MUTUAL FUND

Reliance MF declares 40 pc dividend in Reliance NRI Eq Fund

SREI Infra to foray into mutual fund operations

MUMBAI: SREI Infrastructure Finance Ltd said on Monday India's market regulator, Securities and Exchange Board of India, has given in-principle approval to the firm to set up mutual fund operations.

The equipment financing firm said its board has approved forming two units to carry out asset management operations.

http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/SREI-Infra-to-foray-into-mutual-fund-operations/articleshow/5009520.cms

Equity funds find no takers

Ban on entry load leads advisors to focus more on Ulips, insurance and NSC.
Pramod Chowdhary, a small independent financial advisor (IFA) and distributor of mutual fund schemes in Gwalior, is an unhappy man. The reason: His monthly commission has dipped over 60 per cent from Rs 10,000 to Rs 3,000 last month, thanks to the Securities and Exchange Board of India (Sebi)’s ban on entry load for equity funds effective from August 1.
As a result, other financial products, including unit linked insurance policies (Ulips), general insurance, National Savings Certificate (NSC), corporate deposits and even recurring deposits at post offices are increasingly being preferred by small town IFAs across the country as these products offer higher commissions.
Faced with investors’ non-willingness to pay the consultancy fees and the inability to charge, Pramod says, “Business is adversely affected. Enthusiasm and interest to run after clients is no more alive.”
Chowdhary is not alone as a majority of over 90,000 IFAs across the country are finding it hard to continue with their expenses. The sudden change in payment model is something advisors are not able to come in terms with.
Vineet Sharma, a Jaipur-based IFA, is grappling with a 50 per cent fall in his turnover last month. “Whatever commission we are getting is only through trail commission. In a small town like Jaipur, it’s hard to make our clients pay our fees separately,” he says. They say that change in the mindsets of investors will take one to two years. “We have to convince the investors about better returns in mutual fund schemes,” says Devanand Amin, an Anand-based advisor. “But,” adds Sudhir Baghel from Jabalpur, “We cannot service clients without reasonable commission. I would prefer to push Ulips and other insurance products more than mutual fund schemes.”
Asset Management Companies (AMCs) have already admitted that the channel of IFAs will be severely impacted given their inability to charge the customers at a time when clients are aware of the fact that no entry fee can be charged.
To tackle the crisis, fund houses are paying 50 to 100 basis points or even higher to their distributors as an upfront commission to continue pushing their products in the market.
However, IFAs say they are getting only 30-60 basis points as upfront fees. They point out that national distributors are being paid an upfront fees of as high as 125-150 basis points.
Saroj Singh, who travels 40 kilometers to Dhanbad in Jharkhand to sell mutual fund schemes, says, “I was earning an overall commission of Rs 20,000 a month which plunged over 70 per cent to Rs 5,000-6,000 in August,” he says. “This is not helping me meet my expenses.”
Fund houses, according to IFAs, have started sending their own marketing staffs to clients. “They don’t charge any fees, then why should an investor come to us. It is affecting our business. I get an upfront commission of 40 basis points only. It is hard to stay like this as I am left with nothing once income and service tax are deducted,” adds Saroj.
However, advisors based in cities like Ahmedabad, Anand and Jabalpur said that though AMCs were using their marketing executives, “IFAs outnumber the AMC executives. They cannot reach out to the penetration level in the rural regions the way we are present and have access to,” says Nilesh Shah, an Ahmedabad-based financial advisor.
Out of the total inflow of retail investments to the mutual fund industry, around 15 per cent comes from the rural regions of the country which mainly comes through the IFA channel. The intial responses from the financial advisors’ fraternity is likely to apply brakes on the pace with which mutual fund industry has been penetrating the rural markets in Tier- II & III cities. This could prove a major jolt to the concerns of Reserve Bank of India in its annual report last month in which the central bank had suggested the fund management industry to shed over-dependence on corporate money and penetrate more in rural areas and reach out to households.

http://www.business-standard.com/india/news/equity-funds-find-no-takers/370063/

Fund mobilisation through debt up 42 per cent in Q1: Report

The first quarter of 2009-2010 saw a 42 per cent jump in fund mobilisation through private debt placements by domestic corporate houses, according to a Prime Database report.
Around 67 companies together raised Rs 40,300 crore between April and June 2009 compared to Rs 28,385 crore raised in the corresponding period of the previous year. Deals having put and call options of over a year were only reflected in the database.
The top fund mobilisers during the quarter included Tata Motors (Rs 4,200 crore), HDFC (Rs 2,500 crore), Indian Railway Finance Corporation (Rs 2,311 crore), Tata Steel (Rs 2,151 crore), and Axis Bank (Rs 2,000 crore).
Financial companies recorded a 35 per cent increase in fund raising through debt instruments to Rs 21,002 crore compared to Rs 15,535 crore raised in the corresponding quarter of the previous year.
While fund mobilisation by private sector firms in the quarter went up by 50 per cent to Rs 16,753 crore from Rs 11,184 crore, mobilisation by public sector companies was up 48 per cent at Rs 2,300 crore from Rs 1,552 crore, said the report.

http://www.business-standard.com/india/news/fund-mobilisation-through-debt42-per-cent-in-q1-report/370061/

Fund valuations head south

Entry load ban prompts many buyers to look at near-zero or pay-to-buy models.
Weighed down by a ban on charging investors entry load, mutual funds, specially those with low assets, have seen valuations nosedive.
Industry experts said valuations were down almost 50 per cent, from 5 to 6 per cent of assets under management (AUM) to 3 per cent after the October 2008 crisis because buyers were looking at asset quality rather than size.
 

In fact, unlike earlier years, asset size no longer warrants great valuations. “I don’t see why anyone should pay on sheer asset size anymore because it does not ensure income,” the chief of a leading fund house said.  
In the heydays, asset management companies attracted high valuations. For example, Infrastructure Development Finance Corporation (IDFC) bought Standard Chartered Mutual Fund for around Rs 830 crore, or a whopping 5.7 per cent of its assets in April 2008.
But buyers can now expect to snap up funds at near-zero, or even be paid to buy a fund house. For example, last November, Lotus Mutual Fund had to pay Religare Rs 50-100 crore to take over its liabilities.
Things have worsened since then because of the entry loan ban by the Securities and Exchange Board of India (Sebi) on August 1. Experts said going forward, more such deals could take place, if not at pay-to-buy, but at 100 to 150 basis points of the AUM.
Already, there are talks that DBS Chola and Bharti Axa could be looking for buyers. And industry experts said there could be more players looking to exit. “Six to seven fund houses are looking for buyers, but valuation is the main issue,” said the chief investment officer (CIO) of a leading fund house.
After the entry load ban, Asset Management Companies (AMCs) face a catch-22 situation. To ensure fresh inflows and compete with big guns such as Reliance Mutual Fund and HDFC Mutual Fund, they need to pay distributors upfront fees plus a higher trail commission.
At the same time, the extra cost to ensure inflows will mean their already-strained balance sheets will continue to bleed. Sanjoy Banerjee, executive director, ICRA Online, said, “The industry's profitability was already extremely poor, according to the 2007-08 numbers. Things could get worse now.”
And although AMCs have only 25 per cent of their money in equities, it was their main source of income.
Earlier, the cost of garnering new clients was borne by the investor, in the form of the 2.25 per cent entry load on equity funds. As a result, fund houses were able to retain the 90 basis point to 1 per cent annual fund management fees in an equity scheme.
This income will be under severe pressure because the upfront payment of 50 to 75 basis points to distributors will have to be paid out of this.
Also, fund houses paying higher trail commission than the 0.50 to 0.75 per cent may have to bear the burden from management fees or the AMC’s capital. 
In liquid and short-term debt schemes, in which most of the money lies, the average fund management fees range from 10 basis points to 50 basis points, depending on the type of fund.
And medium- and long-term debt schemes earn 75 basis points to 1 per cent.
Importantly, the upfront fees will have to be paid regularly by AMCs because of the high churn. “The average investor stays for only two or three years in equity and even less in debt.
The industry will have to continue incurring these high costs to acquire clients. Many AMCs may not be able to continue taking this hit,” said an industry expert.
Further, a large part of the assets is with a few top funds. At present, there are 36 AMCs. Out of the total Rs 7.48 lakh crore of AUM in August, 15 funds control Rs 6.72 lakh crore. 
That means 21 AMCs have only Rs 75,000 crore, of which Rs 53,000 crore is in debt or debt-oriented schemes.
Industry experts blamed some fund houses for this mess. “Many fund houses went into the business with a ‘build-to-sell’ intention instead of a ‘build-to-operate’ motive. So assets were built using the wholesale route in debt funds where large-scale inflows and outflows take place making AMCs very unstable,” said a CIO.Consolidation, thus, is on the cards. Banerjee felt that since small doesn’t make sense anymore, the industry could ultimately have 20 or 25 good players with staying power.
In fact, experts believed that the players waiting in the wings would have to do some serious rethinking because the timeline for becoming profitable would become much longer than the five or seven years which was the earlier target.As Banerjee put it, “Sebi’s measures will means AMCs would have to work towards profitability. This, as a natural progression, would mean a healthier industry.

INSURANCE

SBI Life Insurance launches Shubh Nivesh

MUMBAI: SBI Life Insurance has launched SBI Life Shubh Nivesh, a traditional savings plan with an option of whole life cover.

Shubh Nivesh has been designed to meet the savings, protection and income needs of customers having a risk-averse profile.

"Strengthening our product suite, the introduction of Shubh Nivesh is a step towards presenting customers a range of solutions which enables them to choose one that best suits their risk profile and financial needs," SBI Life Insurance, Managing Director and Chief Executive Officer, M N Rao, said in a press release today.

The product is available in two options. In endowment assurance option, the accrued bonus and the sum assured amount is payable during an unfortunate event of death during the endowment term or on survival at the end of term, the release said.

In addition to these benefits, in whole life endowment option, an amount equivalent to sum assured is payable on an unfortunate event of death even after the completion of endowment term or on survival till 100 years of age.

Catering to the income needs arising out changing life stages, Shubh Nivesh presents an attractive feature of deferred maturity payment options.

http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/SBI-Life-Insurance-launches-Shubh-Nivesh/articleshow/5009869.cms

‘Unit-linked insurance policies may sell less after cap on charges’

Roudra Bhattacharya
New Delhi, Sept. 13 Canara HSBC Oriental Bank of Commerce Life Insurance is just over a year old, but the joint venture is the fastest life insurance company to cross the Rs 500-crore mark in weighted premium income at 14.5 months.
In an interview with Business Line, Mr Harpal Karlcut, CEO, explains how the pure bancassurance model has helped the company keep costs at a minimum, while leveraging the massive network of both the public sector banks to sell its products. He also spoke on the prescribed cap on ULIP charges by the Insurance Regulatory and Development Authority (IRDA) and how the proposed new direct tax code will actually be a boon if implemented.
Why a joint venture between three banks and a pure bancassurance model? Both are firsts in the industry?
What HSBC brings to the joint venture is a tremendous amount of knowledge about how to make insurance work for a bank. About 16 per cent of HSBC’s global profits last year came from the insurance business. A model of bancassurance made sense, as both Canara and OBC have tremendous brand strength pan-India, while HSBC is typically confined to the metros. Together OBC and Canara have about 4,100 branches, with a customer base of over 45 million. Combining the three banks, you’re talking 48 million.
The industry has asked for an increase in the FDI cap to 49 per cent from 26 per cent. Is HSBC interested in increasing its stake in the joint venture?
We have no view on that. From the company perspective, it is not important if HSBC has 26 per cent or a higher number. We were probably the most highly capitalised company before launch. We’re also fortunate that our shareholders, in these very testing times in the financial markets, are very strong and are willingly putting in the capital that we’ve asked for. Moreover, Canara Bank is by far the strongest brand amongst the three and therefore it is prominently displayed on our logo.
How does this model of pure bancassurance work?
We only develop the product here and support the bank in the sales activities. But the SPs (selling persons) work for the bank. A big benefit is that these customers trust their own banks and typically have long relationships with their banks. This also means our headcount is very low at about 600.
This is reflected in the fact that we are the fastest company in the industry to cross the Rs 500-crore of business mark since launch. Plus our cost base is also very low and we have the lowest expense ratio of any insurance company in its first year – that’s the strength of bancassurance.
When do you plan to break even?
There’s no break even point that we have, but because of our lower costs we expect it to be much sooner than the industry. The industry has not yet broken even, even with some companies coming into their tenth year. The industry average is plus 10 years, while some are project 7-8 years. In July, we did around Rs 45 crore of issued business, putting us around 12th or 13th on the table. That shows that we’re growing very fast.
The IRDA has prescribed a cap on ULIP charges, applicable from October 1. What is the rationale behind this?
IRDA has a genuine concern over the cost basis of companies. So it has asked for more disclosure around costs, while it is looking at capping those costs. What it is trying is to put a break on the amount of charges you can put on the customers. They’re trying to make sure that the charges are sufficiently low in aggregate, so it doesn’t take away the gross yield that the customer would have otherwise got. The details are still being worked out for this.
What kind of an impact do you think these charges will have on the industry?
Those with high cost bases, who pass it on to the customers, will clearly have to roll them back. They will now sell less unit-linked business and focus on other areas, as there are no caps on the traditional business.
They will also have to look into their distribution. Our distribution costs are relatively low owing to our model. Companies with high costs of people, branches and marketing will have to bring those down – to a level that they can match with the policy charges.
The industry itself has slowed down quite markedly from a year ago due to the economic scenario, so I see the cost basis anyway being addressed.
Are there any plans of further capital infusion for the company?
Right now we’re capitalised at Rs 525 crore. When we launched we had Rs 325 crore, and infused another Rs 200 crore at the end of last year. In the 2009-10 fiscal, the shareholders have committed another Rs 200 crore.
What is the ratio of traditional policies you sell, in respect to the ULIP portfolio?
At the moment we have 10 products on sale, of which a third are traditional policies, and two-thirds are ULIPs.
Because of when we launched, most of our sales today have been unit-linked products. Going forward, even when the markets wobbled, the industry tended to sell more unit-linked products. Generally customers prefer unit linked products, because they are more transparent in their charging structure.
But aren’t unit-linked products more risky?
Depends on what funds you choose. If you are a young person and have about 30 years till you retire, you’d be more prepared to go into equities. Whereas if you have dependents and you’re closer to retirement, you’d typically pick bond funds because they are less volatile, so the capital tends to be more secure.
According to HSBC’s ‘Future of retirement’ report, India’s has a much lower average age than other countries at 26. Does that have any relation with ULIPs being more popular in India?
Could be, as younger people are able to take more risks since they have a long time. You wouldn’t want to be in cash or bonds at 26, you’d want to make sure you have good equity exposure. But if you have just 10 years to retire, then you’d be happy to have no exposure to equity. ULIPs give customers that option and it is also transparent as you can see what charges the company is taking, in terms of front-end charge and annual management charge and so on – we have to give an illustration and a personal copy of this. In a traditional product, it is tougher to know which is better. Because they don’t tell you much - about what bonuses you’d get in the future.
What kind of growth do you see in ULIPs, as compared to the traditional policies?
The product mix of two-thirds ULIPs and a third for traditional policies should stay through this fiscal. But I would like to see higher growth in non-linked products, particularly for segments like the group business.
The industry is mostly flat at the moment. But with a strong Government at the helm and hoping that the monsoon situation is less bad than is being talked about, India should grow at about 6 per cent. If that continues, the life insurance sector should grow by end of the year. In such a situation, I see a larger growth for the traditional component than ULIPs. But ULIPs won’t fall dramatically overall, because customers like clarity of products.
On the proposed new direct tax code.
Having a higher opportunity for customers to put into insurance is a good thing. I think in most markets around the world today, customers have to be encouraged to save for tomorrow, rather than today. We, along with the industry, had made a case that the limit should be increased from Rs 1 lakh upwards. If that happens, I think it’s a good thing for people to put more of their savings into their insurance.
So you see a growth in the business, if the limit is increased to Rs 3 lakh?
Some customers still buy insurance for tax reasons, so it should grow. Growth in our mass market policies were very high last fiscal, but were flat in the highest income segments. Overall our sales were up because the masses are a much bigger segment.
However, our proportion of people buying insurance for tax reasons is comparatively lower than other companies, and it’s our intention to keep it that way.

http://www.thehindubusinessline.com/2009/09/14/stories/2009091450441000.htm

Global insurance scheme could be a solution to financial crisis

What a difference a year makes. The Lehman bankruptcy a year ago triggered something that was previously unfathomable-the near-collapse of the US financial system.  with enormous collateral damage to the global financial system and the world economy.

Remarkably, financial systems around the world have stabilised and the economic recovery has begun. Whether this is due to the resilience of economies and financial markets or the sagacity of policymakers who responded to the crisis with massive macroeconomic stimulus and other measures to prop up their domestic financial systems is already being hotly debated.  This debate matters greatly in terms of the timing of "exit strategies" to withdraw these measures. Huge fiscal deficits and large amounts of liquidity sloshing around could create their own collateral damage in the future. But declaring victory prematurely could stall a recovery that is weak at best. The advanced economies, in particular, still face a lot of headwinds including rising unemployment rates, weak household and financial sector balance sheets, and tepid domestic demand.

As we contemplate the future, it is useful to reflect on what got us into such desperate circumstances in the first place. Not so much to assign blame-and there is certainly plenty of blame to go around-but to try and fix the core problems. Weaknesses in financial regulatory systems, abetted by regulatory failures and an under-appreciation of how leverage could generate systemic rather than institution-specific risk, were a key problem. Investment managers faced perverse incentives to take large gambles that could bring down not just their institutions but the whole edifice. Measures are being taken, even if in a rather timid manner, to deal with these problems.

Astonishingly, the world is again looking to the US to pull the global economy out of its slump and as a safe haven to stash cash until that happens. Consider China. Its economy has rebounded strongly after hitting a wall at the end of last year, thanks to an investment binge fueled by government spending on infrastructure as well as massive bank lending. The surge in bank lending-more than a trillion dollars in the first half of 2009!-is likely to create further excess capacity in some industries where there is already spare capacity. So China will continue looking for export markets to absorb its excess capacity and generate employment growth. Even large advanced economies like Germany and Japan are still quite dependent on exports, without which their incipient recoveries could stall. So this could leave the US as the demander of last resort, which would hold back its own recovery and perpetuate the old problem of global imbalances.

The US consumer has of course retreated into a shell after the sharp fall in household wealth. This has left the US government to take up the slack, running up a deficit of $1.6 trillion this year (11.2 percent of GDP) and expected to add $9 trillion to the public debt over the next decade. The sheer size of this borrowing requirement means that it will soak up not only savings from the US but from other countries.

Far from being reluctant providers of credit to the US, China and other emerging markets now have an even stronger motive to build up foreign exchange reserves and purchase more US treasury bonds. After all, the crisis has shown that massive disruptions to the global financial system are not a thing of the past and that moderate levels of self-insurance in the form of reserves may not provide adequate protection.

I have proposed a global insurance scheme that would allow countries to directly purchase insurance against crises, removing the stigma of depending on an institution like the IMF to save them from crises. By contrast, self-insurance is not a good solution for individual countries and could perpetuate global imbalances.

In the absence of coordinated solutions, we could be back where we started on global imbalances. The US needs to develop a coherent plan for bringing its deficit back to reasonable levels, China and other surplus countries have to take measures to boost their domestic demand, and economies like Japan and Germany should reform their labor and product markets and financial systems.
http://economictimes.indiatimes.com/Corporate-Trends/Global-insurance-scheme-could-be-a-solution-to-financial-crisis/articleshow/5007441.cms

Obama says he's expecting 'good health care bill'

President Barack Obama said he is confident Congress will pass "a good health care bill," as months of rancor over reforming the US health care system seemed to be easing, with the White House playing down an immediate role for a government insurance option.
At the same time, Obama was critical of Republican opponents who he said were trying to block an overhaul of the national heath care system for political gain.
"I believe that we will have enough votes to pass not just any health care bill, but a good health care bill that helps the American people, reduces costs, actually over the long-term controls our deficit. I'm confident that we've got that," Obama said in an interview broadcast yesterday on CBS' 60 Minutes.
"There are those in the Republican party who think the best thing to do is just to kill reform. That that will be good politics."
Obama has retaken the offensive on his key domestic policy issue, most notably with a speech last week to both houses of Congress. And sought to turn down the heat over a government-run health insurance plan.
"The public option is only a means to that end and we should remain open to other ideas that accomplish our ultimate goal," he said.
Obama is trying to push opposing lawmakers away from positions - both left and right - that were threatening stalemate.
http://www.business-standard.com/india/news/obama-says-he/s-expecting-/good-health-care-bill//73330/on

BANK

RBI unlikely to raise key rates

Our Bureau
Kolkata, Sept.14 The Reserve Bank of India is unlikely to raise key rates as of now as the credit growth continues to be sluggish, according to Mr Suman K. Bery, Member of Prime Minister’s Economic Advisory Council and Director-General of the National Council of Applied Economic Research.
In reply to a question from journalists, on the sidelines of an interactive session organised by the Bharat Chamber of Commerce here on Monday, he said, “Globally, we haven’t seen any significant resumption in credit growth and the case is the same for India as well. The real cost of finance for the borrowers is still high.” Asked if the central bank would consider raising key rates Mr Bery said, “I don’t think so."
However, the RBI’s decisions would depend upon the global economic scenario, particularly with regard to commodity prices, which were still volatile, he said.
India’s focus areas at the G-20 forum would be the role of international finance institutions, cross-border regulatory architecture, issues related to resources and quotas, managing systematic risks and financial safety, among other factors, he added.

http://www.thehindubusinessline.com/2009/09/15/stories/2009091550660600.htm

SEBI

Sebi proposes tighter audits

MUMBAI: A Securities & Exchange Board of India (Sebi) panel has recommended rotation of audit partners, selection of the chief financial officer   by a company’s audit committee and standardisation of earnings disclosure, in an attempt to prevent another accounting scandal such as Satyam Computer.

The committee has also proposed that companies publish their balance sheets, which show the assets and liabilities, halfyearly , against the present annual system. This would help investors know the company’s solvency position, instead of just the profitability which comes out in quarterly results. The committee has invited comments and suggestions on these proposals before a final recommendation. The Sebi Committee on Disclosures and Accounting Standards (SCODA), made these recommendations after B Ramalinga Raju, the promoter of the then fourthlargest software company Satyam Computer Services, in January said he had falsified accounts of about a billion dollars. That led to charges of lack of transparency, a flurry of investor suits in the US and accusations that independent directors had failed in their duty to protect investors. Probe by various agencies, including Sebi, is on.

New financial reporting norms

“A longer association between a particular audit firm and a listed entity may lead to complacency and defeat the true sense of independence of the auditors,’’ the panel said. But mandatory rotation of firms may not be practical by all companies, it said without detailing. Hence, it recommends mandatory rotation of partners every five years and suggests the audit committee be held responsible for the independence of audit firms and partners.

In the case of Satyam, PricewaterhouseCoopers had been the audit firm for many years and its partners S Gopalakrishnan and Srinivas Talluri have been signing the accounts. All are under probe for their role in the Satyam accounting scandal by differenc agencies.

“The role of the audit committee should be only to the extent of expressing its opinion about the appointment,” said RS Loona, managing partner of Alliance Corporate Lawyers and former executive director (law) at Sebi adding the appointment should be done by the board.

Some lawyers believe the focus on the audit committe is to reduce fears of some individuals who have either quit, or avoid becoming independent directors in companies after the Satyam episode. The committee has also recommended streamlining the submission of financial results and reduce the period for their submission to the stock exchanges.

“There is still a need to try and standardise the extent and quality of reporting by various companies; some report audited, some reviewed and some unaudited and unreviewed results which may either be standalone or consolidated,” said V.Venkataramanan, Director, accounting advisory services, KPMG. “Introducing a more consistent and comparable format for quarterly reporting should be the medium term aim for listed companies in India,” he said.

The panel proposed that companies should be allowed to voluntarily adopt International Financial Reporting Standards as a possible first step towards phased implementation of the new accounting practice starting April, 2011.

http://economictimes.indiatimes.com/articleshow/5012077.cms

Sebi panel rejects regulator's demand for external auditor for internal audit

Tue, Sep 15 05:10 AM
A committee set up by the Securities and Exchange Board of India (Sebi) has rejected the regulator's proposal to get the internal audit function performed by an external auditor. The panel also turned down some other Sebi's suggestions — including mandatory financial qualification for chief financial officers and rotation of auditors — in the wake of the accounting irregularities at Satyam Computer Services.
Reiterating the need for having greater internal checks and controls in an organisation, the Sebi Committee on Disclosures and Accounting Standards (SCODA), headed by Y H Malegam, was of the view that the current mechanism laid down under Clause 49 of the Listing Agreement — wherein the Audit Committee is given the responsibility to review the performance of an internal auditor — "was sufficient and provides adequate checks and balances as far as internal control mechanisms are concerned".
The 19-member Sebi committee also rejected a proposal by the Sebi that only chartered accountants should be appointed as chief financial officers (CFOs) of listed companies. The CFO of listed companies can be any person with financial or accounting background, the panel suggested.
SCODA said that persons with requisite financial qualifications could be appointed as CFOs of the audit committees of the listed companies, said a discussion paper 'Proposals relating to amendments to the listing agreement' on which the regulator has sought opinion from stakeholders by September 25.
On the issue of rotating auditors, SCODA was of the view that mandatory rotation of firms may not be practical by all companies. The committee recommended that Sebi may mandate that the partner of the audit firm signing the audited accounts of a listed entity be mandatorily rotated every five years.
On the issue of disclosures made by promoters about the pledged shares, the committee suggested that the issue may not be within the scope of statutory auditors of listed entities where the opinion is given by them on the financial results.
Regarding the issue of presenting consolidated accounts in IFRS (International Financial Reporting Standards) format, it said only those listed entities which have overseas subsidiaries contributing to a major portion, say at least 50 per cent of the total revenue of the consolidated entity, should be given the option to voluntarily adopt IFRS, the logic being that the financials of the overseas subsidiaries are often prepared in IFRS and requiring them to recast accounts in Indian GAAP for purposes of consolidation may be retrograde, especially when India is contemplating migration to IFRS by 2011.
SCODA recommended that the audited figures of the major heads of the balance sheet prepared in accordance with Schedule VI to the Companies Act or its equivalent in other statutes may be disclosed by listed entities on a half-yearly basis.
http://in.news.yahoo.com/48/20090915/1238/tbs-sebi-panel-rejects-regulator-s-deman.html