5 Jan 2011
In this post we bring to you a number of Circulars issued recently by the Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI). We generally do not run an update on such items as they are fairly recurring and not of much impact on the legal policy as such from a macro perspective. However in as much as these Circulars reflect a consolidation attempt on the part of these Regulators, we are running an update on these for the information and convenience of our readers and thus can be treated as a new year gift by the regulators in as much as it makes the applicable provisions at one place.
(a) On 28th December, 2010 the RBI issued Comprehensive Guidelines on Over the Counter (OTC) Foreign Exchange Derivatives and Overseas Hedging of Commodity Price and Freight Risks. The A.P. (DIR Series) Circular No. 32 dated 28.12.2010 provides the Comprehensive Guidelines which will come into effect from 01.02.2011 which the Circular states as having been revised "in the light of developments in the domestic and international financial markets" in consultation with the banks, corporates and other stake holders. The Circular provides the guidelines for (i) persons resident in India; (ii) persons resident outside India; (iii) Authorised Dealers; (iv) Commodity Derivatives; (v) Freight Derivatives; and also covers the aspects related to reporting to the RBI.
On 31st December, 2010 SEBI issued a number of Master Circulars to consolidate and replace a number of circulars covering the specified areas. These are;
(b) The Master Circular on Administration of Stock Exchanges, Arbitration in recognised Stock Exchanges and Stock Exchanges/trading platform for Small & Medium Enterprises including guidelines for Market Makers issued vide Circular No. CIR/MRD/DSA/SE/43/2010 dated 31.12.2010 is another consolidation attempt in as much as it consolidates the circulars/directions issued by SEBI in this regard up to December 31, 2010. It covers areas such as (i) Allotment of Codes to Stock Exchanges; (ii) Subsidiary Management by Stock Exchange; (iii) Governance of recognised Stock Exchanges; (iv) Arbitration in recognised Stock Exchanges; and regarding (v) Small and Medium Enterprise.
(c) The Master Circular for Stock Exchange - Cash Market issued vide Circular No. CIR/MRD/DP/42/2010 dated 31.12.2010 runs into about 300 pages to consolidate the legal framework earlier covered by a number of other circulars and thus brings the policy in perspective under one Circular itself. It addresses areas such as (i) Internet trading; (ii) Direct Market Access; (iii) Electronic Contract Note; (iv) Trading Terminals; (v) Smart Order Routing etc.
(d) The Master Circular for Depositories issued vide Circular No. CIR/MRD/DP/41/2010 dated 31.12.2010 enlist the guidelines to the followed by the Depositories on areas such as (i) Beneficial Owner (BO) Accounts; (ii) Issuer related; (iii) Depositories/Depository Participant (DP) Related; and (iv) Other communications to Depositories having policy implications.
(e) The Master Circular on AML/CFT Anti Money Laundering (AML) Standards/Combating the Financing of Terrorism (CFT)/Obligations of Securities Market Intermediaries under the Prevention of Money Laundering Act, 2002 and Rules framed there under issued vide Circular No. CIR/ISD/AML/3/2010 dated 31.12.2010 "consolidates all the requirements/instructions issued by SEBI with regard to AML/CFT till January 31 2010 and supersedes the earlier circulars". The Circular is divided into two parts wherein "the first part is an overview on the background and essential principles that concern combating money laundering (ML) and terrorist financing (TF)" and the "second part provides a detailed account of the procedures and obligations to be followed by all registered intermediaries to ensure compliance with AML/CFT directives".
(f) The Master Circular on Matters relating to Exchange Traded Derivatives issued vide Circular No. CIR/DNPD/7/2010 dated 31.12.2010 consolidates the policy framework on these issues. This Circular, running into about 150 pages relates to (i) Index Futures; (ii) Index Options; (iii) Stock Futures; (iv) Stock Options; (v) Currency Futures; (vi) Currency Options; (vii) Interest Rate Futures; and other miscellaneous issues and deals with them in detail.