April 28, 2017 - Issue 133
Reserve Bank of India (RBI) Proposes
Fresh Regulations under Foreign Exchange
Management Act, 1999 (FEMA) for
Cross Border Mergers: Invites Comments
from Stakeholders
RBI vide press release dated April 26, 2017
has placed on its website the draft guidelines
proposed to be issued on cross border merger
transactions pursuant to the Rules notified by
Ministry of Corporate Affairs (MCA)
through Companies (Compromises,
Arrangements and Amalgamation)
Amendment Rules, 2017 (Rules) on April
13, 2017. Section 234 of the Companies Act,
2013 provides for mergers and amalgamations
between Indian companies and foreign
companies. Accordingly, MCA issued the
Rules to operationalize this section.
The Reserve Bank of India has proposed these
Regulations under the FEMA in order to
address the issues that may arise when an
Indian company and a foreign company enter
into Scheme of merger, demerger,
amalgamation, or rearrangement. These
Regulations stipulate conditions that should be
adhered to by the companies involved in the
Scheme. The Regulations shall be named
Foreign Exchange Management (Cross Border
Merger) Regulations. Members of public,
including the stakeholders and experts in the
area, have been requested to offer their views
and comments on the proposed Regulations.
RBI issues norms for Chief Risk Officers
(CRO)
As part of effective risk management, banks
are required, inter-alia, to have a system of
separation of credit risk management function
1
from the credit sanction process. However, it
was observed that the banks follow diverse
practices in this regard. Hence, RBI vide
notification dated April 26, 2017 in order to
bring uniformity in approach followed by
banks, as also, to align the risk management
system with the best practices, banks have
been advised as under:
They shall lay down a Board-approved
policy clearly defining the role and
responsibilities of the CRO.
Mumbai. In case of listed banks, any
change in incumbency of CRO shall be
reported to the stock exchanges also.
CRO shall be a senior official in the
banks hierarchy and shall have the
necessary and adequate professional
qualification/experience in the areas of risk
management.
The CRO in his role as an adviser shall be
an invitee to the credit sanction/approval
committee without any voting rights in the
proceedings of the committee.
The CRO shall not have any reporting
relationship with the business verticals of
the bank and shall not be given any
business targets
MCA Circular on Transfer of Shares to
Investor Education and Protection Fund
(IEPF)
MCA vide Circular dated April 27, 2017 has
provided the procedure for transfer of shares
to IEPF. IEPF Authorities have decided to
open a special demat account with National
Securities Depository Limited (NSDL)
through its depository participant. The special
demat account will have features and
functionality to support IEPF operations using
paperless, digital process and facilitate record
keeping of shares transferred to IEPF
Authority to meet the requirements of the
Rules.
Companies are required to transfer shares to
this demat account , whether shares held in
demat form or physical form by way of
corporate action and details of shares
transferred required to be submitted to NSDL
in prescribed format which will be issued soon
by MCA.
Key Decisions Taken by Securities and
Exchange Board (SEBI) of India in its
Board Meeting Held On April 26, 2017
SEBI, in its Board Meeting held on April 26,
2017, deliberated upon and concluded on
various initiatives for improving the facilities
being offered to the stakeholders. The key
decisions taken by SEBI are as follows:
Amendment to Securities Contracts
(Regulation) (Stock Exchanges and
Clearing Corporations) Regulations,
2012- to enable the Commodity
Derivatives Exchanges to organize trading
of options', the Board, after undertaking
due public consultation process, has
approved a proposal to amend the relevant
provisions of Securities Contracts
(Regulation) (Stock Exchanges and
Clearing Corporations) Regulations, 2012;
Strengthening the Monitoring of
Utilization of Issue Proceeds- As per the
SEBI (Issue of Capital and Disclosure
Requirements) Regulations, 2009, require
mandatory appointment of Monitoring
2
Agency if the issue size of specified
securities exceeds Rs. 500 Cr. The Board
in its meeting decided to for mandatory
appointment of Monitoring Agency where
the issue size (excluding offer for sale
component) is more than Rs. 100 Cr.;
Amendment to SEBI (Foreign Portfolio
Investor) Regulations, 2014- An express
provision shall be inserted in the
regulations to prevent Resident
Indians/NRIs or the entities which are
beneficially owned by Resident
Indians/NRIs from subscribing to Offshore
Derivative Instruments.
Integration of broking activities in
Equity Markets and Commodity
Derivatives Markets under single entity-
Consequent to merger of Forward Market
Commission with SEBI, commodity
derivatives brokers are also being
regulated by SEBI. However, as per extant
Securities Contracts (Regulation) Rules
(SCR Rules), 1957 and SEBI (Stock
Brokers and Sub-brokers) Regulations,
1992, a stock broker /clearing member
dealing in commodity derivatives cannot
deal in other securities or vice versa,
except by setting up of a separate entity. In
this regard, the Board approved the
proposal to remove this restriction by
amending Stock Brokers Regulations and
also to recommend to Government of India
for amending SCR Rules accordingly.
SEBI allows International Financial
Services Centers (IFSC) banking units to
act as trading members of Stock Exchanges
Clause 8 of SEBI (IFSC) Guidelines, 2015
provides that "Any recognized entity or
entities desirous of operating in IFSC as an
intermediary, may form a company to provide
such financial services relating to securities
market, as permitted by the Board".
SEBI vide Circular dated April 27, 2017 has
clarified that an IFSC Banking Unit (IBU) set
up in IFSC shall be permitted to act as a
Trading Member of an exchange or a
Professional Clearing Member of a clearing
corporation in IFSC, without forming a
separate company, subject to the conditions
mentioned in the RBI circular dated April 10,
2017.
As per the Circular the Clearing Corporations
have been directed to:
take necessary steps to put in place
systems for implementation of the circular,
including necessary amendments to the
relevant bye-laws, rules and regulations;
bring the provisions of this circular to the
notice of their members and also
disseminate the same on its website; and
communicate to SEBI, the status of
implementation of the provisions of this
circular in the Monthly Report.

Clearing members can contribute Govt. Employee Provident Fund (EPF)

securities in Core Settlement Guarantee
fund
SEBI vide Circular dated April 26, 2017 has
been decided that the clearing members shall
be permitted to bring their contribution
towards Core Settlement Guarantee Fund, in
the form of Central Government Securities, in
addition to Cash and Bank Fixed Deposits in
terms of point 11 of the SEBI circular dated
August 27, 2014.
members now required to submit self-
declaration for advance in case of illness of
members/ dependents
EPF members will now only be required to
submit a self-declaration for the advance in
case of illness of members/ dependents.
Differently able members will also get
advance on the basis of self-declaration. A
member will no longer be required to submit
any medical certificate or any other certificate
or document to avail advances under EPF
Scheme 1952.

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