Business Daily from THE HINDU group of publications
Saturday, Sep 30, 2006
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Business Daily from THE HINDU group of publications Saturday, Sep 30, 2006 ePaper |
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Markets - Regulatory Bodies & Rulings Our Bureau
Zero charges SEBI issued a circular on January 28 rationalising the tariff structure with regard to the levy of charges. The board had made entry into demat free except for applicable statutory charges. This circular was challenged by NSDL maintaining that the board had without justification interfered with its functioning.
Mumbai , Sept. 29 Dismissing the appeal filed by the National Securities Depository Ltd (NSDL), the Securities Appellate Tribunal (SAT) today upheld the Securities and Exchange Board of India's (SEBI) move to rationalise the tariff structure and directing depositories and their participants not to levy transaction charges when the securities are transferred from one participant to another or even to another depository. Depositories and their participants levy charges on the opening of new demat accounts apart from custody and transaction charges towards the credit of the securities.
Tariff structure
The SEBI board had issued a circular on January 28, 2005, rationalising the tariff structure with regard to the levy of these charges. After issuance of the circular, several representations were received from the investor community. With a view to encouraging more investors to hold securities in demat mode, the board had made entry into demat free except for applicable statutory charges. The depositories and their participants were advised to put in place systems and procedures to differentiate between an account closure transaction and a normal share transfer transaction. They were also asked to make suitable amendments in their by-laws, rules and regulations to facilitate the move. This circular was challenged by NSDL, the appellant, maintaining that the board had without justification interfered with its functioning by debarring it from levying fee/charges while rendering service to the investors who hold demat account with it.
Making Profits
NSDL said as a company its Articles and Memorandum of Association permit making profits and distribute dividend to its shareholders. Accordingly, it was argued that they could not be required to render such services free. NSDL stressed that its electronic systems and those of its participants did not distinguish between transfer of securities on the closure of an account and a normal transfer on account of sale/purchase. The SEBI order would imply heavy expenditure to put in place necessary systems and procedures. The board felt otherwise and directed the depositories and their participants not to levy any charge.
SAT Order
"The argument that the depositories and their participants render service and should be allowed to levy the charge cannot be accepted because the investor is unhappy. We have seen what competition has done in the field of telecom industry. The prices have come down and this is what benefits the consumer. Similarly, competition between the depositories and amongst the hundreds of their participants will mean improved service to the investors. "We have, therefore, no hesitation in holding that the impugned circular is for the benefit of the investors and in their interest. No fault can, thus, be found with the decision of the board directing the depositories and their participants not to levy the transaction charges when the securities are transferred from one participant to another participant or even to another depository. In view of our findings recorded on the merits of the impugned circular, the appeal fails and the same is dismissed with no order as to costs," the SAT order said.
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