Friday, June 22, 2012

Regulatory Updates: SEBI and CCI


SEBI: Stock Exchanges and Clearing Corporations
SEBI has issued the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012 that deal with the recognition, ownership and governance of stock exchanges and clearing corporations.
Certain minimum ownership and net worth requirements have been specified. Maximum shareholding by a single shareholder has been limited to 5% (with some exception). Moreover, a majority of equity shares is required to be held by public shareholders.
Relevant extracts are as follows:
17. (1) Atleast fifty one per cent. of the paid up equity share capital of a recognised stock exchange shall be held by public.
(2) No person resident in India shall at any time, directly or indirectly, either individually or together with persons acting in concert, acquire or hold more than five per cent. of the paid up equity share capital in a recognised stock exchange:
 Provided that,—
(i) a stock exchange;
(ii) a depository; 
(iii) a banking company;
(iv) an insurance company; and 
(v) a public financial institution,
may acquire or hold, either directly or indirectly, either individually or together with persons acting in concert, upto fifteen per cent. of the paid up equity share capital of a recognised stock exchange.
(3) No person resident outside India, directly  or indirectly, either individually or together with persons acting in concert, shall acquire or hold more than five per cent. of the paid up equity share capital in a recognised stock exchange.
Every stock exchange is required to have a minimum net worth of Rs. 100 crores.
In addition to the regulations, SEBI has issued a press release that details additional mechanism for regulating conflicts of interest in market infrastructure institutions such as stock exchanges and clearing corporations.
These regulations arise as a result of the settlement arrived at by SEBI with the MCX Exchange during the pendency of an appeal before the Supreme Court. They are also issued pursuant to decisions taken by SEBI on April 2, 2012.
CCI: Cement Companies
In a significant order, the Competition Commission of India (CCI) has imposed a hefty penalty on 11 cement manufacturers for anti-competitive practices. CCI’s accompanying press release summarizes the impact:
The Competition Commission of India has found cement manufacturers in violation of the provisions of the Competition Act, 2002 which deals with anticompetitive agreements including Cartels. The order was passed pursuant to investigation carried out by the Director General upon information filed by Builders Association of India. The Commission has imposed penalty on 11 Cement Manufacturers named in the information @0.5 times of their profit for the year 2009-10 and 2010-11. The penalty amount so worked out amounts to more than Six thousand Crores.  The Commission has also imposed penalty on the Cement Manufacturers Association.
[emphasis added]
The order is fairly lengthy (at 258 pages), and we will have the opportunity to analyze it in some detail soon.

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