source Business standard and Business Line Source Business Standard *House clears Sebi Bill on Ponzi schemes * BS REPORTER New Delhi, 12 August The Securities and Exchange Board of India ( Sebi) will not have any authority to tap telephones but may seek call data records for investigation of Ponzi schemes under the new Bill, passed in the Parliament on Tuesday. “The Act has been fine- tuned and new architecture with a wider language has been introduced... Sebi can call for information on call data records ( but) the power to bug or intercept is not given to it,” Finance Minister Arun Jaitley said in reply to a debate on the Securities Laws ( amendment) Bill in the Rajya Sabha. The house later passed the Bill, already voted through in the Lok Sabha. This paves the way for notification of the new legislation, to amend the relevant Sebi Acts. The bill was brought in the backdrop of tens of thousands of small investors being duped into by fraudulent investment schemes, such as in the Saradha scam. The new law will empower Sebi investigators to conduct searches and seek information from suspected entities, both within and outside the country. However, any search operation first needs approval of a designated court in Mumbai, where Sebi is headquartered. *Real estate investment trusts: Pros and cons * The real estate industry received a much- needed boost recently when the Securities and Exchange Board of India (Sebi) finally cleared guidelines for the real estate investment trusts ( Reits). This gives the cash- strapped industry a new route to tap capital. Real estate is notorious for the number and size of the bubbles it creates. The global financial crisis of 2007 and its sequel, the crisis of 2012, were both sparked off by real estate bubbles. The price of the same land can vary a lot, depending on sentiment. This makes the Reserve Bank of India ( RBI) extremely cautious about lending to the real estate industry. Banks have to keep a high risk- weight for loans against real estate and as aresult, charge higher interest and value the loans conservatively. There are further grounds for caution since repossession of mortgaged real estate in case of default is a lengthy process due to the slow legal system.. The usual method for a real estate developer is to acquire the land ( this can in itself be challenging), get clearances to build, pre- sell the property and use advances to start construction. Advances are never enough to complete construction. So the developer has to find bridge financing, usually at very high interest. ( Not to mention the financial jugglery required to manage black and white streams because the overwhelming majority of land deals involve a large undeclared component.) Enter the Reit. This is a sort of mutual fund or pool, which finds alternative means of financing real estate. A Reit owns real estate directly and it might also own mortgages. The assets are sub- divided into equal units, which are sold to investors. There are income streams from interest in the case of mortgages, and from rentals in owned property. Indian Reits will be allowed to own only commercial property and there are other restrictions. To be eligible for listing, the value of the assets owned or proposed to be owned by a Reit should be worth at least ₹ 500 crore. Assets must be valued and net asset value updated at least twice in every financial year. Reits must distribute at least 90 per cent of their net distributable cash flows to their investors every six months. Also, at least 80 per cent of assets must be in properties that are generating revenue. A Reit can invest only 10 per cent in properties under construction. This means Reits can also invest a small portion ( about 20 per cent or less) in mortgagebacked securities and cashequivalent assets like money market funds. The tax treatment is passthrough, meaning the Reit need not pay tax on the income it distributes. Since Reits can be listed, they afford liquidity to investors in the same fashion as mutual funds do. The minimum initial investment on an IPO is ₹ 2 lakh, which is nominal for a foothold in real estate. Hence, Reits reduce the lumpy nature of real estate exposure. Liquidity, relatively low entry- level investments, stable income generation, potential capital appreciation - all these are obvious benefits from Reits. What are the downsides? Well, if theres a bubble in real estate, a Reit will tend to accentuate it. Also, by providing anew market for trading mortgage- backed securities, Reits can encourage the sort of speculation that caused the subprime crisis. Theres plenty of unsold, semi- developed commercial property across India. Once Reits get rolling, some of that should come on the market. This will allow developers to complete stalled projects and exit. The infrastructure variation on the Reit, where the investment trust holds infra project assets has similar but broader applicability. There could be a reflexive sequence of investments into realty stocks. However, in reality, Reits will take a while getting off the ground and, as the rules stand, they will benefit only specific developers with exposures in commercial property. The author is a technical and equity analyst INSIGHT DEVANGSHU DATTA Source Business Line thehindubusinessline/companies/companies-have-to-comply-with-csr-norms-govt/article6307922.ece Companies have to comply with CSR norms: Govt source Business Line New Delhi, Aug. 12: Government will keep close watch on social welfare spending by corporates to check whether they are complying with Corporate Social Responsibility (CSR) norms under the new companies law. Certain class of profitable companies are required to spend at least two per cent of their three-year average annual net profit towards CSR activities. The norms came into force from April 1. Replying to questions in Rajya Sabha, Minister of State for Corporate Affairs Nirmala Sitharaman said the Companies Act, 2013 came into operation this year only and the government was watching the spendings under CSR. “We are keenly watching” the companies,” she said, adding, in case a company does not meet the norms, government would certainly ask for reasons. The Act does not mandate CSR for all companies. However, every company having net worth or net profit of Rs 500 crore or more or turnover of Rs 1,000 crore or more during any financial year has to constitute a CSR Committee of the Board and take up CSR activities. Sitharaman said there are no tax exemptions for CSR activities, except for spending on 11 specific activities. In her written reply, she said the issue of amending rules relating to CSR with a view to plugging any loophole can be examined only after some information about the actual implementation is available. As relevant provisions of the law have come into force this year and CSR policies of companies are in the process of formulation, specific details would be available once Board reports are available after September, 2015, she said. A.Rengarajan Company Secretary Chennai 93810 11200 “ CS Benevolent Fund is a collective effort towards extending the much needed financial support to the community of Company Secretaries in times of distress Let us lend support and join for noble cause.
Posted on: Wed, 13 Aug 2014 02:16:04 +0000
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