Sebi ups vigil on market to prevent manipulation

Rajesh Abraham, Anto T Joseph, Financial Chronicle, 25/8/11


The Securities and Exchange Board of India (Sebi) is beefing up its internal market surveillance systems to check stock manipulations on a real-time basis, chairman UK Sinha said.

The market regulator is also concerned about rising retail participation in the risky equity derivatives segment, Sinha said, adding that Sebi would check if some sort of misselling or mis-communication is going to investors to lure them into this segment.

At present, retail segment’s share in equity derivatives – termed as weapons of mass destruction by billionaire investor Warren Buffet – is nearly 60 per cent compared with that of only 13 per cent from institutions, who are relatively better equipped to deal with such sophisticated and risky trades.

In an exclusive interview with Financial Chronicle, Sinha said the capital market regulator through its integrated market surveillance system generates 12 different kinds of alerts on doubtful or suspicious trades in the stock market. This will be beefed up further to send a clear message to rogue traders that the regulator was on top of things.

“Sebi has introduced an integrated surveillance system. This means we have our own independent system where data from all exchanges are captured automatically on a real-time basis. That part of the project is over,” Sinha said.

“The second part is what we do with the data? Have we developed enough business intelligence to take that data forward to identify any pattern that can be suspicious? That part is going on,” the Sebi chief said.

The alerts on which the system generates information is only the initial stage of phase one. “We have to take it to a very different level so that if anybody is trying to manipulate any scrip or the market, our system is able to tell us immediately. Bu immediately, I mean immediately, on a real-time basis. That is our ambition,” Sinha said.

The Sebi chief said allowing an offence to take place and punish the guilty was not the regulator’s goal. “Our job is to stop the offence. It will take a few years. One phase will be completed by the end of this year,” he said.

On increased participation of small investors in the risky equity derivatives segment, Sinha said it throws up challenges for Sebi to see what sort of communication was going to them.

“Are retail investors being told in very clear terms what are the risks? If there is any mis-selling and mis-communication, we will definitely look into it, because if 60 per cent of investors in a country like India, where the level of financial literacy is not very high, are participating in derivatives, then Sebi should look at the way sales are happening. We will definitely look at the way communication is happening,” he said.


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Government Lokpal Bill Vs Jan Lokpal Bill

Issue View of ‘India against corruption’ Government’s view Comments
Prime Minister Lokpal should have power to investigate allegations of corruption against PM. Special safeguards provided against frivolous and mischievous complaints PM kept out of Lokpal’s purview. As of today, corruption by PM can be investigated under Prevention of Corruption Act. Government wants investigations to be done by CBI, which comes directly under him, rather than independent Lokpal
Judiciary Lokpal should have powers to investigate allegation of corruption against judiciary. Special safeguards provided against frivolous and mischievous complaints Judiciary kept out of Lokpal purview. Government wants this to be included in Judicial Accountability Bill (JAB). Under JAB, permission to enquire against a judge will be given by a three member committee (two judges from the same court and retd Chief justice of the same court). There are many such flaws in JAB. We have no objections to judiciary being included in JAB if a strong and effective JAB were considered and it were enacted simultaneously.
MPs Lokpal should be able to investigate allegations that any MP had taken bribe to vote or speak in Parliament. Government has excluded this from Lokpal’s purview. Taking bribe to vote or speak in Parliament strikes at the foundations of our democracy. Government’s refusal to bring it under Lokpal scrutiny virtually gives a license to MPs to take bribes with impunity.
Grievance redressal Violation of citizen’s charter (if an officer does not do a citizen’s work in prescribed time) by an officer should be penalized and should be deemed to be corruption. No penalties proposed. So, this will remain only on paper. Government had agreed to our demand in the Joint committee meeting on 23rdMay. It is unfortunate they have gone back on this decision.
CBI Anti-corruption branch of CBI should be merged into Lokpal. Government wants to retain its hold over CBI. CBI is misused by governments. Recently, govt has taken CBI out of RTI, thus further increasing the scope for corruption in CBI. CBI will remain corrupt till it remains under government’s control
Selection of Lokpal members

1. Broad based selection committee with 2 politicians, four judges and two independent constitutional authorities.

2. An independent search committee consisting of retd constitutional authorities to prepare first list.

3. A detailed transparent and participatory selection process.

1. With five out of ten members from ruling establishment and six politicians in selection committee, government has ensured that only weak, dishonest and pliable people would be selected.

2. Search committee to be selected by selection committee, thus making them a pawn of selection committee

3. No selection process provided. It will completely depend on selection committee

Government’s proposal ensures that the government will be able to appoint its own people as Lokpal members and Chairperson. Interestingly, they had agreed to the selection committee proposed by us in the meeting held on 7th May. There was also a broad consensus on selection process. However, there was a disagreement on composition of search committee. We are surprised that they have gone back on the decision.
Who will Lokpal be accountable to? To the people. A citizen can make a complaint to Supreme Court and seek removal. To the Government. Only government can seek removal of Lokpal With selection and removal of Lokpal in government’s control, it would virtually be a puppet in government’s hands, against whose seniormost functionaries it is supposed to investigate, thus causing serious conflict of interest.
Integrity of Lokpal staff Complaint against Lokpal staff will be heard by an independent authority Lokpal itself will investigate complaints against its own staff, thus creating serious conflicts of interest Government’s proposal creates a Lokpal, which is accountable either to itself or to the government. We have suggested giving these controls in the hands of the citizens.
Method of enquiry Method would be the same as provided in CrPC like in any other criminal case. After preliminary enquiry, an FIR will be registered. After investigations, case will be presented before a court, where the trial will take place CrPC being amended. Special protection being provided to the accused. After preliminary enquiry, all evidence will be provided to the accused and he shall be heard as to why an FIR should not be regd against him. After completion of investigations, again all evidence will be provided to him and he will be given a hearing to explain why a case should not be filed against him in the court. During investigations, if investigations are to be started against any new persons, they would also be presented with all evidence against them and heard. Investigation process provided by the government would severely compromise all investigations. If evidence were made available to the accused at various stages of investigations, in addition to compromising the investigations, it would also reveal the identity of whistleblowers thus compromising their security. Such a process is unheard of in criminal jurisprudence anywhere in the world. Such process would kill almost every case.
Lower bureaucracy All those defined as public servants in Prevention of Corruption Act would be covered. This includes lower bureaucracy. Only Group A officers will be covered. One fails to understand government’s stiff resistance against bringing lower bureaucracy under Lokpal’s ambit. This appears to be an excuse to retain control over CBI because if all public servants are brought under Lokpal’s jurisdiction, government would have no excuse to keep CBI.
Lokayukta The same bill should provide for Lokpal at centre and Lokayuktas in states Only Lokpal at the centre would be created through this Bill. According to Mr Pranab Mukherjee, some of the CMs have objected to providing Lokayuktas through the same Bill. He was reminded that state Information Commissions were also set up under RTI Act through one Act only.
Whistleblower protection Lokpal will be required to provide protection to whistleblowers, witnesses and victims of corruption No mention in this law. According to govt, protection for whistleblowers is being provided through a separate law. But that law is so bad that it has been badly trashed by standing committee of Parliament last month. The committee was headed by Ms Jayanthi Natrajan. In the Jt committee meeting held on 23rd May, it was agreed that Lokpal would be given the duty of providing protection to whistleblowers under the other law and that law would also be discussed and improved in joint committee only. However, it did not happen.
Special benches in HC High Courts will set up special benches to hear appeals in corruption cases to fast track them No such provision. One study shows that it takes 25 years at appellate stage in corruption cases. This ought to be addressed.
CrPC On the basis of past experience on why anti-corruption cases take a long time in courts and why do our agencies lose them, some amendments to CrPC have been suggested to prevent frequent stay orders Not included
Dismissal of corrupt government servant After completion of investigations, in addition to filing a case in a court for prosecution, a bench of Lokpal will hold open hearings and decide whether to remove the government servant from job. The minister will decide whether to remove a corrupt officer or not. Often, they are beneficiaries of corruption, especially when senior officer are involved. Experience shows that rather than removing corrupt people, ministers have rewarded them. Power of removing corrupt people from jobs should be given to independent Lokpal rather than this being decided by the minister in the same department.
Punishment for corruption

1. Maximum punishment is ten years

2. Higher punishment if rank of accused is higher

3. Higher fines if accused are business entities

4. If successfully convicted, a business entity should be blacklisted from future contracts.

None of these accepted. Only maximum punishment raised to 10 years.
Financial independence Lokpal 11 members collectively will decide how much budget do they need Finance ministry will decide the quantum of budget This seriously compromises with the financial independence of Lokpal
Prevent further loss Lokpal will have a duty to take steps to prevent corruption in any ongoing activity, if brought to his notice. If need be, Lokpal will obtain orders from High Court. No such duties and powers of Lokpal 2G is believed to have come to knowledge while the process was going on. Shouldn’t some agency have a duty to take steps to stop further corruption rather than just punish people later?
Tap phones Lokpal bench will grant permission to do so Home Secretary would grant permission. Home Secretary is under the control of precisely those who would be under scanner. It would kill investigations.
Delegation of powers Lokpal members will only hear cases against senior officers and politicians or cases involving huge amounts. Rest of the work will be done by officers working under Lokpal All work will be done by 11 members of Lokpal. Practically no delegation. This is a sure way to kill Lokpal. The members will not be able to handle all cases. Within no time, they would be overwhelmed.
NGOs Only government funded NGOs covered All NGOs, big or small, are covered. A method to arm twist NGOs
False, Frivolous and vexatious complaints No imprisonment. Only fines on complainants. Lokpal would decide whether a complaint is frivolous or vexatious or false. Two to five years of imprisonment and fine. The accused can file complaint against complainant in a court. Interestingly, prosecutor and all expenses of this case will be provided by the government to the accused. The complainant will also have to pay a compensation to the accused. This will give a handle to every accused to browbeat complainants. Often corrupt people are rich. They will file cases against complainants and no one will dare file any complaint. Interestingly, minimum punishment for corruption is six months but for filing false complaint is two years.

source: India Against Corruption


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Direct Tax Code set to miss deadline again

Santosh Tiwari, Business Standard, 12/8/2011


The implementation of the Direct Taxes Code appears set to miss its deadline once again.

The Direct Taxes Code (DTC) Bill, introduced in Parliament on August 30 last year, proposes to replace the 50-year-old Income Tax Act.

Initially proposed to come into force from April 2011, the code’s deadline had been extended to April 2012 as the draft Bill was referred to a Parliamentary standing committee.

The standing committee is unlikely to give its report on the draft Bill in the ongoing session.

Though a standing committee member said the government could implement the DTC from April 2012 even if the panel’s report was presented in the Winter session, a senior finance ministry official handling the process told Business Standard it would be very difficult.

“There won’t be enough time. The Act needs to be passed by March 31 for implementation from April 1. If the standing committee report comes in the Winter session, the final Bill can at best be tabled in Parliament in the Budget session and it would not be possible to announce the implementation from the next financial year in the Budget without the Act’s passage,” explained the official.

The new direct tax law proposed to simplify and streamline the income tax regime. After it missed the April 2011 deadline, Finance Minister Pranab Mukherjee had shown optimism it would be implemented from April 2012. The official, however, said the delay in implementation by another year would not create problems, as the government had started the process of moving towards the DTC under the existing income tax provisions in the last two years.

“Ideally, after the passage in Parliament, both the income tax department and industry should get at least nine months to prepare themselves to handle the new framework,” he added.
The industry, in fact, has indicated to the finance ministry it would be good to implement the DTC from April 2013 along with the proposed goods and services taxation (GST).

"The industry wants certainty and time to understand the exact implications of a particular law to settle down before getting into a new policy framework," said the official.

The Central Board of Direct Taxes has started working out the systemic requirements to handle the DTC and implementation of the code from April 2013 will give it extra time to develop the infrastructure.

The annual I-T exemption limit is proposed at Rs 2 lakh in the DTC Bill compared to Rs 1.8 lakh at present.

Under the Bill, the government proposes to widen tax slabs to levy 10 per cent tax on income between Rs 2 lakh and Rs 5 lakh, 20 per cent on Rs 5-Rs 10 lakh and 30 per cent above Rs 10 lakh.

Currently, income up to Rs 1.8 lakh per annum is exempt from tax for individuals. For women and senior citizens, the limit is Rs 1.9 lakh and Rs 2.5 lakh, respectively.

Tax is levied at a 10 per cent rate on income between Rs 1.8 lakh and Rs 5 lakh, 20 per cent on Rs 5-Rs 8 lakh and 30 per cent above Rs 8 lakh.


AUG 2009
First DTC draft put up for public discussion

JUNE 15, 2010
Revised draft issued for discussion

AUG 26, 2010
Cabinet clears DTC Bill

AUG 30, 2010
* DTC Bill tabled in Parliament

* Deadline extended to April 2012 from April 2011

* Bill referred to the standing committee

AUG 2011
Standing committee report expected in Winter session, not enough time to complete process by March 31


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Fresh rap for UPA by apex court

Court sets up SIT to probe black money cases, says names will be disclosed only if wrongdoing involved

Nikhil Kanekal, Mint 5/7/2011


The Supreme Court took the onus of investigating money that Indians may have stashed in secret foreign accounts and on which taxes have not been paid, continuing to display an activist streak that has discomfited the government.

The court created a new special investigative team (SIT) to investigate such instances of black money being secreted in overseas accounts in foreign banks and appointed two of its former judges, B.P. Jeevan Reddy and M.B. Shah as chairman and vice-chairman of the body, respectively.

While the United Progressive Alliance (UPA) government chose not to respond to the court’s criticism, claiming it hadn’t seen the “text of the judgement”, the opposition seized the opportunity to attack the government, and an analyst cautioned that the court may have over-reached itself.

The SIT has come from a previously appointed high-powered committee, comprising 10 top officials of government agencies, which was set up as a response to a public interest litigation on retrieving black money filed by senior lawyer Ram Jethmalani and some public figures in 2009.

The high-powered committee includes the revenue secretary, deputy director of the Reserve Bank of India, chairman of the Central Board of Direct Taxes, director general of revenue intelligence, director general of narcotics control, director of foreign intelligence office, joint secretary of foreign trade and the directors of the Central Bureau of Investigation, the Intelligence Bureau and the Enforcement Directorate.

On Monday, the court added the director of the Research and Analysis Wing to the newly-created SIT.

The Union government has been directed to pass a notification to formalize the appointment of the SIT, which in turn has been mandated to pursue the black money probe with vigour, starting with the case of Pune-businessman Hasan Ali Khan and his associates Kashinath Tapuriah and Chandrika Tapuriah.

“The Supreme Court is clearly violating the constitutional separation of powers. What will two judges do? Will they go after everybody or just Hasan Ali and some others? The danger in my view is that the court will undermine its own legitimacy,” said Pratap Bhanu Mehta, president of Centre for Policy Research, a New Delhi-based think tank.

The court’s stinging criticism had an overarching concern for the general failure of governance in the country. In an order that went well beyond the domains of black money, the bench unleashed denigration upon the government, asking why “incapacities” were prevailing “system-wide”.

Justice B. Sudershan Reddy, who will retire on Thursday, delivered the 53-page order along with justice Surinder Singh Nijjar. Reddy began his order with a reference to a line immortalized in the story of the Watergate scandal in the US (and its cinematic retelling). “Follow the money”, the bench said, while taking a critical view of the government for its slowness in the investigation.

“The worries of this court relate not merely to the quantum of monies said to have been secreted away in foreign banks, but also the manner in which they may have been taken away from the country, and with the nature of activities that may have engendered the accumulation of such monies. The worries of this court are also with regard to the nature of activities that such monies may engender, both in terms of the concentration of economic power, and also the fact that such monies may be transferred to groups and individuals who may use them for unlawful activities that are extremely dangerous to the nation, including actions against the state.”

The court said that information on the identity of people who had money in foreign accounts would be disclosed if investigators had reason to believe that there was wrongdoing involved. Identity of individuals with show-cause notices against them would become known to the public, while that of the rest would be withheld in the interests of their privacy.

The court also observed that the double-taxation avoidance agreement between India and Germany, which the government was using as a shield to protect the information, was not a valid argument.

The court expressed concerns over the cyclical nature of black money that it believed was causing damage to the economy and not allowing people from the lower economic classes to come out of their poverty. And it could not have made its distrust in the government more clear: “Finally, the worries of this court are also with respect to the extent of incapacities, system-wide, in terms of institutional resources, skills, and knowledge, as well as about incapacities of ethical nature, in keeping an account of the monies generated by various facets of social action in the country, and thereby developing effective mechanisms of control. These incapacities go to the very heart of constitutional imperatives of governance.”

The Bharatiya Janata Party (BJP) said the order highlighted the trust deficit in the government’s relationship with the judiciary. “BJP welcomes the decision of the Supreme Court to appoint an SIT in view of the government’s failure to bring back black money stashed in foreign banks. This is a slap in the government’s face. This is proof that even courts don’t believe the government has the ability to bring back the money,” said BJP spokesperson Prakash Javadekar.

The high-powered committee, constituted by the court on 25 April, has met only once, on 9 June. The panel has asked for recommendations from citizens on how to curb the black money problem (at It is not yet clear whether SIT will also seek suggestions from the public since the panel had not received any substantial inputs, according to a finance ministry official, who did not want to be named. For now, the Supreme Court has asked the finance ministry to provide infrastructure support to SIT.


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BSE to train millions in financial skills

There is hope for skilled manpower-starved banks, financial services’ firms and insurance companies.

Business Standard, 29/6/2011


The Bombay Stock Exchange (BSE) says it will train 6.5 million people in the next 10 years to work in the BFSI (banking, financial services and insurance) sector, the largest employer in the Indian private sector.

BSE has been brought in by the National Skill Development Corporation (NSDC), a public-private partnership created by the finance ministry in 2008, for the job. The pilot project, to include developing a complete work programme, is to begin next month.

NSDC is to extend a grant of Rs 5 crore for the first three years to BSE for creating a pilot programme, said sources. BSE would set up at least 200 accredited training centres across the country. Each would train 3,250 people every year. The project will be carried out by BSE’s training institute, which till now had been conducting certified courses in capital market studies.

According to a recent estimate by the Indian Banks’ Association, public sector banks alone require at least 400,000 new employees in the next two years. For example, Bank of Baroda is looking to recruit 5,000 employees during the current financial year. India’s largest lender, State Bank of India, which hired 20,000 people last year, is planning to hire 10,000 more this year. Union Bank of India plans to hire 4,000 people.

Says a member of the Institute of Banking Personnel Selection (IBPS), "At present, public sector bank employees’ number almost a million but a large chunk of them will retire in the next two years." Last year, IBPS facilitated the recruitment of 48,000 employees in PSBs.

Madhu Kannan, chief executive officer and managing director of BSE, said: "It is one of the most important social causes. The BFSI sector severely lacks skilled workers and there is a vacancy at every level. We will invite other exchanges, depositories, banks and insurance companies to work together and also invest money, if need be."

So far, NSDC has approved 36 projects, involving 30 companies and six sector skill councils (SSCs). It has committed funding of Rs 1,016 crore since February 2010 to train five million people. NSDC has identified 20 sectors to train 150 million people by 2022. The six sector skill councils are in the automotive segment, energy, retail, private security; media, entertainment and animation; and information technology and IT-enabled services.

The SCCs are to create clear definition of qualifications required to perform a given job and to move into advanced positions.


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India growth to overtake China

India growth to overtake China – economic adviser Basu

Financial Chronicle, 27/6/2011


India’s growth rate is poised to overtake China’s within two to three years, despite a near-term slowdown, the finance ministry’s chief economic adviser Kaushik Basu said on Monday

Basu told a conference that it was necessary for India to throttle back growth in the short-term to control inflation and preserve long-term growth prospects.

"I would argue that this is a road bump, a sticky patch. The medium- to long-run growth prospect for India happens to be very good," he said.

Basu, speaking at a conference ahead of high-level U.S.-India economic talks, said India’s Ministry of Finance would make new growth projections next week. He said there was "a lot of lamenting" about a slowdown from India’s recent growth rates.

The economy grew 8.5 percent in the last fiscal year, but growth slipped to 7.8 percent in the January-March period.

Basu said the government was moving forward with plans to change the way it subsidizes fuel and would allow kerosene to find its true market price while giving vouchers to the poor to directly subsidize their purchases of the fuel.

He said allowing foreign investment in India’s long-coveted retail sector would help temper inflation and provide better management of food supplies.

Lael Brainard, the U.S. Treasury’s undersecretary for international affairs, told the conference the two countries have tapped only a small fraction of their joint economic potential despite rapid growth in trade in recent years.

She called for "reinvigorating" the two countries’ commitment to domestic reform in their financial services industries and broader economies.

"We are going to continue to deepen our collaboration in the Financial Stability Board, the IMF and the G20, where the U.S. and India — based on our shared growth model, powered by domestic consumers, by markets, by innovation — will work together to advance our goals for more-balanced growth," she said.


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If your total income is up to Rs.5 lakh, don’t file returns

Total income should be from one employer and can include interest income from savings bank deposit

Deepti Bhaskaran, Mint 27/6/2011


If you are a salaried individual with a total annual income up to Rs5 lakh, you can stop chasing the 31 July deadline to file your income-tax returns (ITR). The Central Board of Direct Taxes (CBDT) has notified the scheme that exempts salaried individuals with a total income up to Rs5 lakh from filing returns for the assessment year 2011-2012.

Says Homi Mistry, partner, Deloitte Haskins and Sells, a tax consulting company: “The notification is perhaps useful for individuals who have very low salary. For example, individuals who have started afresh or those in the lower income group like office boys.”

What makes total income

The total income should be from your salary and from a single employer. Your total income can also include interest income from deposits in a savings bank account up to Rs10,000.

To calculate your total income, factor in all the deductions. A deduction is a straight subtraction from your income and the remainder is your taxable income. Some of the most popular deductions come under section 80C, including premiums of life insurance policies, principal repayment of home loans, savings in an equity-linked savings schemes and investments in Public Provident Fund. If you have a health insurance policy, the premiums will qualify for a deduction of up to Rs15,000 under section 80D.

What you need to do

Though you need not file your ITR, you will need to give your Permanent Account Number and details of the entire interest income from your bank to your employer. After factoring in all the deductions and exemptions, your employer will then deduct tax payable by you at source. The Form 16 that you get will reflect the tax deducted at source (TDS).

Who’s out of ambit

But if you are earning a salary from more than one employer, or have other income sources in addition to interest income from your savings bank account and salary, you will need to file your returns even if your salary is up to Rs5 lakh. Also, if you have refund claims, you will need to file tax returns.

The scheme shall also not be applicable in cases where notices have been issued for filing ITR under section 142(1) for late or non-submission of return; or section 148 for reassessment; or section 153A for search and requisition; or section 153C for any other person.

The limitation

The proposal was first made in Union Budget 2011-12, when the finance minister evinced interest in notifying a category of salaried taxpayers, whose tax liability is discharged by their employers through TDS.

However, what seems to be a convenient move may actually not turn out to be a practical one. Says Sudhir Kaushik, co-founder and chief financial officer,, a tax filing portal: “From a practical standpoint, an individual should anyway file his income-tax return. It not only helps an individual keep a record of his tax history, but is also required when one wants to submit an application for a visa, a bank loan, or any such application for which one needs to furnish an authentic proof of income.”

The income-tax return receipt is an important document and is used for authentication purposes in some cases, such as getting a visa when travelling abroad or applying for a bank loan. So it may actually make sense for you to file your returns even if your total income is up to Rs5 lakh.

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