ArchiveAugust 2009

SEBI and Corporate Law

Some of the previous posts on this Blog (SEBI prohibits issue of shares with “superior” rights and Shareholders and Their Duties under Indian Law) have generated reactions from readers on a significant issue, which is the role that SEBI has recently been playing in altering provisions of basic company law as far as listed companies are concerned. It may be worthwhile to ponder whether...

Corporate Frauds; Earnings Management

One question that does not seems to have been fully answered in the last few months is whether the Satyam episode is truly an aberration or whether it is just the tip of the iceberg (thereby signalling a systemic problem generally in several Indian companies). The Economic Times has an interesting report on various types of frauds that are practised in Indian companies and the role of various...

The Revival of Housing Derivatives

An article in the latest issue of the Economist discusses the revival of housing derivatives, and its close connection with the recent financial meltdown. The idea first surfaced in 2006, when housing derivatives were available as futures contracts on the Chicago Mercantile Exchange. However, the housing bubble, and the fact that these were available only for sophisticated investors, reduced...

Swiss Accounts and Banking Secrecy: Contrasting Outcomes

After prolonged discussions, the US and Swiss authorities came to an agreement earlier this month whereby UBS would disclose details of certain US account holders who are suspected of evading US taxes. The Time Magazine outlines the terms: Under the terms of the new agreement, the IRS will submit a request to Swiss tax authorities to divulge within one year the names of clients suspected of...

The Resurgence of Securitization and CDS

The concepts of securitization and credit default swaps (CDS) have acquired a negative connotation over the last couple of years since they were said to have triggered the global financial crisis during the second half of 2007. More, importantly, the assets involved were sub-prime loans that underwent a process of disintermediation due to which risk perceptions on the underlying assets were...

Financial Crisis, Economics and Regulation

There is a recent assortment of interesting columns regarding the financial crisis, the role that regulation (or the lack thereof) has played in the exacerbation of the crisis, and the various economic instruments utilized by policy makers to rein in the crisis. The following is a list of these readings: 1. Beyond the crisis by Subir Gokarn in the Business Standard.2. Financial Regulation –...

Scope of Deductions under the Income Tax Act

Two recent decisions of the Income tax Appellate Tribunals have provided important guidelines on the scope of the deductions under the Income Tax Act. One deal with what expenditures cannot be deducted on grounds of being ‘prohibited by law’, and the other dealt with the extent to which foreseeable losses could be allowed as deductions prior to their crystallisation. The first of these was a...

Norms on Minimum Public Float Set to Become Reality

In a post over a year ago, we had discussed that several companies were listed with differing minimum public shareholding in the past due to varying rules regarding minimum public float. These discrepancies continue to date. In order to obviate them, the Ministry of Finance had proposed imposing a uniform public float of 25%. This was also alluded to in the Budget this year. The Economic Times...

Amendments to DIP Guidelines: Rights Issues and IDRs

SEBI today issued amendments to the SEBI (Disclosure and Investor Protection) Guidelines, 2000 with a view to simplifying the process for a rights issue. Since listed companies embarking on a rights issue are already subject to the disclosure norms under the listing agreement, substantial information regarding such companies are already available in the public domain, and hence SEBI has decided...

Merits of a Financial Services Appellate Tribunal

(The following column by Somasekhar Sundaresan appeared in today’s Business Standard) Newspapers have recently reported that a proposal has been mooted in government to convert the Securities Appellate Tribunal (SAT) into a “Financial Services Appellate Tribunal” to hear grievances against orders passed by various sub-sectoral regulators. Currently, the SAT hears appeals only against orders...

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