Sebi sets up panel on margins

MUMBAI, FEBRUARY 21: After imposing a host of margins, the market regulator has now decided to rationalise the system following confusion ...

MUMBAI, FEBRUARY 21: After imposing a host of margins, the market regulator has now decided to rationalise the system following confusion among operators and exchanges. The SEBI will be setting up yet another committee to look into rationalisation of the margining system. It has also decided to reduce the notice period for book closures of demat scrips to one week from the current six weeks. Sebi chairman D R Mehta said there was a need to rationalise the current margining system, with varying margins on scrips.

The intention is to impose a flat margin, which will be the base. Then additional volatility margins can be imposed on this flat rate depending on the scrip and its volatility. SEBI had last week set up a panel to look into the margin system for institutions and FIIs.

At present there are a number of margins on scrips, which operators often find it difficult to keep track. There are daily margins, then special margins, volatility margins and additional volatility margins. With more scrips goinginto compulsory demat mode, Sebi is also thinking in terms of reducing the notice period required for book closures.

Under the current format, where a good number of scrips are still traded physically, some time six weeks was required as the notice period for book closures. Mehta said that securities watchdog was also ready to implement the Malegam committee recommendations on disclosures and investor protection.

Earlier Mehta addressed a seminar on Investors Grievances 8211; organised by Investors Grievances Forum headed by BJP MP Kirit Somaiyya 8211; where he enumerated the steps being taken by Sebi to safeguard investor interest.There is also a move by Sebi to capture shorter term volatility. The present structure of margining captures six weekly volatility which is felt to be a long time, especially in the current context where scrips show wild swings.

According to sources, the markets regulator might refine the system to take into account a three week volatility in the initial stage and then reduce itfurther.

Corp governance code listed
MUMBAI: SEBI finally made it mandatory for the board of directors of companies to comprise not less than 50 of non-executive directors and set up independent audit committee as part of adhering to its corporate governance guidelines.

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The regulator, in a circular to SEs on corporate governance based on the recommendations of the Kumar Mangalam Birla committee, asked them to make the necessary amendments to their listing agreements by incorporating a new clause Clause 49. The Sebi board had approved the committee suggestions at its meeting on January 25, 2000. However, the number of independent directors would depend on whether the chairman is an executive or non-executive director, Sebi said adding if they have a non-executive chairman, at least one-third of board should comprise independent directors.

The company will have to disclose all pecuniary relationship or transactions of the non-executive directors viz-a-viz the company, in the annual report andto publish a report on CG in a separate section in the annual report.