HOME 'ICSI House', 22 Institutional Area, Lodi Road, New Delhi-110003, India. Phone-(011) 41504444, 45341000, Fax-(011)24626727, Email - info@icsi.edu HOME Forthcoming Programmes 38 th National Convention of Company Secretaries at Kolkata on 2-3-4 September, 2010 PCS Updates MOU between CBEC and ICSI for setting up ACES Certified Facilitation Center SEBI Updates Circular on Valuation of Debt and Money Market Instruments Circular on Certification Programme for sale and/ or distribution of mutual fund products RBI Updates Issuance of Non-Convertible Debentures (Reserve Bank) Directions, 2010 Disclaimer: - CS Update contains government notifications, case laws and contributions received from the members. Due care and diligence is taken in compilation of the CS Update. The Institute does not own the responsibility for any loss or damage resulting from any action taken on the basis of the contents of the CS Update. Anyone wishing to act on the basis of the contents of the CS Update is advised to do so after seeking proper professional advice. - 1 -
38th National Convention of Company Secretaries at Kolkata on 2-3-4 September, 2010 HOME - 2 -
38th National Convention of Company Secretaries Dates: September 2-3-4, 2010 Venue Swissotel City Centre New Town, Action Area 2, D. Plot No. 11/5, New Town, Rajarhat, Kolkata THEME INDIA Inc. AND INCLUSIVE GROWTH SUB-THEMES I. CSR A Win-Win Business Model II. Emerging Contributors III. Governance An Essential Tool IV. Innovative Financing Resources - 3 -
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MOU between CBEC and ICSI for setting up ACES Certified Facilitation Centre Memorandum of Understanding between Central Board of Excise and Customs & The Institute of Company Secretaries of India 25-06-2010-5 -
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Valuation of Debt and Money Market Instruments CIRCULAR Cir/IMD/ DF / 4 / 2010 June 21, 2010 All Mutual Funds/Asset Management Companies/ Trustee Companies/Boards of Trustees of Mutual Funds Sir/Madam, Sub: Valuation of Debt and Money Market Instruments 1. Please refer to circular SEBI/IMD/Cir/No 16/193388/2010 dated February 02, 2010 regarding valuation of Debt and Money Market Instruments. The circular indicated the valuation methodology to be effective from July 1, 2010. 2. In partial modification of the above circular, it has been decided to make this circular applicable w.e.f. August 1, 2010. 3. However, those mutual funds which voluntarily propose to implement the Valuation under the aforesaid circular before August 1, 2010 are permitted to do so. 4. This circular is issued in exercise of powers conferred under section 11(1) of the Securities and Exchange Board of India Act, 1992, read with the provisions of regulation 77 of SEBI (Mutual Funds) Regulations, 1996 to protect the interests of Investors in securities and to promote the development of and to regulate the securities market. Yours faithfully, Asha Shetty Deputy General Manager Tel no. 022-26449258 Email-ashas@sebi.gov.in - 15 -
Certification Programme for sale and/ or distribution of mutual fund products CIRCULAR Cir / IMD / DF / 5 / 2010 June 24, 2010 All Mutual Funds, Asset Management Companies (AMCs) Sir/Madam, Sub: Certification Programme for sale and/ or distribution of mutual fund products 1. In terms of SEBI Circulars dated September 25, 2001, November 28, 2002, April 03, 2003 and February 04, 2004 about, inter alia, the captioned subject, agents/distributors of mutual fund units were required to obtain certification from theassociation of Mutual Funds in India (AMFI) by passing a certification examination, and to obtain registration with AMFI. 2. In terms of SEBI notification No. LAD-NRO/GN/2010-11/09/6422 dated May 31, 2010, under regulation 3 (1) of the (Certification of Associated Persons in the Securities Markets) Regulations, 2007, (Certification Regulations) it has been decided that from June 01, 2010, the certification examination for distributors, agents or any other persons employed or engaged or to be employed or engaged in the sale and/or distribution of mutual fund products, would be conducted by thenational Institute of Securities Markets (NISM). A copy of the notification is attached. 3. Under the existing instructions, the agent/ distributor was exempted from the AMFI certification examination if he had completed fifty years of age and had at least five years of experience in distribution of mutual fund units. As per regulation 4 (3) of the Certification Regulations, persons who have attained the age of fifty years or who have at least ten years experience in the securities markets in the sale and/ or distribution of mutual fund products as on May 31, 2010, will be given the option of obtaining the certification either by passing the NISM certification examination or qualifying for Continuing Professional Education (CPE) by obtaining such classroom credits as may be specified by NISM from time to time. - 16 -
4. The Certification Regulations require the persons referred to in para 2 above to comply with the requirements for CPE as specified by NISM within the validity period of the certificate obtained by passing the certification examination. However, to facilitate the transition process from AMFI to NISM, it has been decided that a person holding a valid AMFI certification whose validity expires between June 01, 2010 and December 31, 2010, would be required to comply with the CPE requirements as laid down by NISM under the relevant clauses of the Certification Regulations, by December 31, 2010. 5. An associated person holding a valid AMFI/NISM certification whose validity expires anytime after December 31, 2010, would be required to comply with the CPE requirements as laid down by NISM under the relevant clauses of the Certification Regulations, prior to the expiry of the validity of the certification. 6. The SEBI Circulars mentioned in Para 1 stand modified to the above extent. 7. The requirement of obtaining registration from AMFI after obtaining certification, as per the Circular dated November 28, 2002, would continue. 8. This Circular is being issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, read with the provisions of Regulation 77 of the SEBI (Mutual Funds) Regulations, 1996, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market. Yours faithfully, Asha Shetty Deputy General Manager Tel no. 022-26449258 Email-ashas@sebi.gov.in Encl: SEBI notification No. LAD-NRO/GN/2010-11/09/6422-17 -
THE GAZETTE OF INDIA EXTRAORDINARY PART - III - SECTION 4 PUBLISHED BY AUTHORITY NEW DELHI, MAY 31, 2010 SECURITIES AND EXCHANGE BOARD OF INDIA NOTIFICATION Mumbai, the 31st May, 2010 Notification under regulation 3 of the Securities and Exchange Board of India (Certification of Associated Persons in the Securities Markets) Regulations, 2007. In terms of sub-regulation (1) of regulation 3 of the Securities and Exchange Board of India (Certification of Associated Persons in the Securities Markets) Regulations, 2007 (the Regulations), the Board is empowered to require, by notification, any category of associated persons as defined in the Regulations to obtain requisite certification. Accordingly, it is notified that with effect from June 01, 2010, the following category of associated persons, i.e., distributors, agents or any persons employed or engaged or to be employed or engaged in the sale and/or distribution of mutual fund products, shall be required to have a valid certification from the National Institute of Securities Markets (NISM) by passing the certification examination as mentioned in the NISM communiqué NISM/Certification/Series-V- A: MFD/2010/01 dated May 05, 2010. Provided that if the said associated person possesses a valid certificate by passing before June 01, 2010, the AMFI Mutual Fund (Advisors) Module, he shall be exempted from the requirement of the aforementioned NISM certification examination. LAD-NRO/GN/2010-11/09/6422 C. B. BHAVE CHAIRMAN SECURITIES AND EXCHANGE BOARD OF INDIA - 18 -
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Issuance of Non-Convertible Debentures (Reserve Bank) Directions, 2010 RESERVE BANK OF INDIA INTERNAL DEBT MANAGEMENT DEPARTMENT CENTRAL OFFICE MUMBAI Mumbai, June 23, 2010 Issuance of Non-Convertible Debentures (Reserve Bank) Directions, 2010 The Reserve Bank of India, having considered it necessary in public interest and to regulate the financial system of the country to its advantage, in exercise of its powers conferred under sections 45K, 45L and 45W of the Reserve Bank of India Act, 1934 and of all the powers enabling it in this behalf, hereby gives to the agencies dealing in securities and money market instruments, the following directions for issuance of Non-Convertible Debentures (NCDs) of original or initial maturity up to one year. 1. Short title and commencement of the directions These directions may be called the Issuance of Non-Convertible Debentures (Reserve Bank) Directions, 2010 and they shall come into force with effect from August 02, 2010. 2.Definition For the purposes of these Directions, i. Non-Convertible Debenture (NCD) means a debt instrument issued by a corporate (including NBFCs) with original or initial maturity up to one year and issued by way of private placement; ii. Corporate means a company as defined in the Companies Act, 1956 (including NBFCs) and a corporation established by an act of any Legislature 3. Eligibility to issue NCDs A corporate shall be eligible to issue NCDs if it fulfills the following criteria, namely, - 20 -
i. the corporate has a tangible net worth of not less than Rs.4 crore, as per the latest audited balance sheet; ii. iii. the corporate has been sanctioned working capital limit or term loan by bank/s or all-india financial institution/s; and the borrowal account of the corporate is classified as a Standard Asset by the financing bank/s or institution/s. 4. Rating Requirement 4.1 An eligible corporate intending to issue NCDs shall obtain credit rating for issuance of the NCDs from one of the rating agencies, viz., the Credit Rating Information Services of India Ltd. (CRISIL) or the Investment Information and Credit Rating Agency of India Ltd. (ICRA) or the Credit Analysis and Research Ltd. (CARE) or the FITCH Ratings India Pvt. Ltd or such other agencies registered with Securities and Exchange Board of India (SEBI) or such other credit rating agencies as may be specified by the Reserve Bank of India from time to time, for the purpose. 4.2 The minimum credit rating shall be P-2 of CRISIL or such equivalent rating by other agencies. 4.3 The Corporate shall ensure at the time of issuance of NCDs that the rating so obtained is current and has not fallen due for review. 5. Maturity 5.1 NCDs shall not be issued for maturities of less than 90 days from the date of issue. 5.2 The exercise date of option (put/call), if any, attached to the NCDs shall not fall within the period of 90 days from the date of issue. 5.3 The tenor of the NCDs shall not exceed the validity period of the credit rating of the instrument. 6. Denomination NCDs may be issued in denominations with a minimum of Rs.5 lakh (face value) and in multiples of Rs.1 lakh. 7. Limits and the Amount of Issue of NCDs - 21 -
7.1 The aggregate amount of NCDs issued by a corporate shall be within such limit as may be approved by the Board of Directors of the corporate or the quantum indicated by the Credit Rating Agency for the rating granted, whichever is lower. 7.2 The total amount of NCDs proposed to be issued shall be completed within a period of two weeks from the date on which the corporate opens the issue for subscription. 8. Procedure for Issuance 8.1 The corporate shall disclose to the prospective investors, its financial position as per the standard market practice. 8.2 The auditors of the corporate shall certify to the investors that all the eligibility conditions set forth in these directions for the issue of NCDs are met by the corporate. 8.3 The requirements of all the provisions of the Companies Act, 1956 and the Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008, or any other law, that may be applicable, shall be complied with by the corporate. 8.4 The Debenture Certificate shall be issued within the period prescribed in the Companies Act, 1956 or any other law as in force at the time of issuance. 8.5 NCDs may be issued at face value carrying a coupon rate or at a discount to face value as zero coupon instruments as determined by the corporate. 9. Debenture Trustee 9.1 Every corporate issuing NCDs shall appoint a Debenture Trustee (DT) for each issuance of the NCDs. 9.2 Any entity that is registered as a DT with the SEBI under SEBI (Debenture Trustees) Regulations, 1993, shall be eligible to act as DT for issue of the NCDs only subject to compliance with the requirement of these Directions. 9.3 The DT shall submit to the Reserve Bank of India such information as required by it from time to time. 10. Investment in NCD - 22 -
10.1 NCDs may be issued to and held by individuals, banks, Primary Dealers (PDs), other corporate bodies including insurance companies and mutual funds registered or incorporated in India and unincorporated bodies, Non-Resident Indians (NRIs) and Foreign Institutional Investors (FIIs). 10.2 Investments in NCDs by Banks/PDs shall be subject to the approval of the respective regulators. 10.3 Investments by the FIIs shall be within such limits as may be set forth in this regard from time to time by the SEBI. 11. Preference for Dematerialisation While option is available to both issuers and subscribers to issue/hold NCDs in dematerialised or physical form, they are encouraged to issue/ hold NCDs in dematerialised form. However, banks, FIs and PDs are required to make fresh investments in NCDs only in dematerialised form. 12. Roles and Responsibilities 12.1 The role and responsibilities of corporates, DTs and the credit rating agencies (CRAs) are set out below: (a) Corporates 12.2 Corporates shall ensure that the guidelines and procedures laid down for issuance of NCD are strictly adhered to. (b) Debenture Trustees 12.3 The roles, responsibilities, duties and functions of the DTs shall be guided by these regulations, the Securities and Exchange Board of India (Debenture Trustees) Regulations,1993, the trust deed and offer document. 12.4 The DTs shall report, within three days from the date of completion of the issue, the issuance details to the Chief General Manager, Financial Markets Department, Reserve Bank of India, Central Office, Fort, Mumbai-400001. 12.5 DTs should submit to the Reserve Bank of India (on a quarterly basis) a report on the outstanding amount of NCDs of maturity up to year. - 23 -
12.6 In order to monitor defaults in redemption of NCDs, the DTs are advised to report immediately, on occurrence, full particulars of defaults in repayment of NCDs to the Financial Markets Department, Reserve Bank of India, Central Office, Fort, Mumbai-400001, Fax: 022-22630981/22634824. 12.7 The DTs shall report the information called for under para 12.4, 12.5 and 12.6 of these Directions as per the format notified by the Reserve Bank of India, Financial Markets Department, Central Office, Mumbai from time to time. (c) Credit Rating Agencies (CRAs) 12.8 Code of Conduct prescribed by the SEBI for the CRAs for undertaking rating of capital market instruments shall be applicable to them (CRAs) for rating the NCDs. 12.9 The CRA shall have the discretion to determine the validity period of the rating depending upon its perception about the strength of the issuer. Accordingly, CRA shall, at the time of rating, clearly indicate the date when the rating is due for review. 12.10 While the CRAs may decide the validity period of credit rating, they shall closely monitor the rating assigned to corporates vis-à-vis their track record at regular intervals and make their revision in the ratings public through their publications and website. 13. Documentary Procedure 13.1 Issuers of NCDs of maturity up to one year shall follow the Disclosure Document brought out by the Fixed Income Money Market and Derivatives Association of India (FIMMDA), in consultation with the Reserve Bank of India as amended from time to time. 14. Violation of the directions will attract penalties, which would include debarring of the entity from the NCD market. IDMD.DOD.09 /11.01.01 (A)/2009-10 (H R Khan) Executive Director - 24 -