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.

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.

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