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Empower

Empower

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Published by ANKIT_XX
www.journaloffinance.in
www.journaloffinance.in

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Published by: ANKIT_XX on Jun 12, 2010
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03/15/2012

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1FINANCIAL SECTOR 
1. FINANCIAL ADVISORS:Weigh impact on investors
Stabilise world financial markets: G7
 Financial leaders from the world’s richest nations (G7) pledged to work together to stabilise world  financial markets shaken by the US housing debacle that is puncturing global economic growth. TheGroup of Seven finance ministers and central bank chiefs acknowledged that they all had a vested interest in shoring up the global financial system.
British finance minister said where coordinated action is found to be necessary to stabilise the worldfinancial markets, we will do all that is needed. We are all after the same thing and this is to restorestability. European Central Bank (ECB) sent a signal that the ECB may soon join the Fed, Bank of England and Bank of Canada in cutting rates.US Treasury Secretary Henry Paulson struck the same theme, urging banks to take losses and raise capitalquickly to stave off a credit crunch. The worst thing is if they don’t raise capital; and then restrain their lending. The draft copy of the communiqué vowed to take actions, individually and collectively, in order to secure stability and growth in economies.
2. WEALTH MANAGERSMap out the details to translate into benefits
Frozen demat account
Quoting PAN has been made mandatory since 2007 for operating demat accounts, but numerousinvestors have failed to comply with directive. This had forced the depositories holding securities inelectronic form to freeze the demat accounts of several investors.
The government is set to act on a proposal to attach the securities lying in frozen demat accounts of lakhsof investors if they do not furnish details of their PAN within a new deadline. If the investor do not comeforward and comply with the identification norms, the CBDT plans to invoke the provisions of theIncome Tax Act to provisionally attach the securities in the credit of such frozen accounts.The CBDT would write to investors whose demat accounts have been frozen warning them about theconsequences of their failure to comply with the norms. At last count, the number of frozen demataccounts was reckoned to be over 20 lakh and the value of securities held by investors in such accounts atleast over Rs 1,00,000 crore, which is over 2% of the market capitalisation of companies listed on BSE.
 
FINANCIAL SECTOR… 2
3. FINANCIAL PLANNERSValue unlocking for investors
Regulation for Art funds
 In a growing economy, art prices are normally on the rise and funds can pay to investors. But problemsmay arise when the economy becomes sluggish or slips into a recession. In such cases, redemption pressure on the funds is not difficult to envisage and a regulatory framework is expected to guard investors to some extent from dips in the art market.
Regulation of art funds seems to be on the cards. With the Sebi recently taking a stand that art funds,which are dealing in public money, should be registered, it appears that a regulatory framework couldtranspire soon. The Indian market regulator Sebi said an analysis of the characteristics of the art fundsshows that they are collective investment schemes as defined under section 11AA (2) of the Sebi Act,1992. Since the art and equity markets are different, their performance parameters will vary.According to section 12 (1B) of the Sebi Act, no person can sponsor without obtaining a certificate of registration from the market regulator. Launching/floating art funds or schemes without obtainingregistration from Sebi amounts to violation of the Sebi Act and appropriate actions, civil and criminal,under the Sebi Act may be taken against such funds/companies. For a collective investment scheme toraise money from the public, it is prerequisite that the entity must (a) be a company and (b) registeredwith Sebi as a collective investment management company.
Regulating Venture capital funds
Only professionals are likely to be allowed to float venture capital funds (VCF) in future. In what could be a major change in India’s venture capital regulations, no business house, and financial service groupor big corporate would be allowed to set up a VCF.
The capital market regulator has veered around to this view, possibly driven by instances where largegroups have used funds sponsored by them to invest in companies where they have strategic or businessinterests. Since VCFs operate under a special regime in relation to taxation, foreign capital and investmentlock-in, and are meant to encourage new entrepreneurs, the vehicle should not be misused by established players.While no formal guidelines have been issued, the change in regulatory stance on VCFs follows viewsexpressed by an informal panel to look into regulations for venture capital. Existing VCFs set up by business houses and banking groups will not be affected. Internationally, there is no special classification, primarily because in most countries VCFs are not regulated entities. It would be interesting to see how theregulations are tweaked in India to ensure that only professionals can come together to sponsor a fund. Inthis case, it would be important how a professional is defined.

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