Se Chiefs' Meet Seeks More Powers For Sebi, Bourses

The stock exchange meet was organised by the Bombay Stock Exchange (BSE) and was attended by presidents/representatives from fifteen stock exchanges.

According to the BSE president M G Damani, all exchange chiefs met for the first time after 1993 to thrash out issues pertaining to the capital market.

The meet also called for the removal of taxation on dividend and also for compulsory audit of end use of funds raised from the primary market.

The representatives also unanimously agreed on the issue of raising the minimum shareholding limit for general public from the present 25 per cent to 40 per cent.

 

The BSE president has been authorised in the meet to approach regulatory authorities on issues of common interest. Damani told Business Standard: We will approach Sebi first on issues of common interest.

There was a general consensus in the meeting on putting a check on such issuers and we felt that there was a need to delegate more powers to Sebi or any other regulatory authority to put a check on them.

Participants were of the unanimous opinion that the confidence of the investors would revive only if the stock markets undergo a series of reforms.

While removal of taxation on dividend and compulsory audit of end use of funds raised from the primary market top the list of measures to improve the state of the markets, other suggested steps include quarterly disclosure of financial results, disciplining of merchant bankers and more specifically the issuers.

The meet has also called for blocking of undesirable issues by denial of in principle approval by the concerned stock exchanges.

It has also said minimum application size by investors should be restored to 200 shares from the existing 500 shares limit.

Other important measures recommended by the meet include the introduction of proportionate allotment of securities and rating of debt with tenure below 18 months. Damani, in his address, made a strong pitch on behalf of the stockbroking community for further reforms on the part of the government to bring the capital market out of the present state of crisis.

Many representative have also called for a representation in the Sebi board of intermediaries.

Says Ramesh Pai, president, Mangalore Stock Exchange: Sebi board needs a representative from the intermediary community.We cannot borrow foreign ideas and implement them here. We need to create laws to suit our needs.

K Ishwara Bhat of Bangalore Stock Exchange endorsed the above view and said: Our regulations need to take a broader view.

The exchanges apart from BSE included Calcutta, Delhi, Ahmedabad, Saurashtra and Kutch, Vadodra, Madhya Pradesh, Hyderabad, Bangalore, Mangalore, Cochin, Magadh, Bhubaneshwar, Ludhiana and NSE Brokers' Association.

On the fiscal front, the meet proposed that incentives may be reintroduced for investment in primary market and mutual funds. It also recommended the abolition of tax on capital gains arising out of securities.

Representatives felt that incentives and procedures for portfolio investment by NRIs hould be brought at least on par with FIIs.

The bourse representatives also demanded that the capital market intermediaries should be given the facility to borrow fully from the banks with margin of 30 per cent against shares and 20 per cent against bonds and debentures.

It was suggested that intermediaries be given bank finance for working capital as also for infrastructure like computers, VSATs and networking equipment. The representatives have also called for investment by pension and provident funds in the equity market.

The presidents of the various stock exchange were also concerned at the distortions in the risk return profile by extraordinary rates of interest of around 18 per cent leading to illiquidity of the corporate sector as also in the capital markets.

The participants also expressed concern over corporates showing disproportionate dependence on debt for funding expansion which in turn brought pressure on the corporate earnings and consequently on equity valuation.