Is Sebi Decisions Controversies
free?
If a regulator plays their role fairly, they will get support
of general peoples, but when a regulator wants to ruled the Country that will
make panic environment. Here some major controversies which is related to Security
Exchange Board of India (Sebi) and reflecting their actual face amongst all of
you. You read and decide “Is Sebi Decisions Controversies free?
Ulips: In 2010, Sebi
issued showcause notices to a dozen life insurers and asked them to stop
introducing unit-linked insurance plans, or Ulips, without its permission as
these hybrid insurance products mimicked mutual fund schemes that are regulated
under Sebi’s collective investment scheme, or CIS, norms. The order gave rise
to a battle between the capital markets regulator and the insurance
regulator—Insurance Regulatory and Development Authority, or Irda. The
President of India had to pass an ordinance amending the CIS norms and keeping
Ulips under Irda.
Mutual funds: In August 2009,
soon after a panel headed by Dhirendra Swarup recommended abolishing agent
commission for distribution of financial products, Sebi ordered scrapping of
entry fees in mutual funds. The move was criticized by the industry and legal
experts. The order forced thousands of mutual fund advisers to sell other
products that offered better incentives, resulting in stagnation of assets
under management.
Participatory notes: In October 2007,
in the wake of an appreciating rupee, Sebi proposed to curb issuance of
participatory notes (P-notes), a favourite investment route used by foreign
institutional investors (FIIs). Sebi was concerned about the quality of money
flowing into India through P-notes but many say it was an attempt to curb
excessive dollar flows. The BSE’s benchmark Sensex crashed 1,700 points the
very day after the announcement and it led to suspension of trading for an
hour. The crash forced the finance minister to clarify that the government was
not against FIIs and there would be no immediate ban on P-notes.
MCX-SX: In a bid to ensure
compliance of exchanges with market infrastructure regulations, Sebi got into a
bitter legal spat with India’s newest stock exchange MCX-SX in 2009. The
regulator fought a three-year long battle with the promoters of the exchange,
alleging the latter violated norms by attaching put options in its share
purchase agreement with investors and not following permissible routes for capital
reduction. While Sebi alleged that MCX-SX promoters did not comply with
ownership and governance norms required by an exchange, MCX-SX claimed that it
had not violated any such norm, that it took prior permission of other
regulators, and followed permissible routes for capital reduction. Later,
MCX-SX was given a licence to start equity trading and given three years to
reduce promoter holding in the exchange.
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