Dividend-stripping curbs; MoF may go in for prospective application
New Delhi: The banking division has recommended to the revenue department to implement the provisions of the new Section 14A in the Finance Bill, 2001 — meant to prevent dividend-stripping — with prospective effect instead of the proposal to do so with retrospective effect from 1962. This could bring relief to many corporates and financial institutions

Senior officials in banking division say that the revenue department may accede to the banking division’s recommendations and will issue a clarification soon.
Corporates and financial institutions were against retrospective application which they said would hit all investments in equity-related instruments.
Moreover, the backlog of 32 years, apart from increasing the tax liability of corporates and banks, which could run into several hundreds of crores, would have also tested the system. The calculation of tax liability for past 32 years on this count itself would be a mammoth task.
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Valuation of UTI-Investor Services to be done by MP Chitale
Mumbai: MP Chitale & Co has been appointed by UTI to conduct a valuation of its 100 per cent subsidiary — UTI-Investor Services (UTI-ISL). This will henceforth be the basis for negotiations with short-listed bidders to be offered a strategic stake in the company.
Once this process is over, UTI-ISL will be taken public.
This is in addition to the internal valuation exercise conducted by UTI.

It is learnt that the internal valuation put UTI-ISL at Rs 2-3 higher per share than the independent valuation. While Pandit declined to comment on the valuation figure, UTI insiders put the figure at Rs 55 crore.
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Sebi opposes draft legislation on securitization of loans
New Delhi: The draft legislation on securitisation of the loans market in the country faces objections from the Securities and Exchange Board of India. The draft proposes that Sebi will not only act as the market regulator, but will also act as the risk manager for the business.

Sebi says that while it has no objection to the setting up of such a market it cannot take up the responsibility of being the asset evaluator.

The market regulator has said that is not keen to get involved in steering the market in its formative stage, as it has already got its hand full in tracking the activities of the stock exchanges.

Instead it suggests that the role should be handed over to a separate agency. In the budget for this year, finance minister Yashwant Sinha had promised to introduce a comprehensive legislation on securitisation of the loans market.

The proposal is part of the series of reforms that the finance minister had proposed to deepen the debt market in the country.

The objection by Sebi is likely to delay the introduction of the legislation. With the government already hit by the impact of the stock scam, it is not keen to rake up another controversy affecting the bourses.
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Sebi may take pragmatic middle course decision on badla
Mumbai: Market regulator Securities and Exchange Board of India (Sebi) may take a pragmatic view of market realities and ultimately stick to a middle path on the badla issue. It is also possible that the market regulator creates conditions that badla dies a "natural death."

There is a feeling among market participants that compulsory rolling settlement is here to stay and the days of badla are numbered. However the question is, when?

The Sebi board is meeting tomorrow to take a final decision on its earlier announcement that badla would be banned from July 2 onwards

There is also a feeling that now is the right time for the reforms process to be set in motion – with trading volumes already low (Sebi cannot be accused of squeezing volumes now), and the inevitability of change already in the market’s mind preparing them for all eventualities.

However, top officials in Sebi closely associated with the committee on derivatives are themselves sceptical about the feasibility of introducing stock specific derivatives instruments.

They feel that the surveillance system in the exchanges is abysmal, the associated infrastructure has a long way to go and the awareness about derivatives is minimal.

Predominantly, there are two schools of thought about the controversial issue of banning badla altogether –the first one, of course, holds the view that badla has been around for a long time so why not continue with it, but with more stringent risk measures such as upfront payment of margins.

The second school of thought is that so long as badla mechanism is available for market participants, derivatives will never take off -- this radical reformist school holds the view that the future contains room for only two markets, the cash segment and the futures (or options) segment.
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