th Regulatory Update SSUED · REGULATIONS SEBI (Listing Obligations and Disclosure Requirements)...

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INDEX

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RAJENDRA THAKKAR


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Regulatory Update

India Edition

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ISSUED 17th August 2016

JUNE & JULY 2016

1.0 RBI REGULATORY UPDATES & DEVELOPMENTS

1.1 NOTIFICATIONS page 3

1.1.1

1.1.2

1.1.3

1.1.4

1.2

1.2.1

1.2.2

1.2.3

1.2.4

1.2.5

1.2.6

1.2.7

1.2.8

1.2.9

1.2.10

Notification to Scheduled Commercial Banks

Notification to AD Banks

Notification to NBFCs

Notification to All Regulated Entities

PRESS RELEASES

Second Bi-monthly Monetary Policy Statement, 2016-2017

Tradability of Sovereign Gold Bonds

RBI Cancels Certificate of Eight NBFCs

RBI Decides to Simplify and Rationalise the Process of Registration of New NBFCs

RBI Holds 29th Annual Conference of State Finance Secretaries

RBI Publishes “Payment and Settlement Systems in India -Vision 2018”

Statement on Brexit by RBI

Six NBFCs Surrender Their Certificate of Registration

RBI Signs Memorandum of Understanding (MoU) on “Supervisory Cooperation

and Exchange of Supervisory Information” With the National Bank of Cambodia

Sovereign Gold Bond 2016-17 – Series I: Issue Price

page 3

page 4

page 5

page 5

page 5

page 5

page 5

page 5

page 5

page 6

page 6

page 6

page 6

page 6

page 7

2.0 SEBI REGULATORY UPDATES & DEVELOPMENTS

2.1 CIRCULARS page 7

2.1.1

2.1.2

2.1.3

2.1.4

2.1.5

2.1.6

2.1.7

2.1.8

Investor Protection Fund (IPF) of Depositories

Issuance of Offshore Derivative Instruments (ODIs)

Review of the framework of Position Limits for Currency Derivatives Contracts

Clarification Relating to SEBI (FPI) Regulations 2014

Revised Formats for Financial Results and Implementation of Ind-AS by Listed Entities

Simplification of Account Opening Kit

Acceptance of Fixed Deposit Receipts (FDRs) by Clearing Corporations

Operationalisation of Central KYC Records Registry (CKYCR)

page 7

page 7

page 8

page 8

page 8

page 9

page 9

page 10

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2.2

2.2.1

2.2.2

2.3

2.3.1

2.3.2

REGULATIONS

SEBI (Listing Obligations and Disclosure Requirements) (Second Amendment)

Regulations, 2016

SEBI (Foreign Portfolio Investors) (Amendment) Regulations, 2016

PRESS RELEASES

SEBI Board Meeting

Electronic Book Mechanism for Issuance of Debt Securities on Private Placement Basis

page 10

page 10

page 10

page 11

page 11

page 11

3.0 INDIA MARKET UPDATES

3.1

3.2

3.3

3.4

3.5

3.6

3.7

RBI Sets up Fraud Monitoring Cell

RBI Suspends Euro Transactions via Asian Clearing Union

One Hundred Twelve Entities Banned by SEBI for Tax Evasion and Money Laundering

Offences

Bank of Baroda, PNB, HDFC Bank Fined for Regulatory Lapses

Penalty Imposed on UCO Bank, Allahabad Bank, Bank of India

Thirteen Banks Fined INR 27 Crores for Violating Forex Laws

Penalty of INR 1 Crore Imposed on UCO Bank for Violation of Current Account Opening

Norms

page 11

page 11

page 12

page 12

page 12

page 12

page 12


[email protected] [email protected]

MEENAKSHI IYER


MAHENDRA ZAVERI

Director, Consultancy [email protected]

CONTACTS

RAJENDRA THAKKAR

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1.0 RBI REGULATORY UPDATES & DEVELOPMENTS

1.1 Notifications

1.1.1 Notification to Scheduled Commercial Banks

Cyber security frame work in banks

RBI has advised all SCBs to put in place a Board approved cyber security policy to be distinct from the broader IT Policy / IS Security policy of a bank, so that it can highlight the risks from cyber threats and the measures to address / mitigate these risks. The policy should provide for testing for vulnerabilities at reasonable intervals. RBI has provided a minimum base line cyber security and resilience frame work to be implemented by banks as well as the indicative configuration of the Security Operations Centre to monitor and manage cyber risks in real time. Banks have also been advised to formulate a cyber crisis management plan and to take appropriate steps in preserving the confidentiality, integrity and availability of customer data, sharing/reporting of information on cyber security/incidents to RBI. https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=10435

Reporting requirements under Basel III capital regulations - review

At present, banks are permitted to raise Perpetual Non-Cumulative Preference Shares (PNCPS) and Perpetual Debt Instruments (PDI) for inclusion in Additional Tier 1 capital. Further, banks are also allowed to raise debt capital instruments, Perpetual Cumulative Preference Shares (PCPS)/Redeemable Noncumulative Preference Shares (RNCPS)/Redeemable Cumulative Preference Shares (RCPS) for inclusion in Tier 2 capital. In terms of the extant instructions, banks are required to submit a report to RBI, Mumbai, giving the details of the debt raised, including the terms of the issue with a copy of the offer document soon after the issue is completed. It has now been decided that banks need not submit a copy of the offer document to RBI but only report the details of the debt raised in the format prescribed, duly certified by the compliance officer of the bank. Banks may also email a soft copy of such details in excel format. https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=10455

Implementation of Indian Accounting Standards (Ind AS)

RBI has advised banks to submit Proforma Ind AS Financial Statements in the prescribed format, for the half year ended 30th September 2016 latest by 30th November 2016. While preparing the statements, banks shall be guided by the Ind ASs notified by the Ministry of Corporate Affairs, Government of India under the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) (Amendment) Rules, 2016, as amended from time to time in this regard. [reference G.S.R.111(E) dated 16th February 2015 and G.S.R.365(E) dated 30th March 2016]. Banks have been advised to refer to the Report of the Working Group on “Implementation of Ind AS by Banks in India” placed on the RBI website on 20th October 2015. https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=10456

Reporting of Information on Investment in Commercial Papers(CPs)and Unhedged Foreign

Currency Exposures (UFCE) of the borrowers to Credit Information Companies (CICs)

RBI has advised banks to report monthly on the information on CPs issued by the companies to all the four credit information companies (CICs) which has been designated as the Issuing and Payment Agent (IPA) for the particular CP issue. However, if there are multiple IPAs for a single CP issue, they shall report to the CICs the details pertaining to the portion of the issue which is with them. The information regarding UFCE of individual borrowers shall be reported on a quarterly basis to all the four CICs by the lending bank (in the case of solo lenders) /consortium leader (in the case of consortium arrangements)/largest lender (in the case of multiple lending arrangements). This information is required to be reported in the Credit Facility (CR) Segment of Commercial Data format in the fields given in the Annex to the circular. The reporting requirements set out above would be effective from 1st July 2016, i.e., from the credit information reports showing the position for the month of June 2016. https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=10459

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Basel III Framework on Liquidity Standards – Liquidity Coverage Ratio (LCR), liquidity risk

monitoring tools and LCR disclosure standards

Presently, the assets allowed as Level 1 High Quality Liquid Assets (HQLAs) for the purpose of computing the LCR of banks, for example, include Government securities in excess of the minimum Statutory Liquidity Ratio (SLR) requirement and, within the mandatory SLR requirement, Government securities to the extent allowed by RBI under Marginal Standing Facility (MSF) [presently 2 per cent of the bank’s Net Demand and Time Liabilities (NDTL)] and under Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR) [presently 8 per cent of the bank’s NDTL. It has been decided that, in addition to the above-mentioned assets, banks will be permitted to reckon government securities held by them up to another 1 per cent of their NDTL under FALLCR within the mandatory SLR requirement as level 1 HQLA for the purpose of computing their LCR. Hence, the total carve-out from SLR available to banks would be 11 per cent of their NDTL. For this purpose, banks would be required to continue to value such reckoned government securities within the mandatory SLR requirement at an amount no greater than their current market value (irrespective of the category of holding the security, i.e., Held To Maturity (HTM), Available for Sale (AFS) or High-Frequency Trading (HFT)). https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=10522

1.1.2 Notification to AD Banks

Foreign Exchange Management (Foreign currency accounts by a person resident in India)

Regulations, 2015

RBI through its Notification No. FEMA 10(R)/(1)/2016-RB dated 1st June 2016, announced certain amendments in the Foreign Exchange Management (foreign currency accounts by a person resident in India) Regulations, 2015 (circular issued on 23rd June 2016) permitting opening, holding and maintaining foreign currency accounts with a bank outside India by those insurance companies registered with the Insurance Regulatory and Development Authority of India,. It specified that Indian start-ups which have an overseas subsidiary or any other entity as may be notified by the RBI in consultation with the Government of India; subject to conditions laid down in the Notification. https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=10457

Permitting writing of options against contracted exposures by Indian Residents

RBI has decided to permit resident exporters and importers of goods and services to write (sell) standalone plain vanilla European call and put option contracts against their contracted exposure, i.e., covered call and covered put respectively, to any AD Category-I bank in India subject to operational guidelines, terms and conditions given in Annex I to the circular. https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=10458

External Commercial Borrowings (ECB) – approval route cases

ECB cases coming under the approval route were required to be considered by an Empowered Committee set up by RBI based on the parameters stated in A.P. (DIR Series) Circular No.32 dated 30th November 2015 and paragraph no. 2.11 of Master Direction No.5 dated 1st January 2016. It has now been decided that ECB proposals received by RBI above a certain threshold limit (refixed from time to time) would be placed before the Empowered Committee. RBI will take a final decision in the cases taking into account the recommendation of the Empowered Committee. https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=10472

Discontinuation of reporting of Bank guarantee on behalf of service importers

RBI has decided to discontinue, with immediate effect, submission of reports on invocation of bank guarantees for service imports. Banks will, however, need to maintain records of such invocations and furnish the required details to RBI, whenever sought. https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=10489






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1.1.3 Notification to NBFCs

Refinancing of project loans

On 2nd June 2016, RBI advised NBFCs that they may refinance any existing infrastructure and other project loans by way of take-out financing, without a pre-determined agreement with other lenders, and fix a longer repayment period. The same would not be considered as restructuring if the conditions laid down in the circular are satisfied. Further, even the existing project loans where the aggregate exposure of all institutional lenders is minimum INR 1000 crore, NBFCs may refinance such loans by way of full or partial take out financing even without a predetermined agreement with other lenders and fix a longer repayment period. The same would not be considered as restructuring in the books of the existing as well as taking over lenders, provided conditions laid down in the circular are satisfied. https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=10434&Mode=0

1.1.4 Notification to All Regulated Entities

Amendment to Master Direction on KYC – Operationalisation of Central KYC Registry

(CKYCR) and KYC norms for Foreign Portfolio Investors (FPIs)

As per the amendment carried out in para 57 in the Master Direction on KYC, Regulated Entities (RE) will now be required to capture the KYC information for sharing with the Central KYC Registry (CKYCR) in the manner mentioned in the Rules, as required by the revised KYC templates prepared for ‘individuals’ and ‘Legal Entities’ as the case may be. Government of India has authorised the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI), to act as, and to perform the functions of the CKYCR, (ref Gazette Notification No. S.O. 3183(E) dated 26th November 2015). Further, RBI has amended Annexure 2 of the Master Direction which deals with KYC norms for FPIs. https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=10498

1.2 Press Releases

1.2.1 Second Bi-monthly Monetary Policy Statement, 2016-2017

Based on the assessment of the current and evolving macro-economic situation, Reserve Bank of India kept all

key rates unchanged, i.e., Policy Repo Rate under Liquidity Adjustment Facility at 6.5 per cent, Reverse Repo rate

under the LAF at 6.0 per cent, Marginal Standing Facility rate and Bank Rate at 7.0 per cent and Cash Reserve

ratio at 4.0 per cent of NDTL. RBI will continue to provide liquidity as required but progressively lower the

average ex ante liquidity deficit in the system from one per cent of NDTL to a position closer to neutrality.

1.2.2 Tradability of Sovereign Gold Bonds

RBI notified that, effective from 13th June 2016, the sovereign Gold Bond (issued on 30th November 2015) held

in dematerialised form would be eligible for trading on the stock exchanges recognised by the Government of

India under the Securities Contracts (Regulation) Act ,1956.

1.2.3 RBI Cancels Certificate of Eight NBFCs

RBI has cancelled the certificate of registration of Eight NBFCs in exercise of the powers conferred on it under

Section 45-IA (6) of the Reserve Bank of India Act, 1934. Following the cancellation of the registration certificates,

these companies cannot transact the business of a Non-Banking Financial Institution as laid down under clause (a)

of Section 45-I of the Reserve Bank of India Act, 1934.

1.2.4 RBI Decides to Simplify and Rationalise the Process of Registration of New NBFCs

On 17th June 2016, RBI announced that, in order to make the process of registration of new NBFCs smoother

and hassle free, the application form for registration of new NBFCs and the check list of documents to be

submitted have been revised. The number of documents to be submitted by the NBFC applicants has been

reduced from the existing set of 45 documents to 7-8 in the revised process. Further, from now onwards, there

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would be two different types of applications for non- deposit taking NBFCs (NBFC-ND) based on Sources of

Funds and customer interface.

The processing of cases for NBFC-ND applicants would be on fast track mode. As these companies will not have

access to public funds and will not have customer interface, they will be subjected to less intensive scrutiny /due

diligence. In case these companies intend to avail public funds or intend to have customer interface, they will be

required to take approval from the RBI, Department of Non- Banking Regulation in the future.

1.2.5 RBI Holds 29th Annual Conference of State Finance Secretaries

The 29th conference of the State Finance Secretaries was held in Mumbai on 17th June 2016. The deliberations

included the need for the states to adopt some of the best practices in debt management that can bring down the

cost of borrowing for the states on a medium and long term basis, improving liquidity and predictability in State

Development Loans, diversification of investor base, elongating the maturity of the issuances and easing the

resumption pressure.

1.2.6 RBI Publishes “Payment and Settlement Systems in India - Vision 2018”

On 23rd June 2016, RBI placed on its website the “Payment and Settlement Systems in India - Vision 2018”

aiming at building the best class payment and settlement systems for ‘Less cash’ India.

The broad contours of vision 2018 revolve around 5 Cs, i.e., coverage, convenience, confidence, convergence,

and cost. To achieve these, vision 2018 will focus on responsive regulation, robust infrastructure, effective

supervision and customer centricity.

With increasing use of technology based innovative payment products, the strategic initiatives under “Vision

2018” are expected to reduce paper based instruments significantly and lead to accelerated growth in mobile

banking and other modes of electronic payments.

1.2.7 Statement on Brexit by RBI

On 24th June 2016, RBI stated that having voted to exit the European Union by the United Kingdom, markets are

trying to factor the consequences of this development and this has already led to sharp corrections in financial

markets around the world. The Indian economy has good fundamentals, low short term external debt, sizeable

foreign exchange reserves and these should stand the country in good stead in the days to come. The RBI is

continuously maintaining a close vigil on the market developments, both domestically and internationally and will

take all necessary steps including providing liquidity (both dollar and INR), to ensure orderly conditions in

financial markets.

1.2.8 Six NBFCs Surrender Their Certificate of Registration

Six NBFCs have surrendered their Certificate of Registration granted to them by RBI. RBI, in turn, has cancelled

these Certificates of Registration under the powers conferred on it under Section 45-IA (6) of the Reserve Bank

of India Act 1934. These companies cannot transact the business of a Non-Banking Financial Institution, as laid

down in clause (a) of Section 45-I of the RBI Act, 1934.

1.2.9 RBI Signs Memorandum of Understanding (MoU) on “Supervisory Cooperation and Exchange of

Supervisory Information” With the National Bank of Cambodia

On 1st July 2016, the Reserve Bank of India signed a Memorandum of Understanding (MoU) on “Supervisory

Cooperation and Exchange of Supervisory Information” with National Bank of Cambodia. The Reserve Bank has

entered into Memorandum of Understanding, Letter for Supervisory Co-operation and Statement of Co-

operation with supervisors of a few countries to promote greater co-operation and share supervisory information.

With this, RBI has signed 33 such MoUs, one Letter for Supervisory Co-operation and one Statement of Co-

operation.

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1.2.10 Sovereign Gold Bond 2016-17 – Series I: Issue Price

In terms of GoI notification F.No.4(7)-W&M/2016 and RBI circular IDMD.CDD. No.2020/14.04.050/2016-17

dated 14th July 2016, Series I of the Sovereign Gold Bond 2016-17 was opened for subscription from 18th July to

22nd July 2016. The issue price of the Sovereign Gold Bond was fixed at INR. 3119/- (Rupees Three Thousand

One Hundred and Nineteen only) per gram of gold.

2.0 SEBI REGULATORY UPDATES & DEVELOPMENTS

2.1 Circulars 2.1.1 Investor Protection Fund (IPF) of Depositories

SEBI (Depositories and Participants) (Amendment) Regulations, 2012 require every depository to establish and maintain an Investor Protection Fund (IPF). Depositories are required to credit five per cent or such percentage as specified by SEBI, of their profits from depository operations every year to the IPF. Consequently, the following guidelines have been issued: (ref SEBI’s Circular dated 7th June 2016)

The IPF is to be utilised for specific purposes such as promoting investor education and investor

awareness programmes aimed at enhancing securities market literacy, promoting and fostering research

activities for development of securities markets, supporting initiatives of DPs for promotion of investor

education etc.

The IPF would be required to be administered by way of a Trust created for the purpose. The IPF Trust

would consist of at least one Public Interest Director (PID) of the depository, one person of eminence

from an academic institution from the field of finance / an expert in the field of investor education / a

representative from the registered investor associations recognized by SEBI and the Managing Director

of the Depository.

The Depository would need to ensure that the funds in the IPF are kept in a separate account designated

for this purpose and that the IPF is immune from any liabilities of the Depository.

Funds of the Trust would be invested in instruments such as Central Government securities, fixed

deposits of scheduled banks and any such instruments, which are allowed as per the investment policy

approved by the Board of the Depository.

The available balance in IPF at the end of the month and the amount utilised during the month including the manner of utilization would need to be reported in the Monthly Development Report of the Depository. The Depositories would be required to implement the above processes within three months from 7th June 2016. 2.1.2 Issuance of Offshore Derivative Instruments (ODIs)

In terms of the SEBI (Foreign Portfolio Investors) Regulations, 2014, Foreign Portfolio Investors (FPIs) issuing ODIs are required to comply with conditions specified for issuance of ODIs. The following provisions have been stipulated by SEBI (ref circular dated 10th June 2016) with regard to issuance and transfer of ODIs:

Applicability of Indian KYC/AML norms for Client Due Diligence: With regard to KYC of ODI

subscribers, ODI Issuers will now be required to identify and verify the beneficial owners in the

subscriber entities who hold in excess of the threshold, as defined under of the Prevention of Money-

laundering (Maintenance of Records) Rules, 2005, i.e. 25 % in case of a company and 15% in case of

partnership firms/ trusts/ unincorporated bodies. ODI issuers would also be required to identify and

verify the person(s) who control the operations when no beneficial owner is identified based on the

aforesaid materiality threshold.

KYC review: The KYC review would be done on the basis of the risk criteria as determined by the ODI

issuers as follows:

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a. At the time of on-boarding and once every three years for low risk clients.

b. At the time of on-boarding and every year for all other clients.

In the case of existing ODI Subscriber, the KYC review would need to be done within three years for

low risk clients and one year for all other clients with effect from 10th June 2016.

Suspicious Transactions Report: ODI Issuers would be required to file any suspicious transaction

reports, with the Indian Financial Intelligence Unit, in relation to the ODIs issued by it.

Reporting of complete transfer trail of ODIs: The ODI issuers would be required to capture the

details of all the transfers of the ODIs issued by them. All intermediate transfers would need to be

reported to SEBI, on a monthly basis, in addition to the report on details of holders of ODIs.

Reconfirmation of ODI positions: ODI Issuers would be required to carry out reconfirmation of the

ODI positions on a semi-annual basis. In case of any divergence from reported monthly data, the same

would need to be informed to SEBI in the format provided.

Periodic Operational Evaluation: ODI Issuers would be required to put in place necessary systems

and carry out a periodical review and evaluation of their controls, systems and procedures with respect to

the ODIs. A certificate in this regard would be required to be submitted on an annual basis to SEBI by

the Chief Executive Officer or equivalent of the ODI Issuer. The said certificate has to be filed within

one month from the close of every calendar year.

The above provisions are effective from 1st July 2016. 2.1.3 Review of the Framework of Position Limits for Currency Derivatives Contracts

In order to ease the trading requirements in the currency derivatives segment, SEBI has clarified that the position limit linked to open interest would be applicable at the time of opening a position and such positions would not be required to be unwound in the event of a drop of total open interest in a currency pair at the stock exchange. However, eligible market participants will not be allowed to increase their existing positions or create new positions in the currency pair until they comply with the applicable position limits. Further, in view of risk management or surveillance concerns with regard to such positions of the market participants, stock exchanges may direct the market participants to bring down their positions to comply with the applicable position limits within the time period prescribed by the stock exchange. 2.1.4 Clarification Relating to SEBI (FPI) Regulations 2014

SEBI has issued the following clarifications (see circular dated 29th June 2016):

ODI subscribers, who have subscribed to ODIs under FII Regulations, can continue to subscribe to

ODIs under the FPI regime, subject to the condition that they comply with Regulation 22 of the SEBI

FPI Regulations, 2014 and meet the eligibility criteria as laid down by SEBI.

ODI subscribers who have not complied with the aforementioned norms, including unregulated funds

whose investment manager is appropriately regulated, can continue to hold the position till the date of

expiry of such positions or till 31st December 2020, whichever is earlier. Such subscribers cannot take

fresh positions or renew the old positions.

Fresh ODIs can be issued to those entities, which comply with the conditions laid down by SEBI in its

circular dated 24th November 2014 along with other conditions that may be stipulated in Regulation 22 of

the SEBI (FPI) Regulations.

2.1.5 Revised Formats for Financial Results and Implementation of Ind-AS by Listed Entities

In its circular dated 30th November 2016, SEBI prescribed formats for publishing financial results. Modifications have been introduced in the formats, as given below:

The existing formats prescribed by SEBI are to be submitted by the listed entities with the stock

exchanges with it continuing until the period ending 31st December 2016. For the period ending on or

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after 31st March 2017, the formats with the stock exchanges would be as per the formats for Balance

Sheet and Statement of Profit and Loss (excluding notes and detailed sub-classification) as prescribed in

Schedule III to the Companies Act, 2013. However, Banking Companies and Insurance Companies

would be required to follow the formats as prescribed under the respective Acts/Regulations as specified

by their Regulators.

Until Companies (Indian Accounting Standards) Rules, 2015 ('Ind-AS Rules') become applicable, listed

entities would need to adopt Companies (Accounting Standards) Rules, 2006 ('AS Rules') as prescribed by

the Ministry of Corporate Affairs.

The financial results published in the newspapers should be in terms of SEBI (Listing Obligations and

Disclosure Requirements) Regulations, 2015 ('Listing Regulations'), and in the format as prescribed in

Annexure I to the circular.

In order to facilitate smooth transition during the first year of Ind-AS implementation, certain

relaxations have been given to listed entities to which Ind-AS Rules are applicable from the accounting

period beginning on or after 1st April 2016. In the subsequent phases (beginning from the Financial Year

2017-18, 2018-19 and 2019-20), the relaxations would be applicable in case of listed entities to which Ind

AS Rules are applicable during their corresponding first year of Ind-AS implementation.

In order to comply with the requirements of Ind AS 101 – First time Adoption of Ind AS, entities will

provide a reconciliation of its equity and net profit / loss, in the manner prescribed in the circular, to

enable investors to understand the material adjustments to the Balance Sheet and Statement of Profit and

Loss on account of transition from the previous Indian GAAP to Ind-AS.

As prescribed under the Companies Act, 2013, a listed entity may now be required to prepare financial

statements for a period longer or shorter than the normal 12-month period for coinciding with 31st day

of March. In such cases, the Ind-AS financial statements for various periods beginning from 1st April

2016, will have comparative information for a shorter or longer period, i.e., beginning from a date other

than 1st April 2015. In such cases, the listed entity would have to prominently disclose a suitable note

stating that comparative amounts presented in the Quarterly / Half-yearly / Year to date / Annual

financial results are not entirely comparable.

The provisions of this circular have come into effect from 5th July 2015.

2.1.6 Simplification of Account Opening Kit

SEBI circulars dated 3rd December 2009, 22nd August 2011, 4th December 2013, state that a stock broker/ depository participant is required to provide a copy of standard documents, which are part of the account opening kit, to the clients: In order to simplify the account opening kit, it has been decided that the stock broker/ depository participant would make available these standard documents to the clients either in electronic or physical form, depending upon the preference of the client as part of account opening kit. The preference of the client will be sought as part of the account opening form. In case the documents are made available in electronic form, the stock broker/ depository participant will have to maintain logs of the same.

2.1.7 Acceptance of Fixed Deposit Receipts (FDRs) by Clearing Corporations

At present, Clearing Corporations accept Fixed Deposit Receipts of banks as eligible collateral from the participants. With a view to further aligning the risk management practices of the securities market with the Principles for Financial Market Infrastructures (PFMIs), Clearing Corporations have been directed to implement the following measures:

Clearing Corporations will not accept Fixed Deposit Receipts (FDRs) from trading/clearing members as

collateral, which are issued by the trading/ clearing member themselves or banks, who are associates of

trading/ clearing member.

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Trading/Clearing Members who have deposited their own FDRs or FDRs of associate banks, would

have to replace such collateral, with other eligible collateral as per extant norms, within a period of six

months from 15th July 2016.

2.1.8 Operationalisation of Central KYC Records Registry (CKYCR)

SEBI’s circulars dated 22nd August 2011, 5th October 2011 and 26th December 2013 issued guidelines on uniform

Know Your Client (” KYC‟) norms, prescribing a standard account opening form (AOF). The Central Registry of Securitization and Asset Reconstruction and Security interest of India (CERSAI), is set up under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002, to act as, and to perform the functions of, the Central KYC Records Registry (CKYCR( under the PML Rules 2005, including receiving, storing, safeguarding and retrieving the KYC records in digital form of a “client”, as specified in the Prevention of Money Laundering Act, 2002. As stated in the 2015 amendment to PML (Maintenance of Records) Rules, 2005, all the reporting entities would be required to capture the KYC information for sharing with the Central KYC Records Registry in the manner prescribed in the Rules, as per the KYC template for “individuals” finalised by CERSAI. The registered intermediaries would need to use the KYC template finalised by CERSAI as Part I of the AOF for individuals. The requirement for Permanent Account Number (PAN) would continue to be mandatory for completing the KYC process. With effect from 15th July 2016, the “live run” of the CKYCR has started in a phased manner beginning with new “individual accounts”. Further, “Test Environment” has also been made available by CERSAI for the use of the reporting entities. The registered intermediaries would upload the KYC data with CKYCR, in the first phase, in respect of all individual accounts opened on or after 1st August 2016, wherever KYC is required to be carried out as per the circulars issued by SEBI from time to time and accordingly, measures would be taken to prepare their systems for uploading the KYC data. A helpdesk has been operationalized by CERSAI for addressing any difficulty in uploading KYC records to CKYCR. 2.2 Regulations 2.2.1 SEBI (Listing Obligations and Disclosure Requirements) (Second Amendment) Regulations, 2016

SEBI has amended its Listing Obligations and Disclosure Requirements Regulations, 2015 by inserting a new sub regulation on Dividend Distribution Policy. The top five hundred listed entities based on market capitalization (calculated as on 31st March of every financial year) would be required to formulate a dividend distribution policy, which would be disclosed in their annual reports and on their websites. The parameters to be included in the dividend policy are as given below:

the circumstances under which the shareholders of the listed entities may or may not expect dividend;

the financial parameters that shall be considered while declaring dividend;

internal and external factors that shall be considered for declaration of dividend;

policy as to how the retained earnings shall be utilized; and

parameters that shall be adopted with regard to various classes of shares

However, if the listed entity proposes to declare dividend on the basis of parameters in addition to clauses (a) to (e) or proposes to change such additional parameters or the dividend distribution policy contained in any of the parameters, then it would have to disclose such changes along with the rationale for the same in its annual report and on its website. The listed entities other than top five hundred listed entities based on market capitalization may disclose their dividend distribution policies on a voluntary basis in their annual reports and on their websites.

2.2.2 SEBI (Foreign Portfolio Investors) (Amendment) Regulations, 2016

On 8th July 2016, SEBI amended its Foreign Portfolio Investors Regulations, 2014 by substituting one of the sub regulation on conditions for issuance of offshore derivative instruments. In terms of the amendment, a foreign portfolio investor would have to ensure that any transfer of offshore derivative instruments issued by or on behalf of it, is made subject to the following conditions:

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Such offshore derivative instruments are transferred to persons subject to fulfilment of sub-regulation

(1), i.e. no foreign portfolio investor may issue, subscribe to, or otherwise deal in, offshore derivative

instruments, directly or indirectly, unless the conditions specified in the regulations are satisfied.

Prior consent of the foreign portfolio investor is obtained for such transfer, except when the persons to

whom the offshore derivative instruments are to be transferred to are pre-approved by the foreign

portfolio investor.

2.3 Press Releases

2.3.1 SEBI Board Meeting On 17th June 2016, SEBI held its Board meeting in Mumbai. The highlights of the meeting are as follows:

Consultation Paper for “Amendments to the SEBI (Portfolio Managers) Regulations, 1993

pursuant to introduction of Section 9A in the Income Tax Act, 1961”: The Income Tax Act, 1961

was amended by inserting Section 9A in the Act. Amongst other things, this section provides that fund

management activity carried out through an Eligible Fund Manager located in India acting on behalf of

an Eligible Investment Fund (overseas fund), would not constitute business connection in India of such

fund, subject to the Fund and the Fund manager meeting certain specified conditions mentioned therein,

which includes registration of the Eligible Fund Manager with SEBI as a portfolio manager or investment

adviser. SEBI will be bringing out a consultation paper proposing certain changes in the Portfolio

Managers Regulations in light of the above amendment. The consultation paper would be placed on

SEBI’s website for public comments.

Consultation Paper for "Amendments to the SEBI (Real Estate Investment Trusts) Regulations,

2014": On 26th September 2014, SEBI notified its Real Estate Investment Trusts Regulations, 2014. In

order to smoothen the process of registration of REIT with SEBI and also the process of launching of

the offer, SEBI Board has approved bringing out a consultation paper proposing certain changes and

providing clarifications in the REIT Regulations.

2.3.2 Electronic Book Mechanism for Issuance of Debt Securities on Private Placement Basis With effect from 1st July 2016, the use of an Electronic Book Mechanism (EBM) has been made mandatory for issuance of debt securities on private placement basis in the primary market with an issue size of INR 500 crores and above, inclusive of the green shoe option. SEBI has granted approval to the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) to act as an Electronic Book Provider (EBP). Accordingly, all issuers of debt securities would mandatorily be required to make such private placement offers through the EBM from 1st July 2016. For issues below INR 500 crores, inclusive of, if any, green shoe option the issuer would have to disclose the details to the EBP and/ or to the information repository for corporate debt market. 3.0 INDIA MARKET UPDATES

3.1 RBI Sets up Fraud Monitoring Cell

RBI has set up a fraud monitoring cell to coordinate the early reporting of fraud cases to the investigative agencies. This is aimed at identifying persons who have diverted money out of their companies, especially into highly visible assets abroad. 3.2 RBI Suspends Euro Transactions via Asian Clearing Union

Temporarily, RBI has suspended all euro transactions through the Asian Clearing Union (ACU) mechanism from 1st July and informed that all such trades will now be settled outside the system until further notice.

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3.3 One Hundred Twelve Entities Banned by SEBI for Tax Evasion and Money Laundering Offences

SEBI has passed orders banning 112 entities for cases of tax evasion and money laundering. Some of the entities were found to be operating through various companies linked to Kailash Auto group, which was later found to be almost non-existent with no operations taking place at its registered office. 3.4 Bank of Baroda, PNB, HDFC Bank Fined for Regulatory Lapses

RBI has imposed penalties of INR 5 crore and INR 3 crore on Bank of Baroda and Punjab National Bank and also fined HDFC Bank with a penalty of INR 2 crore for lapses in adhering to anti-money laundering guidelines. RBI noted that there were deficiencies which were reflective of weaknesses and failures in internal control mechanisms in respect of certain anti-money laundering (AML) provisions such as monitoring of transactions, timely reporting to Financial Intelligence Unit (FIU) and assigning of Unique Customer Identification Code (UCIC) to customers. 3.5 Penalty Imposed on UCO Bank, Allahabad Bank, Bank of India

RBI has imposed a penalty of INR 2 crore each on UCO Bank and Allahabad Bank for non-compliance of KYC/AML guidelines. An aggregate penalty of INR 1 crore has been imposed on Bank of India for certain violations of the requirements under the Master circular on Know Your Customer (KYC) and Anti-Money Laundering (AML). 3.6 Thirteen Banks Fined INR 27 Crores for Violating Forex Laws

In October and November 2015, RBI had undertaken a scrutiny in respect of advance import remittances in respect of 21 banks. In view of the violations and lapses related to foreign exchange laws and KYC (Know Your Customer) norms, RBI has imposed a penalty of INR 27 crore on 13 public and private sector banks, and has directed eight other banks to ensure strict compliance with guidelines. 3.7 Penalty of INR 1 Crore Imposed on UCO Bank for Violation of Current Account Opening Norms

During May-June of 2015, RBI carried out an inspection of books of accounts, internal control, compliance systems and processes at one of the UCO bank's branches. Based on the findings, RBI issued a show-cause notice to the bank in connection with violation of certain regulations and instructions relating to opening of current accounts and then imposed a penalty of INR 1 crore on UCO Bank.

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ABOUT CCL

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This Regulatory Update provides information about the consultative documents and publications issued by the RBI

and SEBI which are still current, proposed changes to the Rules and Guidance set out by RBI and SEBI, actual

changes to Rules and Guidance that have occurred in the months leading up to the update and other matters of

relevance to RBI & SEBI-regulated firms. This Regulatory Update is intended to provide general summarised

guidance only, and no action should be taken in reliance on it without specific reference to the particular RBI and

SEBI Notifications referred to.

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