Insider Trading order by SEBI

SEBI has passed an insider trading order in the matter of Mr. X of Wipro Ltd.

As per Regulation 13(4) of the Prohibition of Insider Trading Regulations 1992

(4) Any person who is a director or officer of a listed company, shall disclose to the company and the stock exchange where the securities are listed in Form D, the total number of shares or voting rights held and change in shareholding or voting rights, if there has been a change in such holdings of such person and his dependents (as defined by the company) from the last disclosure made under sub-regulation (2) or under this sub regulation, and the change exceeds Rs. 5 lakh in value or 25,000 shares or 1% of total shareholding or voting rights, whichever is lower.

It was concluded that Mr. X was an Officer within the purview of the Regulations and therefore having traded shares exceeding Rs.5 lakhs during November - December 2012 and not having given the necessary intimation in Form D he was held guilty under the PIT Regulations 1992 and fined Rs.5 lakh.

A copy of the order can be found here

Definition of Officer in the relevant regulations can be found here:

Regulation 2 (g) of PIT Regulations, 1992 - "Officer of a company' means any person as defined in Clause (30) of Section 2 of the Companies Act, 1956 (1 of 1956) including an auditor of the company".
Section 2 (30), Companies Act, 1956- Definition of ‘Officer’ – “Officer includes any director, manager or secretary or any person in accordance with whose directions or instructions the Board of directors or any one or more of the directors is or are accustomed to act”.

Interesting to note that the person is the geographical head of a particular territory and he in turn reports to the CEO of the organisation. Therefore SEBI holds him as an Officer since he is holding an important position in the organisation .

 

Death is now my neighbour by Colin Dexter

Just finished reading "Death is Now my Neighbour" by Colin Dexter, a Inspector Morse murder mystery. Morse and his assistant Lewis are on the trail of a murder of a woman and their prime suspect is her next door neighbour. Investigation progresses when another murder takes place in the same neighbourhood. Also suspects are two individuals who are contesting for the position of a Master at a Local college, which is supposedly a prestigious post for both of them. The plot unravels slowly and in between Morse has had to be confined to hospital for his usual health problem. Colin Dexter is a fascinating writer and i particularly liked the way in he introduced each chapter with a quotation from the classics or mundane which might or might not have been relevant to the case.  

Free ATM transactions in banks.

Free ATM transactions from other bank ATMs are down to 3 per month, from 5 per month earlier. However individual banks may if they want keep it at 5 free transactions per month. Any transaction above 3 in a month would attract a levy of Rs.20/- plus service tax. This is contained in a RBI circular dated 14th August, 2014 which can be found here

But this limit of 3 free transactions per month will apply only in the 6 metro cities of Delhi, Mumbai, Kolkata, Chennai, Bangalore and Hyderabad. In all other cities and towns, the limit of 5 free ATM transactions still apply.

Reduction will not apply to small/ no frills/ basic savings account which continues to get free services as before.

Own bank ATM transactions will continue to be free for five transactions per month.

In order to beat this levy, makes sense to use own bank ATM transactions for upto 5 times a month and other bank ATMs for upto 3 times in a month. I am sure no body would withdraw more than 8 times a month!!

 

Company Law Settlement Scheme 2014

The Ministry of Corporate Affairs has announced a new Company Law Settlement Scheme 2014 to enable companies which have defaulted in filing their mandatory annual documents to file the same at reduced additional fees of 25% of the normal additional fees. The salient features of the Scheme are as follows:

1) The Scheme is open from 15th August, 2014 to 15th October, 2014
2) Applicable for filing of annual statutory documents like compliance certificate, audited financial statements, annual return and auditors appointment only.
3) Not applicable for other event based documents.
4) Companies can file the documents under respective forms 66, 23ac, 23aca, 20b, 21a and 23b by filing the same within the period. They have to pay the filing plus 25% of the additional filing fees payable.
5) The companies will have to file an immunity application in respect of these documents which were filed under the CLSS 2014. The e-immunity application will be required to be filed after the annual documents are taken on record or approved by the ROC. The e-immunity application counter will be open  for a period of three months after the closure of the Scheme.
6) The designated authority will consider the e-immunity applications and pass the necessary orders;
7) Companies which have already been issued with show cause notices from MCA in respect of non filing of the documents, and which has filed an appeal in a competent court, will have to first withdraw the appeal before it will be allowed to file the documents under the CLSS 2014.
8) The disqualification of directors under section 164 of the Companies Act, 2013 will apply only to prospective defaults if the company files the necessary documents under the CLSS 2014.
9) CLSS 2014 will not apply to vanishing companies, striking off action companies under section 560 of the Companies Act, 1956 and companies which have filed for dormant status under section 455 of the Companies Act, 2013;


DEFAULTING INACTIVE COMPANIES:

1) Where the company is inactive, i.e. there is no business in it, they can also take advantage under the Scheme by either

(a) applying to get themselves declared as dormant companies by filing the necessary form at 25% of the normal fees applicable on the said form. OR
(b) apply for striking off their names from the Register of the MCA by filing the necessary form at 25% of the normal fees applicable on the said form.

The MCA circular is available at this link

Tokyo station by Martin Cruz Smith

Another brilliant book by Martin Cruz Smith, this one "Tokyo station" set in 1941 at the beginning of the greatest war known to mankind. Harry Niles, son of missionary parents is brought up in the Tokyo underworld and he is more Japanese than American. He is seen as a spy by the Japanese and not trusted by the Americans also. In between there is a colonel who is after his blood for betrayal during the chinese war in Nanking in 1937 and his mistress Michiko who is torn between loyalty to him and the nation. Puts in brilliant perspective the Pearl Harbour strike and the beginning of the war for Japan. Intrigue, betrayal, suspense are the hallmark of this brilliant narrative by Smith. Highly recommended.

It is also known as December 6 in some editions. 

RIL fined rs.13 crores by SEBI

Reliance Industries Limited has been fined rs.13 crores by SEBI for incorrectly reporting the diluted earnings per share in its quarterly financials during the period 2007-08. The copy of the judgment can be found here.

Without going into the merits or demerits of the case as to whether the company has or has not incorrectly reported the diluted earnings per share, if one looks at the quantum of fine levied as to whether it is proportionate or disproportionate to the crime committed. Section 23J of the Securities Contracts Regulation Act says as under

23 J - Factors to be taken into account by the adjudicating officerWhile adjudging quantum of penalty under section 23-I, the adjudicating officer
shall have due regard to the following factors, namely:-
 (a) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default;
 (b) the amount of loss caused to an investor or group of investors as a result of the default;
(c) the repetitive nature of the default.

Para 34 of the Judgment says as under:

34.Specific quantum of any direct or indirect unfair gain made by the Noticee and the loss caused to the investor or group of investors, are not available on records. However, as observed above, the fact cannot be ignored that millions of shareholders/investors were deprived of correct disclosures about DEPS. As regards to the repetitive nature of default, as observed above that the Noticee had failed to disclose the DEPS repetitively for the six quarters.Hence, an appropriate penalty needs to be imposed upon the Noticee, taking into account the aforesaid gravity of the violations committed.

The sections relied upon for levying penalty is section 23A(a) and 23E of SCRA, which is reproduced hereunder:

Penalty for failure to furnish information, return, etc.23A. Any person, who is required under this Act or any rules made thereunder,—
(a) to furnish any information, document, books, returns or report to a recognised stock exchange, fails to furnish the same within the time specified therefor in the listing agreement or conditions or bye-laws of the recognised stock exchange, shall be liable to a penalty of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less for each such failure;
Penalty for failure to comply with provision of listing conditions or delisting conditions or grounds
23E. If a company or any person managing a collective investment scheme or mutual fund fails to comply with the listing conditions or delisting conditions or grounds or commits a breach thereof it or he shall be liable to a penalty not exceeding Rs.25 crores.

SEBI order on listed company for non redressal of investor complaints

This is an interesting case passed by SEBI and put up at their website here regarding an order passed against a listed company viz. Vakrangee Softwares Limited. This company had some 10 investor complaints pending against it in the SCORES system when the show cause notice was issued to it. Subsequently one after another the company started redressing one complaint after another. By the time there was a hearing on 22nd January, 2014 there were only five complaints pending against it, though the company has said that there were no complaints pending. After going through the records SEBI came to the conclusion that all the complaints were resolved albeit with a delay.

SEBI relied on section 15-C of the SEBI Act which stated as under:

Penalty for failure to redress investors’ grievances. 
15C. If any listed company or any person who is registered as an intermediary, after having been called upon by the Board in writing, to redress the grievances of investors, fails to redress such grievances within the time specified by the Board, such company or intermediary shall be liable to a penalty of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less.

Further section 15J gives guidelines on the quantum of penalty.

“15J - Factors to be taken into account by the adjudicating officer 
While adjudging quantum of penalty under section 15-I, the adjudicating officer shall have due regard to the following factors, namely:-
a. the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default;
b. the amount of loss caused to an investor or group of investors as a result of the default;
c. the repetitive nature of the default.”

SEBI came to the conclusion that it was unable to quantify the amount of disproportionate gain or unfair advantage or loss to investors and therefore levied a token penalty of Rs.2 lakhs on the company.

I don't know whether the company is going in for appeal against this decision of SEBI.

But for listed company and its intermediaries i.e. the Registrars and Share Transfer Agents this is a wake up call that they should not treat investor complaints lightly. I hope similar penalties are levied against the Mutual Funds who are notorious in their customer service.