The Securities and Exchange Board of India has been vested with powers to regulate pooling of funds under an investment contract involving a corpus of Rs 100 crore or more. President Pranab Mukherjee has promulgated an ordinance to amend the SEBI Act and related Acts to give SEBI more powers as the principal capital market regulator.
SEBI’s powers are primarily meant to act against illegal collective investment schemes and curb insider trading. The regulator now has powers to ensure that such schemes comply with its regulations or it can carry out investigations, attach assets, and authorise search and seizure operations to crack down on so-called Ponzi schemes.
Though the ordinance targets illegal schemes, it remains to be seen how it is enforced and how SEBI generates awareness among investors against such illegal schemes.
Re tumble and the RBI prop
The rupee has continued its downward slide against the dollar, depreciating from Rs 55 to Rs 61 over the past few months. The first quarter review of the monetary policy issued recently by the Reserve Bank of India mentions that the foreign exchange market has come under severe stress starting late-May 2013, prompting the central bank to initiate liquidity tightening measures to contain the volatility.
To stem rupee volatility, the RBI has announced several measures including restrictions on gold imports and sale by public sector banks, restricting the period of realisation and repatriation of export proceeds, and curbing proprietary trading in currency futures/ exchange-traded currency options markets by category–I banks.
Despite these measures, the rupee remains volatile. It remains to be seen whether the RBI would intervene further with more stringent measures, but without adversely impacting the economy.
Better late than never
The much-awaited Companies Bill was passed in the Rajya Sabha last week. The Lok Sabha passed it in December last year. The new Bill will replace the nearly six-decade-old law that governs companies in India.
It envisages numerous changes to laws that would materially impact governance and the functioning of corporates in India. Significant changes include spending in social sectors, enhanced responsibility and liability of auditors, greater scrutiny of related-party transactions, and greater responsibility of independent directors.
With the new law, India would possibly become the first country to regulate the social initiatives of companies through a statutory provision. In legal terms, while CSR (corporate social responsibility) spend is optional, its reporting has been mandatory for companies that meet the prescribed criteria.
With both Houses of Parliament clearing the Bill, it will go for President’s assent. As several provisions are subject to rules, the rule notification is awaited to analyse the full impact of the legislation.
Ten steps to M&A success
The current environment in the country has been fertile for mergers and acquisitions. However, from the FCPA (Foreign Corrupt Practices Act) perspective, companies should have a 360-degree view at the time of acquisition, as financial due diligence alone is not sufficient to overcome the risks of corruption and bribery. Even though companies have been conducting FCPA due diligence in addition to financial due diligence, there is useful guidance on successor liability. In practical terms, this means that private equity firms or companies engaged in acquisitions should conduct a definitive and thorough pre-acquisition due diligence on the target’s policies, processes, accounting and controls. Additionally, the guide stresses on a post-acquisition compliance health-check including regular training. The guide, for the first time, sets down 10 steps that are the keystones of an effective compliance programme in the anti-corruption arena, and includes pre-acquisition due diligence and post-acquisition integration.