June 2009 - Posts - Initial Private Opinion

June 2009 - Posts

Clearing corporations in OTC derivatives

Posted by Sandeep Parekh at 
The Economist makes the same point I made earlier this month in the Economic Times about the risk of introducing clearing corporations clearing and guaranteeing OTC derivatives and exotics. In my opinion and also the magazine, this has the potential of a big blowup which would bring down the whole system. And while regulators fret that some banks are...

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QIP pricing - all is well

Posted by Sandeep Parekh at 
I disagreed with Prof. Jayanth Varma, my colleague at the institute, on the pricing related to Qualified Institutional Placements . I think that the current rules are fair and put a floor of two week averages of highs and lows.To give a little background - SEBI guidelines provide that if a preferential allotment is made to select institutional investors...

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Rationalising rights issue disclosures

Posted by Sandeep Parekh at 
This week SEBI Board also rationalised the disclosures for rights issues based on the existence of continuous disclosures. Though perhaps in the right direction, there is danger in this half baked approach of improving rights transactions without fixing the problem of improved continuous disclosure by companies of information. Here is my post of the...

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SEBI fees - another round of fee cuts

Posted by Sandeep Parekh at 
This is the third time in less than two years that SEBI has cut its fees - that it charges from intermediaries. The fee cuts are a result of a ballooning SEBI fund - a fund well in excess of what SEBI needs to operate for a decade or more even if it stops collecting any more fees. See my previous post on the subject. As I said earlier, the regulator...

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OTC derivatives - US is too impractical

Posted by Sandeep Parekh at 
I wrote a piece for the Economic Times last week on the US Treasury plan on OTC derivatives, which I think is overly ambitious. Here is the piece: "AFTER hearing a year’s worth of regulatory chest thumping — of attempting to regulate the exotic world of over the counter (OTC) derivatives — some realism seems to have seeped into the US government...

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Superior voting rights - outlawed

Posted by Sandeep Parekh at 
In yesterday's Board meeting SEBI has come out with a prohibition on issuing superior voting rights. This is the correct thing to do and is an internationally accepted practice. The Board decision as reflected in the PR says: "(iv) Issue of shares with superior voting rights No listed company can issue shares with superior voting rights. This...

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Some interesting readings du jour

Posted by Sandeep Parekh at 
Lots of interesting reads in today's FT: The three steps to financial reform - By George Soros (it is a bit extreme - particularly his advocating outlawing of CDSes and banning non standardised derivatives - see my post of a few days back on OTC derivatives). Interactive graphic: Caught in a regulatory web (9 US regulators plus 50 X 3 state regulators...

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Securities Transaction Tax - good for Indian investors

Posted by Sandeep Parekh at 
I whole heartedly support the transaction tax on securities trades known as STT - despite the gripe of economists that it makes trades too expensive and the markets less liquid. STT levels the field for Indian investors who would otherwise end up paying 11% odd tax on long term capital gains tax on income from equities while foreign investors take benefit...

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Delisting Regulations - good news for investors

Posted by Sandeep Parekh at 
SEBI has come out with new delisting regulations which provide for: a) Voluntary delisting of a listed company by a reverse book building process. b) An easier voluntary delisting for very small and illiquid companies. c) A very easy delisting from defunct exchanges if the same company remains listed on a working exchange. d) Provisions for compulsory...

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US SEC's reputation in tatters

Posted by Sandeep Parekh at 
In a rather shocking news last month (based on an investigation begun in 2008), three officers of the enforcement department (division) of the US market regulator, SEC, appeared to have committed insider trading on stocks which were being investigated. Here is the report of the Inspector General of the SEC with the names of the three employees covered...

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