study the process of issuing shares in the Indian capital market. The results of this research showed that the whole process is complex and multi stages. Still being a cheapest source of finance, every company wants to acquire this source in the capital structure. Findings of this paper describes about the full-fledged IPO-process in India. This paper is helpful to scholars and researches who want to understand IPO process in India.

Understanding the Indian Legal Regime Regulating Indian Depository Receipts (IDR's)

The past few decades have witnessed the increased internationalisation of various firms through crosslistings on international exchanges. This has been facilitated by market liberalisation, which has led to greater integration of global securities markets. Cross-border listing has become one of the avenues for the integration of global securities markets. There are two forms of cross-border listing, namely, direct listing and indirect listing. Direct listing implies that the firm concerned offers ordinary shares to the public. Indirect listing on exchanges is through Depository Receipts (DRs). Depository receipts are a negotiable certificate issued by a bank in a domestic country that represents ownership of shares in companies of other countries. Cross listing, particularly through DRs such as American Depository Receipts (ADRs) or Global Depositary Receipts (GDRs), is a popular way of internationalization among firms from emerging economies. In addition to Europe and America, International firms are allowed to cross list in other countries through the DR programme. There could be several reasons for a domestic company to cross-list, such as an expanding investor base, the desire to improve stock liquidity through its highly liquid secondary market, the increasing visibility of the company, a growing customer base, and the wish to take advantage of higher valuations. From the perspective of investors, cross listing mitigates some of the uncertainties and costs involved in making direct purchases in foreign markets. Cross listing through DRs has more advantages compared to direct listings as it offers an easier and flexible mechanism with less stringent regulations for individual companies to enter foreign markets according to their needs. The listing of a company on a foreign exchange through a DR framework exempts the firm from many stringent regulatory requirements compared to those required for direct listings on foreign exchanges, thereby enabling the investors to realise dividends and capital gains in another market. The concept of introduction of Indian Depository Receipts (IDRs) was conceived in the year 2004 but the actual action or implementation is happening only now, with the first ever IDR issue by Standard Chartered Bank which opened on May 25, 2010 and closed on May 28, 2010. The Central Government, in exercise of powers available with it under section 642 read with section 605A of the Companies Act, 1956 had prescribed the Companies (Issue of Indian Depository Receipts) Rules, 2004 (IDR Rules) vide notification number GSR 131(E) dated February 23, 2004. The said Rules provide, inter alia, for eligibility for issue of IDRs, procedure for making an issue of IDRs, registration of documents, conditions for the issue of prospectus and application, listing of IDRs, procedure for transfer and redemption and other conditions related to the same. It has also been provided in such rules that an issuing company shall also fulfil the eligibility criteria laid down by the Securities Exchange Board of India (SEBI) from time to time in this behalf. The SEBI, in view of authorisation available to it under IDR Rules, had originally issued a Circular No. CFD/DIL/IDR/1/2006/3/4 dated April 30, 2006 through which it has specified the Model Listing Agreement for listing of IDRs and subsequently the SEBI simplified the said Listing Agreement vide its Circular dated June 16, 2009.

Compliance of Interim Financial Reporting as Per Regulatory Requirement in India (With Special Reference to Nationalized Bank)

Clause 41 of the listing agreement as issued by Securities Exchange Board of India (SEBI) directs the India Inc to comply with the provisions laid down by the board in respect of financial reporting. The board has made special requirement in respect of Interim Financial Reporting (IFR) to prepare and publish interim financial results and limited reviews of interim results by the auditor etc. In this paper an attempt has been made to verify the compliance of guidelines issued by SEBI as regard to interim financial result and put it on a scorecard to measure the level of compliance.

Securities Exchange Board of India (SEBI) Act, 1992: A Summary

SEBI which is an abbreviation for Securities and Exchange Board of India has functions similar to the SEC or Securities Exchange Commission in the USA. In other words, the SEBI regulates the working of the financial markets in India, vis-a-vis investor protection and laying down of ethical standards for the working of the financial markets in India. This is why SEBI is also called as the watchdog of the Indian Markets. In this article the author has attempted to give a summary description of the SEBI Act of 1992.

Securities Transaction Tax Reduction and Stock-Futures Arbitrage in India

UK Sinha, Chairman of the Securities Exchange Board of India (SEBI) announced in November, 2011 that SEBI had engaged the Ministry of Finance in a discussion hopefully leading to a reduction of India's Securities Transaction Tax (STT) discussion that would hopefully produce benefits to India's capital markets (CNBC, 2011). The matter of reducing or eliminating the STT is presently under study by the Ministry of Finance and will come before the Indian Parliament in February 2012. Removal of this tax has been a long-term objective of brokers, stock exchanges and investors who compare the exceptionally high total transaction cost of fees and taxes in India with lower total costs in other countries. In this study both intraday and inter-day data on a representative selection of single stocks and their associated futures contracts is used to explore the effects of reduction or elimination of the STT when single stocks are arbitraged against their related futures contracts. For this purpose data was chosen spanning selected days in June through December 2011 for eight liquid single stocks. Since the profit from a potential arbitrage can be calculated in advance of entering a trade, the number of profitable single stock arbitrage trades available on a specific day can be calculated after accounting for STT cost ranging from zero to 100% of its current statutory level. The result of this careful analysis suggests a decrease in the STT of at least 75% is necessary to achieve meaningfully increased levels of arbitrage normally found in most successful global futures markets. Such a decrease in the STT is also likely to result in the maximum transaction revenue collected by the government.

Violation of SEBI Act and Rules in India: A Study on ‘Other than Collective Investment Scheme’

Economy of any country largely depends on its capital market now more than ever before. A capital market is a market for securities (debt or equity), where business enterprises (companies) and governments can raise funds by selling securities to general public and other financial institutions. The capital market includes the stock market (equity securities) and the bond market (debt). Capital markets of India are monitored by financial regulator SEBI (Securities Exchange Board of India). SEBI oversee the capital markets in their designated jurisdictions to ensure that investors are protected against fraud, among other duties. The need for a financial regulator for a country like India is due to the following reasons as India is an 'informationally' weak market, to boost the confidence of lay investors who have been beaten by repeated scams, to soften interest rates and to enhance investing skills in India. But since the formation SEBI in the year 1992 every 2-3 years there has been a new 'scam'. Each scam has led to SEBI being conferred with greater powers. Scams are administered by SEBI officials. Sentencing and prosecution is done by SEBI officials. Recent rise in scams and scandals in Indian market have made investors to doubt on the efficiency of Indian Financial regulator SEBI (Securities Exchange Board of India). Even though SEBI is confronted with numerous powers it is still observed that SEBI is unable to minimize or curb the violations which costs huge to investors and also to the whole economy. This study focuses on the numerous cases filed with SEBI which prove that SEBI needs to maintain much closer watch in the market. The main objectives of this work, taking 586 cases of SEBI rule violations for analysis, are to study various cases of SEBI rule violations in other than collective investment scheme, categorize these cases into six categories, to identify the most violated provision of Act with SEBI and to attempt to provide suggestions to minimize violation of SEBI norms. This study showed even though SEBI has numerous regulations and norms to monitor the market activities loopholes still remain which are being exploited by swindlers rendering the regulation of the capital market and protection of investor interests wanting.

A Study of Information Needs of Mutual Funds Investors & Implications for Web Based Marketing of Mutual Fund Products

A Study of Information Needs of Mutual Funds Investors & Implications for Web Based Marketing of Mutual Fund Products

Independent directors: time to introspect, suspect, respect – an Indian perspective

PurposeThe purpose of this paper is to understand the culpability of independent directors (IDs) in a public listed company under clause 49 of the listing agreement of the Securities Exchange Board of India, which, primarily, is the corporate governance mandate in India.Design/methodology/approachThis paper has been developed on the basis of intensive interviews conducted with 16 legal experts working with 50 top listed companies and seven advocates from the Delhi High Court and the Supreme Court of India, literature survey from research papers, bare acts and policy guidelines on corporate governance by the Government of India.FindingsTwo contrary opinions are being rendered on the culpability of IDs. The first proposes a strict and absolute penalty on all directors which would deter them from colluding with promoters. The second proposes that IDs should not be tarred with the same brush unless conclusive evidence of collusion is produced. These contrary opinions are herein analyzed and recommendations put forward.Research limitations/implicationsThe research paper attempts to study only the culpability of IDs. It envisages the appointments of IDs onto boards without deliberation on the issue assuming that these appointments are made in good faith and trust.Originality/valueThe research paper attempts to study whether the IDs who are non‐executive directors and who do not have a pecuniary relationship with the company actually share a fiduciary relationship with the shareholders and observe the principle of conflict of interest. There are some compelling reasons for them to alienate liabilities given the dramatic effects of financial disarray as in the case of Satyam.

Board Structure and Size: The Impact of Changes to Clause 49 in India

Changes to Clause 49 of the Listing Agreement by the Securities Exchange Board of India (SEBI) in 2005, with particular reference to the minimum number of non-executive directors, brought mixed reactions. However, Indian firms generally embraced the changes with the expectation that it sent positive signals to investors about Indian business and corporate governance (Businessline, 2006:13). While the role of independent directors has been well documented particularly in the area of agency theory, there are differing opinions regarding the role of a firm. The ways in which contractual arrangements are introduced, monitored and evaluated are indirectly related to the mode of corporate governance adopted by the firm. Consequently, there has been much attention on the separation of ownership and control including the role of boards.

Beneficiaries of Stock Buybacks: Tendering Shareholders or Non-Tendering Shareholders

As a method of distributing cash to investors, stock repurchases have grown rapidly (relative to dividends) in the past decade. In 1999, 1,253 NYSE companies repurchased their own stocks, spending $181 billion in doing so. This amount compares with the $216 billion that NYSE companies paid out as dividends in the same year. This was a year after the legislation in India permitted companies to buy back stocks subject to a limit of 25% of the paid capital of the company. Nine years since the regulations have been in place the Indian stock markets have witnessed less than 250 offers for buy back from over 6000 companies listed companies. Apart from the regulations permitting buy back various Researchers have identified that, due to market imperfections, firms can create value by repurchasing stocks. Further, tax reasons, adjusting the capital's structure, and signaling or market timing in the face of asymmetric information as the main motives for stock repurchasing. The slow activity of Indian firms in making buy back offers has prompted this study apart from examining who benefits from a stock buyback. The few studies in India have indicated that most firms do not offer the maximum stipulated limit for buy back as well as the buy back acceptance by investors have been less than 100%. The resultant question would be as to who benefits from buy back the investor who tenders or those who hold back their decision. The study therefore examines the wealth creation aspects of a buy back. The sample for the study comprised of companies that have made buyback announcements during the period ending 2005-06 from the year in which the regulations permitted buy back that 1998. The filtered samples comprised of 59 firms across industry categories. The analysis was restricted to secondary data available from firm websites, the regulators' website and online databases. Literature reviewed facilitated the evaluation based on specific models to examine the benefits accruing to the tendered and the non-tendered stockholders. Attempts have been made to explain the probably reasons for the low off take by firms in using buy back for distributing cash to the stockholders. Based on the findings the recommendation have been and directed to the Regulator which is the Securities Exchange Board of India, The Firms and investors. Some possible scope for further Research forms the conclusion of this study.