Regulatory Concerns &

Actions

Reducing financial disasters,

Safety of the financial system

- Mushir Killedar

Looks familiar?

Speak Asia story

• Standard panelist – 7 reward points in a week (364

reward points in a year )

• Premium panelist – 20 reward points ((1040 reward

points in a year)

• How you earn these points? By completing surveys and • How you earn these points? By completing surveys and

other activities

• Rs.11,000/- per panelist to be given to SpeakAsia

• Business Model - ???

• SpeakAsia registered in Singapore

• Not registered in India

• No establishment or office in the country.

• Stunning return of 500%

• Objective for people to fill meaningless surveys and

Speak Asia story

• Objective for people to fill meaningless surveys and

enroll new ‘panellists’

• Investment =Rs.11,000

• Intention to enroll one crore people by the end of 2011

• Estimated remittance of around Rs.200 crore

• Only action till date: a complaint by Mumbai police

• Investigation initiated by The Ministry of Corporate Affairs (MCA), RBI and the Securities and Exchange Board of India (SEBI).

Speak Asia story

Board of India (SEBI).

Is it a case for a financial disaster which has struck?

Or the full impact of it has not yet been felt?

Were our regulators caught sleeping again?

Past cases

• City Limouzine

• Business model of leasing cars

• Return of around 69%

International Experience

• Banned in countries like US, UK, Canada, China

• Pryramid companies:

– based on profits from recruiting rather than retailing – based on profits from recruiting rather than retailing

• Singapore ban pyramid companies but permit

multi-level marketing (MLM) or direct selling

firms to operate, subject to stringent regulation

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Major Regulators

Major Concerns of SEBI

• Source of money

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• Main objectives of SEBI is to regulate and

develop the securities market

• Stock Brokers to identify• Beneficial owner

• Documentation / KYC

Major Concerns of SEBI

• Investments capital market through Participatory

Notes

• Investments flowing through tax heavens eg.

Mauritius 1983 tax treaty

• Registration of FIIs by SEBI

• PMLA implementation

• Increased due diligence leading to voluminous KYC and

terms and conditions

• Non-standard collection of stamp duty on stock market

trades

Major Concerns of SEBI

trades

• Inspection of stock brokers

• Investor Grievance

– Display of grievance on Exchange websites

– SEBI plans to outsource its investor helpline service to a 500-

seater third-party call centre.

– Display of Compliance Officer details

• Power of Attorney

– Huge cases of investor grievances

– Standardization of format

Major Concerns of SEBI

• Automated trading � DMA’s & Algos

• Short-selling � Securities Lending & Borrowing

Scheme

Mutual Fund

• Concern - August 2009: “to reduce cost for investor”

• Ban on entry load

• Impact on industry:

– an outflow of Rs19,549 crores from equity funds (between – an outflow of Rs19,549 crores from equity funds (between

August 2009 and May 2011)

– a decline of 22.61 lakh equity-oriented mutual fund

accounts (April 2009 to March 2011)

• Concern – June 2011: “lack of participation in

mutual fund”

Thoughtful Actions.. for MFs

• regulation of distributors

• disclosure of track record of fund managers by asset

management companies

• break-up of institutional and retail money of fund

houses houses

• simplifying the KYC norms across its domain

Portfolio Management Service

• Portfolio Management Fees

• Complaints of exorbitant fees charged

• Action in pipeline: Uniform fees structure

• Will it be a death knell for PMS?

Outsourcing of Activities

• Jan 19, 2011: Discussion paper by SEBI

• Objective: “to curtail risk associated with

outsourcing”

• KYC documentation • KYC documentation

• Trade processing activities

• Investor grievance

Thank You