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SEBI – IRDA – Finance Minsitry – Total Disconnect

August 24, 2010

The Pillars of Indian Capital Market – SEBI, IRDA and the Supreme Veto Authority, the Finance Ministry are somewhat disconnected in their recent actions and functioning.

It all began with Mr. C.B.Bhave the Chairman of SEBI tightening the rules for errant Agents / brokers in the Mutual Funds and Insurance industry. Since AMFI, the body overlooking Mutual Funds was meek, SEBI overpowered and to an extent cleaned the mess of funds churning and underhand commissions AMCs were rolling out at the cost of investors. SEBI introduced a regime of Zero entry load, a good move. However, recent implementation of compulsory KYC is uncalled for as the systems that approve KYC reject an application if there is a single mis-match of a “letter” anywhere in your address putting investors at loss. Standardize PAN card for now is our opinion.

Mr. Bhave knows the Day Light Loot Insurance Agents have been resorting to by ripping commissions as high as 20% on ULIP Policies. Went to exercise his authority, but IRDA’s Chairman Harinarayan woke up from his long slumber and to me it appears that the Finance Ministry intervened in the vested interest of IRDA and its Shady Agents. Buying an Insurance policy is nothing short of being pick-pocketed in front of you, cheated and mis-sold, evident from the rising number of complaints, yet the Finance Ministry and IRDA have both turned a blind eye.

Today, SEBI has once again raised the question of Black Money being pumped into markets leading to unwarranted speculation the Indian Equities. They have asked for Income-Tax Return (ITR) acknowledgment, Form 16 for salary income, net worth certificate, salary slips, bank account statements for six months, demat account holding statements and asset ownership certificates for individuals who are Trading in the Derivatives and Options Segment. At one end, in the Direct Tax Code drafted by our Honorable Finance Minister Mr. Pranab Ji, they have left a big hole wide open to launder Black Money through Mauritius and other Tax Heavens exempting them from paying taxes, while at the other end, SEBI wants to squeeze the small retail trader’s unaccounted money, but the size of former is much bigger and the cleanup should also be done at offshore accounts and not just within India.

One more thing I wanted to enlighten is the snails pace at which SEBI investigates the matter of Insider Trading. Take for example, Reliance Industries promoter Mukesh Ambani trading in his group company Reliance Petroleum before the merger and yet no action has been initiated against him. When SEBI was questioned on the same, they say they do not have any time restrictions to close an investigation. In simple terms, SEBI and Government have no accountability ? Do you see a common Goal and actions supporting it here in India ?

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