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SEBI CIRCULARS

(January – August 10, 2011)


INDEX

Modifications to Client Code Post Trade Execution 1

Introduction of Derivative Contracts on Foreign Stock Indices 2 - 4

Reporting of Offshore Derivative Instruments (Odis)/ Participatory Notes 5 - 8(PNS) Activity

Establishment of Connectivity with both Depositories NSDL and CDSL – 9Companies Eligible for Shifting From Trade for Trade Settlement (TFTS)to Normal Rolling Settlement

Arbitration Mechanism of Stock Exchanges – Applicability of the Provisions 10of the Limitation Act, 1963

Futures on 91-Day Government of India Treasury-Bill (T–Bill) 11 - 14

Allocation of Government Debt Long Term & Corporate Debt - Old Investment 15 - 16limits to FIIs

Usage of Load Account 17 - 18

Listing Agreement for Securitized Debt Instruments 19

Unauthenticated News Circulated By SEBI Registered Market Intermediaries 20 - 21through Various Modes of Communication

Dissemination of Further Information about FII Activity – Discontinuance of 22Reporting

FII Investment in Corporate Bonds Infra Long Term Category Limitation 23Period for Filing an Arbitration Reference

Limitation Period for Filing an Arbitration Reference 24

Review of Annual Issuers’ Charges 25

Applications Supported By Blocked Amount (ASBA) Facility 26 - 31

Clarification on Circular Dated December 3, 2009 on ‘Dealings between a 32client and a Stock Broker

Self Clearing Member in the Currency Derivatives Segment 33

Adjustment of Differential Pricing Amount at the Time of Application for 34 - 35Allotment of Specified Securities

Option to Hold Units in Demat Form 36


Liquidity Enhancement Schemes for Illiquid Securities in Equity Derivatives 37 - 38Segment

Periodical Report – Grant of Prior Approval to Members of Stock Exchanges/ 39 - 40Sub-Brokers

Processing of Investor Complaints against Listed Companies in SEBI 41 - 42Complaints Redress System (Scores)

Redemption of Indian Depository Receipts (IDRs) Into Underlying Equity Shares 43 - 45

Pre- Funded Instruments / Electronic Fund Transfers 46

Standardisation of Rating Symbols and Definitions 47 - 54

Change of Name by Listed Companies 55

Modification to Investor Protection Fund (IPF)/ Customer Protection Fund (CPF) 56 - 57Guidelines

Periodical Report- Grant of Prior Approval to Depository Participants 58

Periodical Report- Grant of Prior Approval to Credit Rating Agencies 59

Periodical Report- Grant of Prior Approval to Merchant Bankers 60

Periodical Report- Grant of Prior Approval to Underwriters 61

Periodical Report- Grant of Prior Approval to Registrars to an Issue and Share 62Transfer Agents

Shareholding of Promoter / Promoter Group to Be In Dematerialized Mode 63 - 64

Periodical Report- Grant of Prior Approval to Bankers to an Issue 65

Periodical Report- Grant of Prior Approval to Debenture Trustees 66

Review of Internet Based Trading (IBT) and Securities Trading Using 67 - 68Wireless Technology (STWT)

Modification of Client Codes of Non-Institutional Trades Executed On 69 - 70Stock Exchanges (All Segments)

Clarification Regarding Admission of Limited Liability Partnerships as Members 71of Stock Exchanges

Allocation of Government Debt Long Term Limits to FIIs 72 - 73

Indicative Portfolio or Yield in Close Ended Debt Oriented Mutual Fund Schemes 74


Revised Procedure for Seeking Prior Approval for Change in Control through 75 - 76Single Window

SMS and E-Mail Alerts to Investors by Stock Exchanges 77 – 78

Investment by Foreign Investors in Mutual Fund Schemes 79 - 86

Short-Collection/Non-Collection of Client Margins (Derivatives Segments) 87 - 88


CIRCULAR - CIR/DNPD/ 01 /2011 DATED JANUARY 03, 2011

MODIFICATIONS TO CLIENT CODE POST TRADE EXECUTION

In case of genuine error or wrong data entry made by trading members, Stock Exchangescan permit modifications to client code post trade execution for the smooth functioning ofthe system and to be used exceptionally rather than routine.

Stock Exchanges have been advised to:

Set objective parameters (approved by the Governing Board of the Exchange) foridentification of client code modifications arising due to genuine error or wrong dataentry

Impose monetary penalty in addition to disciplinary action against members who donot meet the objective parameters

Include verification of client code modification as a reporting item in internal audit

report of the trading members

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CIRCULAR - CIR/DNPD/ 2 /2011 DATED JANUARY 11, 2011

INTRODUCTION OF DERIVATIVE CONTRACTS ON FOREIGN STOCKINDICES

Objective

To permit Stock Exchanges to introduce derivative contracts (Futures and Options) onforeign stock indices in the equity derivatives segment.

The salient features of the circular contained in the guidelines attached as Annexure 1.

Guidelines as per Annexure 1

1. Eligibility CriteriaA stock exchange may introduce derivatives on a foreign stock index if:

i. Derivatives on that Index is available on any of the stock exchanges listed atAnnexure-A

ii. In terms of trading volumes (number of contracts), derivatives on that Indexfigure among the top 15 Index derivatives globally.

OR

That Index has a market capitalization of at least USD 100 billion.

iii. That index is “broad based”. An Index is broad based if :

a. The Index consists of a minimum of 10 constituent stocks and

b. No single constituent stock has more than 25% of the weight, computedin terms of free float market capitalization, in the Index.

2. Failure to meet Eligibility CriteriaAfter introduction of derivatives on a particular stock index, if that stock index failsto meet any of the eligibility criteria for three months consecutively, no fresh contractshall be introduced on that Index. However, the existing unexpired contracts wouldbe traded till expiry and new strikes may be introduced on those contracts.

3. Currency DenominationThe absolute numerical value of the underlying foreign stock index shall bedenominated in Indian Rupees (INR). The derivatives contracts on that foreign stockindex would be denominated traded and settled in Indian rupees.

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4. Risk Management FrameworkThe stock exchange shall submit the risk management framework along with itsapplication for introduction of derivatives on foreign stock indices.

5. Position LimitsThe Trading Member/Mutual Funds position limits (higher of Rs. 500 crore or 15% of

the total open interest in Index derivatives) as well as the disclosure requirement forclients whose position exceeds 15% of the open interest of the market, as applicable todomestic stock index derivatives, shall be applicable to derivatives on foreign stock

indices.

6. Information SharingThe stock exchange shall ensure that material price sensitive information andinformation relating to regulatory actions and corporate actions relating toconstituent stocks of the foreign stock index, as available in public domain, areavailable to Indian investors.

7. Legal ComplianceThe stock exchange shall ensure compliance with any other legal provisions relatingto introduction of derivatives on foreign stock indices and obtain requisite approvalsfrom the concerned regulatory bodies.

8. EnforcementAny kind of market demeanor in the market for the derivatives on foreign stockindices shall be subject to the appropriate enforcement actions, as applicable to the

market for any securities.

9. TradingTrading in derivatives on Foreign Stock Indices shall be restricted to residents inIndia.

The circular shall come into force from the date of the circular.

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ANNEXURE A

S No. ExchangeAmericas

1. BM&FBOVESPA

2. Chicago Board Options Exchange (CBOE)

3. CME Group

4. ICE Futures U.S.

5. International Securities Exchange (ISE)

6. MexDer

7. Montréal Exchange

8. NASDAQ OMX PHLXAsia Pacific

1. Australian Securities Exchange

2. Bursa Malaysia

3. Hong Kong Exchanges

4. Korea Exchange

5. Osaka Securities Exchange

6. Singapore Exchange

7. TAIFEX

8. Tokyo Stock Exchange GroupEurope, Africa, Middle East

1. Borsa Italiana

2. Eurex

3. Johannesburg SE

4. MEFF

5. NASDAQ OMX Nordic Exchange

6. NYSE Liffe (European markets)

7. Oslo Børs

8. Tel Aviv SE

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CIRCULAR - CIR/IMD/FIIC/1/2011 DATED JANUARY 17, 2011

REPORTING OF OFFSHORE DERIVATIVE INSTRUMENTS (ODIS)/PARTICIPATORY NOTES (PNS) ACTIVITY

Genesis

Refer to SEBI Circular No. IMD/CUST/8/2003 dated August 8, 2003 read with CircularNo. IMD/CUST/9/2003 dated November 20, 2003 read with Circular No.IMD/CUST/15/2004 dated April 02, 2004, advising FIIs issuing Offshore Derivative

Instruments (ODIs)/ Participatory Notes (PNs) against underlying Indian securitiesabout the reporting format for reporting issuance / renewal / cancellation / redemptionof the aforesaid instruments.

On a review, it has been decided to revise the reporting formats.

Features

Revised reporting formats:-

The FIIs issuing ODIs/PNs shall now be required to provide information about theirODI/PN activity and their underlying trade(s) activity in India in the following manner: -

Following reports to be submitted by 10th of every month with a six month’s lag(e.g. report providing details of ODI/PN activity for the month of April shall besubmitted in the month of October):-

Annexure A - Details of ODI/PN activity.

Annexure B_Equity - Details of underlying trade(s) in the Indian market where thetype of underlying Indian security is Equity.

Annexure B_Debt - Details of underlying trade(s) in the Indian market where thetype of underlying Indian security is Debt.

Annexure B_Derivative - Details of underlying trade(s) in the Indian market wherethe type of underlying Indian security is Derivative.

Annexure C_Equity - Details of assets under management in Indian market where thetypeof underlying Indian security is Equity.

Annexure C_Debt - Details of assets under management in Indian market where the

type of underlying Indian security is Debt.

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Annexure C_Derivative - Details of assets under management in Indian marketwhere the type of underlying Indian security is Derivative.

Monthly Summary Report –

This report shall capture the summary of the India ISIN-wise PN/ODI

activity for the preceding month.

The report shall be provided in the prescribed format and submitted to SEBI

by 7th of every month providing summary of its ODI/PN activity for theprevious month.

Revised Undertaking

The reports shall now be submitted with the following revised undertaking:-

“We undertake that the beneficial owner and the person(s) to whom the Offshore DerivativeInstrument is issued in compliance with Regulation 15A of SEBI (FII) Regulations. We alsoundertake that the KYC compliance norms have been followed for the beneficial owner of theOffshore Derivative Instrument”

[Vide Addendum to the Circular No. CIR/IMD/FIIC/1/2011dated January 18, 2011, theword “revised undertaking” was substituted with the word “additional undertaking”].

Reporting to FII to FII ODI/PN activity

In case an ODI/PN issuer (A) issues an ODI/PN to another FII (B) that further issuesthe ODI/PN, then the ODI/PN reporting for (A) would be limited to naming (B) asthe subscriber, on the basis that (B) in its FII capacity is providing a monthly ODI/PNreport to SEBI. The reporting from (B) would meet SEBI’s requirements and avoidduplication of reporting.

As per Circular No IMD/CUST/9/2003 dated November 20, 2003, FIIs who do not

have any outstanding offshore derivatives are required to submit a statement of ‘Nil’report once every quarter along with the stipulated undertaking. Considering pointno.5 mentioned above, the FIIs shall now commence reporting to SEBI in the formatprescribed herein above, for the month they start issuing ODIs/PNs. Hence, quarterly

‘Nil’ reporting is being done away with.

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Threshold for reporting of non-proprietary indices and custom baskets

It is to be clarified that the threshold for non-proprietary indices (eg MSCI World orMSCI EM Asia) shall be taken as 20%, i.e. those trades need not be reported in whichthe materiality of Indian underlyers is less than 20% of the index, even if suchexposure was hedged onshore. However, custom baskets would always be reportableif hedged onshore regardless of percentage of the Indian component that is hedged

onshore.

Manner of submission

The above-mentioned reports shall be submitted in a password secured excel format. Thee-mail should be sent only by the compliance officer of the respective FII to the dedicatede-mail ID – [email protected] with the subject line “ODI/PN Report of [FII Nameand Registration No.] for the month of […]”. Please note that the password should be sent in

a subsequent e-mail.

Effective Dates

The first such monthly summary report shall be submitted for the month of April, 2011before 7th May, 2011. The first such Annexure A, B & C shall be submitted before 10thOctober, 2011 for the month of April, 2011.

Subsequently, SEBI received representations from a number of FIIs seeking variousclarifications on the new reporting format. While these clarifications sought by the FIIsare being addressed by SEBI, it has been decided to defer the implementation of the newreporting format through new circular which was issued on May 12 2011 bearing numberCIR/IMD/FIIC/6/2011 dated May 12, 2011.

Through this circular it was decided that the first such monthly report shall be submittedfor the month of July, 2011 before 7th August, 2011, subject to the condition that theadditional undertaking shall be implemented from the reporting month of April 2011onwards. The old reporting format continues till the reporting month of June 2011.

Further, to the above stated circular the consultation process, in this regard, has beenconcluded on June 03, 2011 and the following clarifications are being provided throughthe circular number CIR/IMD/FII&C/7/2011 issued on June 15, 2011:-

If an ODI (e.g. on MSCI India Index) is hedged with multiple types of Indiansecurities and left partly unhedged, it may be split in separate rows with each row

for each Indian security and a blank column for the unhedged portion. Theoutstanding value of ODIs shall be summation of all such rows.

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The current methodology of reporting F&O positions will be continued. Theoutstanding value of ODIs shall continue to be represented in notional terms.

The ODI issuers shall link hedges to the extent that such a link can be made.

The FIIs shall work out the linkages for all outstanding ODI positions as onSeptember 30, 2011. This report shall be uploaded to SEBI by the entities in March

2012 along with the upload of the first six months’ lag transaction reports.

The column ‘Location of end beneficial owner of the Offshore DerivativeInstrument’ in Annexure A shall state the country of the end beneficial owner.

It is to be clarified with reference to the SEBI circular dated January 17, 2011, asregards FII to FII ODI/PN activity, the reporting/ issuer FII shall provide the SEBI

Registration No. of the subscriber FII in addition to the name of the FII.

It has now been decided to grant further time for implementation of the reports and thatthe first monthly summary report shall be submitted for the month of September, 2011

before 7th October, 2011.

The first such transaction-wise details in Annexures shall be submitted in March 2012 alongwith the outstanding positions as on September 30, 2011 and thereafter with such sixmonths’ lag.

Till such time the new reporting format is implemented, the FIIs shall continue to file thereports in the existing format.

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CIRCULAR - CIR/MRD/DP/01/2011 DATED JANUARY 27, 2011

ESTABLISHMENT OF CONNECTIVITY WITH BOTH DEPOSITORIES NSDLAND CDSL – COMPANIES ELIGIBLE FOR SHIFTING FROM TRADE FOR

TRADE SETTLEMENT (TFTS) TO NORMAL ROLLING SETTLEMENT

Genesis

SEBI has observed from the information provided by the depositories that the companieshave been establishing connectivity with both the depositories and thereby would like to

be eligible for shifting from Trade for Trade Settlement (TFTS) to normal RollingSettlement.

Features of the Circular

The stock exchanges may consider shifting the trading in these securities to normalRolling Settlement subject to the following:

- At least 50% of other than promoter holdings as per clause 35 of Listing

Agreement are in dematerialized mode before shifting the trading in the securitiesof the company from TFTS to normal Rolling Settlement.

- the companies shall obtain a certificate from its Registrar and Transfer Agent

(RTA) and submit the same to the stock exchange/s. However, if an issuer-company does not have a separate RTA, it may obtain a certificate in this regardfrom a practicing company Secretary/Chartered Accountant and submit the sameto the stock exchange/s.

- there are no other grounds/reasons for continuation of the trading in TFTS.

The Stock Exchanges are advised to report to SEBI, the action taken in this regard in theMonthly/Quarterly Development Report.

In continuation to this circular another circular was issued bearing nos.CIR/MRD/DP/03/2011;CIR/MRD/DP/09/2011; CIR/MRD/DP/10/2011 dated March 22, 2011; July 1, 2011 and July18, 2011 respectively in which they have issued list of 14, 3 & 19 Companies respectively whohave been made eligible for this facility.

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CIRCULAR - CIR/MRD/DSA/2/2011 DATED FEBRUARY 09, 2011

ARBITRATION MECHANISM OF STOCK EXCHANGES – APPLICABILITYOF THE PROVISIONS OF THE LIMITATION ACT, 1963

Genesis

SEBI vide Circular No. CIR/MRD/DSA/24/2010 dated August 11, 2010 prescribed thatthe limitation period for filing an arbitration reference shall be governed by the

provisions of the Limitation Act, 1963.


Upon consideration of various representations received by SEBI and pursuant to thediscussions held with the representatives of stock exchanges, it has been decided that thelimitation period, as modified to 3 years in terms of Limitation Act, 1963 shall be

applicable to cover the below-mentioned cases:

where 3 years have not yet elapsed and the parties have not filed for arbitrationwith the stock exchange, or

where the arbitration application was filed but was rejected solely on the groundof delay in filing within the earlier limitation period of 6 months; and 3 years havenot yet elapsed;

Cost for Arbitration

Cases which were not filed earlier will be subject to the fee amount in terms of

SEBI circulars dated August 11, 2010 and August 31, 2010.

For cases filed earlier and rejected on the ground of bar of limitation as per theearlier limitation period of six months, the amount of fee already paid would be

deducted from the amount computed in terms of SEBI circulars dated August 11,2010 and August 31, 2010. The balance shall be borne by the parties to thearbitration in the manner specified vide SEBI circulars dated August 11, 2010 andAugust 31, 2010.

The recognized stock exchanges are advised to:-

make necessary amendments to the relevant rules/ bye-laws/ regulations for theimplementation of the above decision immediately;

bring the provisions of this circular to the notice of the members of the stockexchange and also to disseminate the same through their website; and

communicate to SEBI, the status of implementation of the provisions of thiscircular in the Monthly Development Reports to SEBI.

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CIRCULAR - SEBI/DNPD/3/2011 DATED MARCH 7, 2011

FUTURES ON 91-DAY GOVERNMENT OF INDIA TREASURY-BILL(T–BILL)

This Circular is in continuation of SEBI Circular No. SEBI/DNPD/Cir- 46/2009 datedAugust 28, 2009 regarding Exchange Traded Interest Rate Futures.

It has now been decided to permit introduction of futures on 91-day Government of IndiaTreasury-Bill (T- Bill) on currency derivatives segment of Stock Exchanges. Eligible StockExchanges may do so after obtaining prior approval from SEBI.

The details in terms of product design and risk management framework for futures on 91-day Government of India Treasury-Bill (T- Bill) are as follows:

Product Design And Risk Management Framework For 91-Day Government Of India(Goi) Treasury Bill (T- Bill) Futures

1. Underlying91 - day GoI T-bill.

2. Trading hours9 a.m. to 5 p.m.

3. Size of the contractRs. 2 lakh.

4. Quotation100 minus futures discount yield (i.e. for a yield of 5% the quote would be 100-5=95).The value of 1 basis point change in the futures discount yield would be Rs. 5.

5. Tenor of the contractThe maximum maturity of the contract would be 12 months.

6. Contract monthsThree serial monthly contracts followed by three quarterly contracts of the cycle

March/June/September/December.

7. Settlement mechanismThe 91-day T-Bill future would be settled in cash in Indian Rupees.

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8. Contract valueRs. 2000 * (100 – 0.25 * y)where y is the futures discount yield.For example, for a futures discount yield of 5%, the contract value would be –2000 * (100 – 0.25*5) = Rs. 197,500

9. Daily Contract Settlement valueRs. 2000 * (100 – 0.25 * yw)

(Here yw is weighted average futures yield of last half an hour).In the absence of last half an hour trading, theoretical futures yield would beconsidered for computation of Daily Contract Settlement Value.

10. Expiry/Last trading day/Final settlement dayThe expiry / last trading day / final settlement day for the contract would be the lastWednesday of the expiry month. If any expiry day is a trading holiday, then theexpiry/ last trading day/ final settlement day would be the previous trading day.

11. Final Contract Settlement valueRs. 2000 * (100 – 0.25 * yf)

(Here yf is weighted average discount yield obtained from weekly auction of 91-day T-Bill on the day of expiry).

The methodology of computation and dissemination of the weighted average

discount yield would be publicly disclosed by RBI.

12. Initial marginThe Initial Margin requirement shall be based on a worst case loss of a portfolio of anindividual client across various scenarios of price changes. The various scenarios ofprice changes would be so computed so as to cover a 99% VaR over a one dayhorizon. In order to achieve this, the price scan range may initially be fixed at 3.5

standard deviation. The initial margin so computed would be subject to a minimum of0.1 % of the notional value of the contract on the first day of trading in 91-day T-billfutures and 0.05 % of the notional value of the contract thereafter (the notional value

of the contract shall be Rs. 200,000). The initial margin shall be deducted from theliquid net worth of the clearing member on an online, real time basis.

13. Extreme Loss marginExtreme loss margin of 0.03 % of the notional value of the contract for all gross openpositions shall be deducted from the liquid assets of the clearing member on an online, real time basis.

14. Calendar spread marginInterest rate futures position at one maturity hedged by an offsetting position at adifferent maturity would be treated as a calendar spread. The calendar spread marginshall be at a value of Rs. 100/- for spread of one month, Rs. 150 for spread of two

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month, Rs. 200/- for spread of three month and Rs. 250/- for spread of four monthand beyond. The benefit for a calendar spread would continue till expiry of the near

month contract. For a calendar spread position, the extreme loss margin shall be 0.01%of the notional value of the far month contract.

15. Formula for determining standard deviationThe exponential moving average method would be used to obtain the volatilityestimate every day. The estimate at the end of time period t (σydt) is estimated usingthe volatility estimate at the end of the previous time period. i.e. as at the end of t-1

time period (σydt-1), and the return (rydt) observed in the futures market during thetime period t. The formula would be as under:

(σydt)2 = λ (σydt-1)2 + (1 - λ ) (rydt)2

whereλ is a parameter which determines how rapidly volatility estimates change.

The value of λ is fixed at 0.94.

i. σydt (sigma) means the standard deviation of daily logarithmic returns of discount yield of91-day T-Bill futures at time t.

ii The "return" is defined as the logarithmic return: rydt = ln(Ydt/Ydt-1) where Ydt is thediscount yield of 91-day T-Bill futures at time t. The plus/minus 3.5 sigma limits for a99% VAR based on logarithmic returns on discount yield of 91-day T-Bill futures wouldhave to be converted into price changes through the following formula :

σpt=D*σydt* Ydt

whereσpt means the standard deviation of percentage change in price at time t

D means Modified DurationYdt =Discount Yield for 91-day T-Bill futures at time tσydt (sigma) means the standard deviation of daily logarithmic returns of discount yield at

time t

The margin on long position would be equal to 100 * (D*3.5σydt* Ydt) percentage of thenotional value of the futures contract and the margin on short position would be equal to100 (D*-3.5σydt* Ydt) percentage of the notional value of the futures contract. TheModified Duration for 91 day T-Bill Futures shall be -0.25.

iii. The volatility estimation and margin fixation methodology should be clearly made knownto all market participants so that they can compute the margin for any given closing levelof the interest rate futures price. Further, the trading software itself should provide thisinformation on a real time basis on the trading workstation screen.

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iv. During the first time-period on the first day of trading in 91-day T-bill futures, the sigmawould be equal to 2.7 %.

16. Position limits

i. Client Level: The gross open positions of the client across all contracts shouldnot exceed 6% of the total open interest or Rs. 300 crores whichever is higher.The Exchange will disseminate alerts whenever the gross open position of theclient exceeds 3% of the total open interest at the end of the previous day’strade.

ii. Trading Member Level: The gross open positions of the trading member across

all contracts should not exceed 15% of the total open interest or Rs. 1000 croreswhichever is higher.

iii. Clearing Member Level: No separate position limit is prescribed at the level of

clearing member. However, the clearing member shall ensure that his owntrading position and the positions of each trading member clearing throughhim is within the limits specified above.

iv. FIIs: In case of Foreign Institutional Investors, registered with Securities andExchange Board of India, the total gross long (bought) position in cash and

Interest Rate Futures markets taken together should not exceed their individualpermissible limit for investment in government securities and the total grossshort (sold) position, for the purpose of hedging only, should not exceed theirlong position in the government securities and in Interest Rate Futures, at any

point in time.

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CIRCULAR - CIR/IMD/FIIC/3/2011 DATED MARCH 08, 2011

ALLOCATION OF GOVERNMENT DEBT LONG TERM & CORPORATEDEBT - OLD INVESTMENT LIMITS TO FIIS

Based on the assessment of the allocation and the utilization of the limits to FIIs forinvestments in debt, it has been decided to allocate the unutilized limits in Governmentdebt long term & corporate debt – old category in the following manner:-

Allocation through bidding process: The bidding for these limits shall be done on the

NSE from 15:30 hrs to 17:30 hrs, on March 15, 2011, in terms of SEBI circularIMD/FII&C/37/2009 dated February 06, 2009, subject to the modifications stated below:-

Government debt long term:

No single entity shall be allocated more than Rs. 750 cr. (in IMD/FII&C/37/2009,it was Rs. 10,000 Cr.) of the investment limit.

Where a single entity bids on behalf of multiple entities provided:

(i) It provides due authorization to act in that capacity by those entities

(ii) It provides the stock exchanges, the allocation of the limits interse for theentities it has bid for to exchange with 15 minutes of close of bidding,

then such bid would be limited to INR 750 cr. for every such single entity.

the minimum amount which can be bid for shall be Rs.100 cr. (inIMD/FII&C/37/2009, it was Rs. 250 Cr)

the minimum tick size shall be Rs.50 cr. (in IMD/FII&C/37/2009, it was Rs. 100Cr.)

Corporate Debt – Old limit:

No single entity shall be allocated more than Rs.300 cr. of the investment limit.(in IMD/FII&C/37/2009, it was Rs. 10,000 Cr.)

Where a single entity bids on behalf of multiple entities provided:

(iii) It provides due authorization to act in that capacity by those entities

(iv) It provides the stock exchanges, the allocation of the limits interse for theentities it has bid for to exchange with 15 minutes of close of bidding,

then such bid would be limited to INR 300 cr. for every such single entity.

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the minimum amount which can be bid for shall be Rs.100 cr. (inIMD/FII&C/37/2009, it was Rs. 250 Cr)

the minimum tick size shall be Rs.50 cr. (in IMD/FII&C/37/2009, it was Rs. 100Cr.)

Allocation through first come first serve process (FCFS)

In terms of SEBI circular dated January 31, 2008, the Government debt long term &corporate debt -old limits shall be allocated in the FCFS basis subject to the followingconditions:-

The remaining amount in Government debt long term & corporate debt -oldlimits other than bidding process shall be allocated among the FIIs/sub-accountson a FCFS basis.

The debt requests in this regard shall be forwarded to the dedicated email [email protected]. The window for FCFS process shall open at 08:30AM IST, March 15, 2011.

Maximum limit per request under this process shall be INR 50 cr.

A non-utilisation charge would be levied at average successful bid premium (inrespective bidding process) for non-utilized part from the allocation in first comefirst serve.

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CIRCULAR - CIR/IMD/DF/4/2011 DATED MARCH 9, 2011

USAGE OF LOAD ACCOUNT

Genesis

SEBI vide circular SEBI/IMD/Cir-4/168230/09 dated June 30, 2009 had, interalia,

mandated the following :

There shall be no entry load for all mutual fund schemes.

The upfront commission to distributors will be paid by the investor directly to thedistributor, based on his assessment of various factors including the service renderedby the distributor.

Exit load or CDSC charged to the investor, a maximum of 1% of the redemptionproceeds shall be maintained in a separate account which can be used by the AMC topay commissions to the distributor and to take care of other marketing and sellingexpenses. Any balance shall be credited to the scheme immediately.

The above circular came into effect from August 01, 2009 and ensured that the entiresubscription amount is invested in the scheme without any charge of entry load.

Objective

To bring uniformity in usage of load balances (i.e. entry load and exit load)

Features

Prior to August 2009, mutual funds charged both entry and exit loads on its investors.Since August 2009, mutual funds can charge only exit load. These load balances aremaintained as ‘liabilities’ in the books of the scheme and are not included in the net assetvalue (NAV).

The load balance shall be segregated into two accounts in the books of accounts ofthe scheme -

to reflect the balance as on July 31, 2009

to reflect accretions since August 01, 2009

The load balances can be used for marketing and selling expenses includingdistributor’s/agent’s commissions.

The total spending cannot be more than one third of the load balances as on July 31,2009 in any of the financial year including F.Y. 2010 – 11.

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The accretions after July 31,2009 can be used by mutual funds for marketing andselling expenses including distributor’s/agent’s commissions without anyrestrictions.

This circular was issued in supersession of all the instructions regarding use of loadaccounts issued subsequent to the circular dated June 30, 2009 mentioned above.

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CIRCULAR - CIR. /IMD/DF/5/2011 DATED MARCH 16, 2011

LISTING AGREEMENT FOR SECURITIZED DEBT INSTRUMENTS

Genesis

To develop the primary market for securitized debt instruments in India, SEBI has notified theSecurities and Exchange Board of India (Public offer and Listing of Securitised DebtInstruments) Regulations, 2008. The regulations provide for a framework for issuance andlisting of securitized debt instruments by a special purpose distinct entity (SPDE).

Features

With a view to improve the secondary market liquidity for such instruments and to

enhance information available in the public domain on performance of asset pools onwhich securitized debt instruments are issued, it has been decided to put in place aListing Agreement for securitized debt instruments. The Listing Agreement provides fordisclosure of pool level, tranche level and select loan level information.

The Listing Agreement for securitized debt instruments shall come into force withimmediate effect for all ‘securitised debt instruments, as defined under regulation 2(1)(s)of the Securities and Exchange Board of India (Public Offer and Listing of Securitised

Debt Instruments) Regulations, 2008, seeking listing on the Stock Exchange.

In respect of listed securitized debt instruments, it is clarified that SPDEs which makefrequent issues of securitized debt instruments are permitted to file umbrella offerdocuments on the lines of a ‘shelf prospectus’.

In order to ensure uniform market convention for secondary market trades of securitizeddebt instruments, Actual/ Actual day count convention, shall be mandatory for all listedsecuritized debt instruments.

All the recognized Stock Exchanges are directed to:

Give effect to the abovementioned policies and put in place the Listing Agreementfor securitized debt instruments

Make consequential changes, if any, to the bye-laws of the Exchange, as may beapplicable and necessary.

Note: The Listing Agreement for Securitized Debt Instruments is available on www.sebi.gov.in.We have not included the same in this referencer as it would make it voluminous andprofessionals may find it difficult to open in this circular.

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CIRCULAR - CIR/ ISD/1/2011 DATED MARCH 23, 2011

UNAUTHENTICATED NEWS CIRCULATED BY SEBI REGISTEREDMARKET INTERMEDIARIES THROUGH VARIOUS MODES OF

COMMUNICATION

Objective

It has been observed that unauthenticated news related to various scrips have beencirculated in blogs/chat forums/e-mail etc. by employees of Broking Houses/OtherIntermediaries without adequate caution as mandated in the Code of Conduct for Stock

Brokers and respective Regulations of various intermediaries registered with SEBI.

It has also been observed that in various instances intermediaries do not have properinternal controls and do not ensure that proper checks and balances are in place to governthe conduct of their employees. Due to lack of proper internal controls and poor training,employees of such intermediaries are sometimes not aware of the damage which can becaused by circulation of unauthenticated news or rumours. It is a well established factthat market rumours can do considerable damage to the normal functioning and

behaviour of the market and distort the price discovery mechanism.


SEBI Registered Market Intermediaries are directed that:

Proper internal code of conduct and controls should be put in place.

Employees/temporary staff/voluntary workers etc. employed/working in the

Offices of market intermediaries do not encourage or circulate rumours orunverified information obtained from client, industry, any trade or any othersources without verification.

Access to Blogs/Chat forums/Messenger sites etc. should either be restrictedunder supervision or access should not be allowed.

Logs for any usage of such Blogs/Chat forums/Messenger sites (called by any

nomenclature) shall be treated as records and the same should be maintained asspecified by the respective Regulations which govern the concerned intermediary.

Employees should be directed that any market related news received by themeither in their official mail/personal mail/blog or in any other manner, should beforwarded only after the same has been seen and approved by the concerned

-20-


Intermediary’s Compliance Officer. If an employee fails to do so, he/she shall bedeemed to have violated the various provisions contained in SEBI

Act/Rules/Regulations etc. and shall be liable for actions. “The ComplianceOfficer shall also be held liable for breach of duty in this regard” [last line wasadded to this para vide addendum dated March 24, 2011 through circular no.Cir/ISD/2/2011]

Stock Exchanges are advised to

a. Bring the provisions of this circular to the notice of the Stock Brokers and also

disseminate the same on their websites.

b. Make necessary amendments to the relevant bye-laws, rules and regulations for theimplementation of the above decision in co-ordination with one another to achieveuniformity in approach.

c. Communicate to SEBI, the status of the implementation of the provisions of this circularin their Monthly Development Reports.

Depositories are advised to

a. Make amendments to the relevant bye-laws, rules and regulations for the implementationof the above decision immediately, as may be applicable/necessary ;

b. Bring the provisions of this circular to the notice of their DPs; and

c. Disseminate the same on the website.

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DISSEMINATION OF FURTHER INFORMATION ABOUT FII ACTIVITY –

DISCONTINUANCE OF REPORTING

Genesis

SEBI issued various circulars IMD/FII&C/32/2008 dated October 16, 2008,

IMD/FII&C/34/2008 dated October 20, 2008 and IMD/FII&C/4/2010 dated June 29,2010 according to which FIIs have been submitting weekly reports based on whichdisclosures have been made available for public dissemination athttp://203.199.12.51/SecuritiesLentMain.html every Tuesday.


Noted that as on March 04, 2011 there are no outstanding short positions reported by theFIIs.

While the prohibition on the activity of synthetic short continues, the FIIs are no longerrequired to file these reports, with effect from the date of this circular, as there are nooutstanding short positions.

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FII INVESTMENT IN CORPORATE BONDS INFRA LONG TERMCATEGORY

Genesis

On November 26, 2010 vide Circular CIR/IMD/FIIC/18/2010 the mechanism ofallocation of newly announced limit of long-term corporate debt (infrastructure) wasannounced.


Limit of Investment by foreign Institutional Investors (Flls) in corporate bonds issued by

companies in the infrastructure sector with a residual maturity of over five years has beenincreased by an additional limit of USD 20 billion taking the total limit to USD 25 billion.

FIIs shall now be eligible to invest in unlisted bonds issued by companies in the

infrastructure sector that are generally organised in the form of special purpose vehicles.

Lock-in period for investments subject to inter FII trading: Investments in such bonds

shall have a minimum lock-in period of three years. During the lock in period, FIIs will beallowed to trade amongst themselves and the investment cannot be sold to Domesticinvestor.

To facilitate to the FII during the lock in period, a special trading window for FIIs shall be

provided by Exchanges on the same lines as is available for equities in companies where theoverall FII investment has touched the maximum limit.

Manner of allocation: (a) Allocation methodology for investment in Corporate Debt –Long term Infra category, is done away with. (b) FII/sub-accounts can now avail of theselimits without obtaining SEBI approval till the overall FII investments reaches 90%(ninety percent) i.e. USD 22.5 billion. After which the process mentioned in circular datedNovember 26, 2010 shall be initiated for allocation of remaining limits.

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CIRCULAR - CIR/MRD/DP/4/2011 DATED APRIL 07, 2011

LIMITATION PERIOD FOR FILING AN ARBITRATION REFERENCE

Objective

To streamline the provisions in the depositories on the limitation period for filing an

arbitration reference.


The limitation period for filing an arbitration reference shall be governed by the law oflimitation, i.e., The Limitation Act, 1963. It shall be applicable to cover inter alia in thefollowing cases:

i. where the limitation period (in terms of Limitation Act 1963) have not yet elapsedand the parties have not filed for arbitration with the depository,

or,

ii. where the arbitration application was filed but was rejected solely on the ground of

delay in filing within the earlier limitation period; and the limitation period (interms of Limitation Act 1963) have not yet elapsed.

Depositories shall;

i. make necessary amendments to the relevant bye-laws for the implementation ofthe above decision,

ii. bring the provisions of this circular to the notice of the Depository Participants anddirect them to communicate the same to all the Beneficial Owners (BOs), and,

iii. disseminate the same on the website.

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CIRCULAR - CIR/MRD/DP/ 05 /2011 DATED APRIL 27, 2011

REVIEW OF ANNUAL ISSUERS’ CHARGES

Genesis

SEBI issued a circular on February 10, 2009, according to which the Depositories may levyand collect the charges towards custody from the issuers, on a per folio (ISIN position)basis as at the end of the financial year.


In modification of the above, the annual issuer charges would be based on the averageno. of folios (ISIN positions) during the previous financial year instead of the totalnumber of folios (ISIN positions) as on 31st March of the previous financial year.

The average no. of folios (ISIN positions) for an Issuer may be arrived at by dividing thetotal number of folios for the entire financial year by the total number of working days inthe said financial year.

May adjust the excess or deficit arising out of the change, with the issuers for the current

financial year.

Stock Exchanges are advised to

Implement the above by making necessary amendments to the bye-laws and ListingAgreement, as applicable;

To bring the provisions of this circular to the notice of the listed companies/Issuers andalso to put up the same on the website for easy access to the investors; and

Communicate to SEBI the status of the implementation of the provisions of this circularand the action taken in this regard in the Monthly Development Report.

Depositories are advised to

Make amendments to the relevant bye-laws, rules and regulations for the implementationof the above decision, as may be applicable/necessary;

Bring the provisions of this circular to the notice of the DPs of the Depositories and theissuers whose securities have been admitted into the depositories and also to disseminatethe same on the website; and

Communicate to SEBI the status of the implementation of the provisions of this circular inthe Monthly Development Report.

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CIRCULAR - CIR/CFD/DIL/1/2011 DATED APRIL 29, 2011

APPLICATIONS SUPPORTED BY BLOCKED AMOUNT (ASBA)FACILITY

Genesis

SEBI issued a circular CIR/CFD/DIL/8/2010 on October 12, 2010, according to which thesyndicate / sub-syndicate members were enabled to procure ASBA forms from theinvestors, upload the bid and other relevant details of such ASBA forms in the bidding

platform and thereafter forward the ASBA forms to the SCSBs.

SCSBs shall carry out further action for the ASBA forms such as signature verification,

blocking of funds and forward the forms to the registrar to the issue.

Applicability

Red Herring Prospectus/ Prospectus / Letter of Offer filed with Registrar of Companies/Stock Exchanges, as the case may be, on or after May 2, 2011.


The respective intermediaries shall take note of the following:

a. Bidding Centers: ASBA facility through syndicate / sub-syndicate membershall initially commence with the following bidding centers:

i. Mumbai

ii. Chennaiiii. Kolkataiv. Delhiv. Ahmedabadvi. Rajkotvii. Jaipurviii. Bangaloreix. Hyderabadx. Punexi. Barodaxii. Surat

The Syndicate / sub-syndicate members located in the abovementioned centers shall acceptASBA forms. Before accepting these ASBA forms syndicate / sub-syndicate members shallsatisfy themselves that the SCSBs whose name has been filled in the ASBA form has named a

branch in that centre to accept ASBA forms.

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a. Naming of Branch: All the SCSBs which are providing ASBA facility in any ofthe above mentioned centers are required to name atleast one branch where

syndicate / sub-syndicate members can submit the ASBA forms. The format inwhich SCSBs has to provide to SEBI the details of the branch to accept ASBAforms from the syndicate / sub- syndicate member is placed at Annexure A.This list would be displayed on the website of SEBI.

b. Syndicate ASBA process: An indicative process flow for ASBA throughsyndicate members vis-à-vis non-ASBA is placed at Annexure B.

Non-retail investors i.e. Qualified Institutional Buyers and Non-Institutional Investors,making application in public/ rights issue shall mandatorily make use of ASBA facility.disclosures shall be made in the offer document such as in issue procedure section as partof payment instructions.

Merchant Bankers shall

Ensure that appropriate disclosures are made in the offer document in this regard.

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Annexure A

Format for providing the details of the branches named for Syndicate ASBA

All SCSBs are required to submit to SEBI the details of the branches, in the format as below,where syndicate / sub-syndicate members are required to submit bidded Syndicate ASBAforms:

Details of Branch for Syndicate ASBA:

Branches named for Syndicate ASBA

Sl

No.

Bidding Centre Branch Address Contact Person Contact Number Fax Email

1.

2.

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Annexure BIndicative timeline schedule for various activities

Sl.No. Details of Activities Due Date(Working Day)

Non - ASBA ASBA through SyndicateMember

1. Investor submits a completedbid cum application form toSyndicate /Sub-SyndicateMember, who shall upload biddetails in the electronic biddingsystem of stock exchange(s).

Syndicate members need toensure that required documentsare attached with theapplication form.

Investor submits a completed bidcum application form indicatingthe mode of payment option asASBA to Syndicate Member.

Syndicate Member shall give anacknowledgement by giving thecounter foil as proof of havingaccepted his/ her application.

Syndicate Member shall uploadbid details in the electronicbidding system of stockexchange(s).

Issue openingdate to issueclosing date(where T isissue closingdate)

2. Issue closes. T

3. Stock exchange(s) to allow syndicate members to undertakemodification of select fields in the bid details already uploaded.

Registrar to get the electronic bid details from the stock exchanges atthe end of the day.

T+1

4. Issuer, merchant banker andregistrar to submit relevantdocuments to the stock exchange(s)except listing application, allotmentdetails and demat credit and refunddetails for the purpose of listingpermission.

Syndicate members to forward aschedule (containing applicationnumber, payment instrumentnumber and amount), applicationforms and payment instruments tocollecting banks.

Collecting banks may not accept bidschedule, bid applications andpayment instrument after T+2 day.

Syndicate members toforward a schedule(containing applicationnumber and amount) alongwith application forms to thebranch named for ‘SyndicateASBA’ of the respectiveSCSBs for blocking of Fund.

Designated branches may notaccept schedule andapplications after T+2 day.

T+2


Registrar to give bid file receivedfrom the stock exchangescontaining the application numberand amount to all the collectingbanks who can use this file forvalidation at their end.

Registrar to commence validation ofthe electronic bid details withdepositories records for DP ID,Client ID and PAN.

Registrar to give bid filereceived from the stockexchanges containing theapplication number andamount to respective SCSBsduly sorted centre wise whomay use this file forreconciliation.

SCSBs to start blocking funds.

5. Registrar to continue validation ofthe electronic bid details withdepositories records.

Collecting banks to commenceclearing of payment instruments.

Blocking funds continues. T+3

6. Registrar to complete validation ofthe electronic bid details withdepositories records.

Collecting banks to start forwardingapplication forms along with bankschedules to registrar.

SCSBs to start forwardingapplication forms along withbank schedules to registrar.

T+4

7. Registrar to prepare list of rejected bids based on mis-matchbetween electronic bid details and depositories data base. Registrarto undertake “Technical Rejection” test based on electronic biddetails and prepare list of technical rejection cases.

T+5

8. Collecting banks to submit status ofclearance status of paymentinstrument i.e. “Final Certificate” tothe registrar.

SCSBs to submit status ofblocking of fund i.e. “FinalCertificate” to the registrar.

T+6

9. Collecting banks/SCSBs to ensure that all application forms areforwarded to the registrar.

Registrar to undertake and complete reconciliation of final certificatereceived from the collecting banks with electronic bid details.Collecting banks/SCSBs to ensure that all application forms areforwarded to the registrar.

Registrar to undertake and complete reconciliation of final certificatereceived from the collecting banks with electronic bid details.

T+7


10. Designated stock exchange(s) to approve the basis of allotment.

Registrar to prepare funds transfer schedule based on approvedallotment.

Registrar to give instructions to depositories to carry out lock-in forpre issue capital.

T+8

11. Registrar and merchant banker to issue funds transfer instructions tocollecting banks/SCSBs.

Collecting banks/SCSBs to credit the funds in Public Issue Accountof the issuer and confirm the same.

Issuer to make allotment.

Registrar to give instruction to depositories for credit of shares tosuccessful allottees.

Registrar to receive confirmation for pre-issue capital lock-in fromdepositories.

T+9

12. Issuer and registrar to file allotment details with designated stockexchange(s) and confirm all formalities are completed except dematcredit and refund.

Registrar to complete refund dispatch.

Registrar to issue bank-wise data of allottees, allotted amount andrefund amount to collecting banks/SCSBs.

T+10

13. Registrar to receive confirmation of demat credit from depositoriesand submit the same to the stock exchange(s).

Issuer and registrar to file confirmation of demat credit and refunddispatch with stock exchange(s).

Issuer to make a listing application to stock exchange(s) and stockexchanges to give listing and trading permission.

Issuer, merchant banker and registrar to publish allotmentadvertisement before the commencement of trading, prominentlydisplaying the date of commencement of trading, in all thenewspapers where issue opening/closing advertisements haveappeared earlier. Stock exchange(s) to issue commencement tradingnotice.

T+11

14. Trading commences T+12

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CIRCULAR - SEBI/ MIRSD /CIR/ 01/ 2011 DATED MAY 13, 2011

CLARIFICATION ON CIRCULAR DATED DECEMBER 3, 2009 ON‘DEALINGS BETWEEN A CLIENT AND A STOCK BROKER

Genesis

A circular was issued by SEBI on December 3, 2009 wherein the stock brokers weredirected to comply with the requirements pertaining to renewal of Running Account

Authorisation once in a year.

Objective

Would simplify and rationalize the requirements while protecting the interest ofinvestors.


The above requirements have now been modified as follows:

i. Clause 12(a) of the aforesaid annexure pertaining to renewal of authorisation stands deleted.

ii. Clause 12(c) of the aforesaid annexure is revised and shall read, as under:

“The authorisation shall be dated and shall contain a clause that the clients may revoke the authorisationat any time. The stock brokers, while sending periodical statement of accounts to the clients, shall mentiontherein that their running account authorisation would continue until it is revoked by the clients.”

Stock Exchanges are directors to;

Bring the provisions of this circular to the notice of the Stock Brokers and alsodisseminate the same on their websites.

Make necessary amendments to the relevant bye-laws, rules and regulations for theimplementation of the above decision.

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CIRCULAR – CIR/DNPD/4/2011 DATED MAY 13, 2011

SELF CLEARING MEMBER IN THE CURRENCY DERIVATIVES SEGMENT

With regard to the newly created category of self clearing member, in the currencyderivatives segment of a Stock Exchange, communicated vide notification no. LADNRO/GN/2011-12/01/11486 dated April 6, 2011, it is clarified that such self clearing member shallhave a minimum net worth of Rs. 5 crore.

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CIRCULAR - CIR/CFD/DIL/2/2011 DATED MAY 16, 2011

ADJUSTMENT OF DIFFERENTIAL PRICING AMOUNT AT THE TIME OFAPPLICATION FOR ALLOTMENT OF SPECIFIED SECURITIES

Genesis

Regulation 29 of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009,provides for offer of specified securities at different prices to certain investors.

It has been observed that the effect of such differential pricing in a public issue, is beinggiven to the eligible investors only at the stage of allotment of specified securities and notat the time of filing an application for such allotment.

This takes away certain benefits from the investors such as lower cash outflow at a pricenet of discount, the ability to apply for more shares with the same cash outlay, etc.

Applicability

On Red Herring Prospectus/Prospectus filed with Registrar of Companies on or afterJune 15, 2011.


It has been decided to allow investors eligible for differential pricing in public issues tomake payment at a price net of discount, if any, at the time of bidding itself, and in this

context, it is clarified that –

a. Merchant Bankers shall ensure that appropriate disclosures are given in the offerdocument / application forms to the effect that investors eligible for discount canmake payment after adjusting the discount, if any. It shall be disclosed that suchinvestors shall in the relevant column indicate the bid price before adjusting fordiscount, if any. Further, it shall be clearly disclosed under what circumstancesapplication would be liable for rejection in case of errors, if any, in this regard.

b. For the ease of calculation by investors eligible for differential pricing, it ispreferable that discount, if any, is stated in absolute rupee terms subject to

maximum discount, as per SEBI (Issue of Capital and Disclosure Requirements)Regulations, 2009, that can be given at the issue price.

c. Stock Exchanges shall ensure that appropriate provisions for discount adjustmentare provided in the bidding platform. Whenever the net payment (post discount) ismore than two lakh rupees, the bidding system should be capable of ensuring thatsuch applications are not eligible for discount.

-34-


d. Syndicate /Sub syndicate members and SCSBs shall enter the bid price asindicated by the applicant in the price column.

e. Segregation of Investor Categories (i.e. two lakh rupees for retail category), shall bebased on the net payment amount (after adjusting for discount).

f. SCSBs shall carry out the necessary system changes at their end, if any.

Merchant Bankers shall;

Create awareness among the investors eligible for discount on account of differentialpricing to make payment at price net of discount.

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CIRCULAR - CIR/IMD/DF/9/2011 DATED MAY 19, 2011

OPTION TO HOLD UNITS IN DEMAT FORM

Genesis

SEBI issued a circular on August 18, 2010, wherein, AMCs were advised to clarify thatunits of all Mutual Fund schemes held in demat form shall be fully transferable.

It is observed that in their close ended schemes, many mutual funds provide an option tohold units either in physical or in demat form, but offer no such option in case of openended schemes.

Objective

To the investors to receive allotment of Mutual Fund units in their demat account while

subscribing to any scheme (open ended/close ended/Interval).


Mutual Funds/AMCs shall ensure that above mentioned option is provided to theinvestors in all their schemes (existing and new) from October 01, 2011 onwards.

Mutual Funds/AMCs are advised to obtain ISIN for each option of the scheme and quote

the respective ISIN along with the name of the scheme, in all Statement ofAccount/Common Account Statement (CAS) issued to the investors from October 01,2011 onwards.

Mutual Funds/AMCs are advised to;

Obtain ISIN for each option of the scheme and quote the respective ISIN along with thename of the scheme, in all Statement of Accounts/Common Account Statement (CAS)

issued to the investors from October 01, 2011 onwards.

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CIRCULAR - CIR/DNPD/5/2011 DATED JUNE 2, 2011

LIQUIDITY ENHANCEMENT SCHEMES FOR ILLIQUID SECURITIES INEQUITY DERIVATIVES SEGMENT


Stock Exchanges are permitted to introduce liquidity enhancement schemes (LES) toenhance liquidity of illiquid securities in their equity derivatives segments.

Stock Exchange shall ensure that the LES, including any modification therein or itsdiscontinuation,

a. has the prior approval of its Board and its implementation and outcome is

monitored by the Board at quarterly intervals;

b. prescribes and monitors the obligations of liquidity enhancers (liquidity provider,market maker, maker-taker or by whatever name called);

c. disburses the incentives linked to performance;

d. is objective, transparent, non-discretionary and non-discriminatory;

e. does not compromise market integrity or risk management;

f. complies with all the relevant laws; and

g. is disclosed to market at least 15 days in advance and its outcome (incentivesgranted and volume achieved – liquidity enhancer wise and security wise) isdisseminated monthly within a week of the close of the month.

LES can be introduced in any of the following securities

a. New securities permitted on the Stock Exchange after the date of this circular,

b. Securities in case of a new Stock Exchange / new Segment, and

c. Securities where the average trading volume for the last 60 trading days on theStock Exchange is less than 0.1% of market capitalization of the underlying.

If a Stock Exchange introduces LES on securities eligible under the above categories,other Stock Exchanges may introduce LES in the same / competing securities even ifthose are not eligible under the above categories. Such LES of the other Stock Exchanges

cannot be continued beyond the period of LES of the former stock Exchange.

-37-


Discontinuation of LES

Any time with an advance notice of 15 days

Shall be discontinued as soon as the average trading volume on the Stock Exchange,

during the last 60 trading days, reaches 1% of market capitalization of the underlying, orsix months from introduction of the scheme, whichever is earlier.

Incentives under LES

Shall be transparent and measurable. May take either of the 2 forms;

Discount in fees, adjustment in fees in other segments, cash payment;

The incentives during a financial year shall not exceed 25% of the net profits or 25% of the freereserves of the Stock Exchange, whichever is higher, as per the audited financial statements ofthe preceding financial year.

Shares, including options and warrants, of the Stock Exchange.

The shares, including the shares that may accrue on exercise of warrants or options, given as

incentives under all LES, during a financial year, shall not exceed 25% of the issued andoutstanding shares of the Stock Exchange as on the last day of the preceding financial year.

Other features

Stock Exchange shall submit half-yearly reports on the working of its LES for review ofSEBI.

Implementation of this circular shall be covered in the inspection of the Stock Exchange.

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CIRCULAR - CIR/MIRSD/2/2011 DATED JUNE 3, 2011

PERIODICAL REPORT – GRANT OF PRIOR APPROVAL TO MEMBERS OFSTOCK EXCHANGES/SUB-BROKERS

Genesis

SEBI (Stock Brokers and Sub-brokers) Regulations, 1992 have been amended videNotification No. LAD-NRO/GN/2011-12/03/12650 dated April 19, 2011

According to which the requirement of members of the stock exchanges and sub-brokersto obtain prior approval from SEBI for change in status or constitution has been doneaway with.


However, stock exchanges will continue to grant prior approval to their members andsub-brokers for change in status or constitution, which would include the following;

(a) in case of a body corporate —

(i) amalgamation, demerger, consolidation or any other kind of corporaterestructuring falling within the scope of section 391 of the Companies Act,1956 (1 of 1956) or the corresponding provision of any other law for the time

being in force;

(ii) change in its managing director, whole-time director or director appointed incompliance with clause (v) of sub-rule (4A) of rule 8 of the SecuritiesContracts (Regulation) Rules, 1957; and

(iii) any change in control over the body corporate;

(b) any change between the following legal forms - individual, partnership firm,Hindu undivided family, private company, public company, unlimited companyor statutory corporation and other similar changes;

(c) in case of a partnership firm any change in partners not amounting to dissolutionof the firm;

(d) any other purpose as may be considered appropriate by the stock exchanges

Stock exchanges shall submit a periodical report with details of the changes in status orconstitution of the members / sub-brokers to SEBI by 7th day of month following the endof each quarter, starting with report for the quarter ending June 2011.

-39-


The Stock Exchange are directed to;-

(a) Bring the provisions of this circular to the notice of the Stock Brokers and alsodisseminate the same on their websites.

(b) Make necessary amendments to the relevant bye-laws, rules and regulations forthe implementation of the above decision in coordination with one another toachieve uniformity in approach.

(c) Communicate to SEBI, the status of the implementation of the provisions of thiscircular in their Monthly Development Reports.

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CIRCULAR - CIR/OIAE/2/2011 DATED JUNE 3, 2011

PROCESSING OF INVESTOR COMPLAINTS AGAINST LISTEDCOMPANIES IN SEBI COMPLAINTS REDRESS SYSTEM (SCORES)

Genesis

Salient Features of centralised web based SEBI Complaints Redress System (SCORES),commenced for processing of investors complaints are as follows;

Centralised database of all complaints,

Online movement of complaints to the concerned listed companies,

Online upload of Action Taken Reports (ATRs) by the concerned companies, and

Online viewing by investors of actions taken on the complaint and its current status.

Features of the System (SCORES)

Complaints will be electronically sent through SCORES.

Companies will view the pending complaints against them and submit the ATRs alongwith supporting documents electronically in SCORES. Physical ATRs will not be acceptedfor a complaint lodged through SCORES.

Failure of submitting ATRs will be treated as non redressal of investor complaints by the

company

The user id and password for logging into SCORES are being communicated to

companies against whom complaints are lodged in SCORES. In case, complaints areprocessed by the Registrar to Issue and Share Transfer Agent (RTI/STA) on behalf of theCompany the company should indicate in the enclosed Annexure whether they requirethe facility to forward complaints to the RTI/STA, so that the ATRs can be uploaded by

them. In such cases, the name of the RTI/STA, the name of the Compliance Officer andemail id should be furnished, so that the user id and password can be providedaccordingly. Further, failure on the part of the RTI/STA to update the ATR in SCORESwill be treated as non redressal of investor complaints by the company.

Stock Exchange are advised to;

Bring the provisions of this circular to the notice of all the companies whose securities arelisted in the exchange and also to disseminate the same on the website.

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In continuation to the above stated circular, another circular was issued on August 02, 2011,bearing number CIR/MIRSD/13/2011 in which these features of SCORES has been made

applicable to All Bankers to an Issue (BTI) and Debenture Trustees(DT) registered withSEBI.

The salient features of the circular were, as follows;

- Centralized database of all complaints.

- Online movement of complaints to the concerned intermediaries

- Online upload of Action Taken Reports (ATRs) by the concerned entities, and

- Online viewing by investors of action on the complaints and its current status.

- henceforth all complaints shall be forwarded electronically through SCORES only.

- all the BTI and DT are hereby directed to view the pending complaints athttp://scores.gov.in/admin and submit the ATR along with supporting documents

electronically in SCORES.

- updation of action taken would not be possible with physical ATRs. Hence,submission of physical ATR will not be accepted for complaints lodged in SCORES.

- a daily alert on pending complaints will be forwarded to the Compliance Officer of allBTI and DT and they have to send the current details of the Compliance Officer i.e.name and email ID to SEBI by August 20, 2011.

- The said details shall be forwarded by SEBI to [email protected] (BTI) [email protected] (DT) with subject “SCORES”. On receipt of the same, the user ID and

password for logging into SCORES shall be communicated to you.

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CIRCULAR - CIR/CFD/DIL/3/2011 DATED JUNE 3, 2011

REDEMPTION OF INDIAN DEPOSITORY RECEIPTS (IDRS) INTOUNDERLYING EQUITY SHARES

Genesis

In order to facilitate foreign issuers to raise funds from the Indian capital marketsthrough IDRs and enable investors in the domestic market to have investmentopportunities in the securities of major multi-national companies listed on well

developed markets, a legal framework was created by the Ministry of Corporate Affairs(MCA), Reserve Bank of India (RBI) and SEBI.

Pursuant to the same, Standard Chartered PLC came out with its IDR issue in May 2010

and the said IDRs have been listed on BSE and NSE on June 11, 2010. In terms ofdisclosures in their offer document on ”ability to withdraw shares” from the IDR Facilityand to deposit further shares into the IDR Facility, it has been stated as under:-

“Pursuant to the terms of the RBI Circular, IDRs are not redeemable into underlying equityshares before the expiry of a one-year period from the date of issue of the IDRs. The SEBIRegulations and the RBI Circular state that automatic fungibility of IDRs is not permitted.Therefore, fungibility of IDRs into the underlying Shares would be permitted only after the expiryof the one year period from the date of issue of the IDRs and subsequent to obtaining RBI approvalon a case-by-case basis. Further, two-way fungibility (the ability to purchase existing Shares onthe London Stock Exchange and/or the Hong Kong Stock Exchange and deposit them into the IDRprogramme) is not currently permitted. Additionally, in terms of the RBI Circular, at the time ofredemption/conversion of IDRs into underlying shares, the Indian holders (persons resident inIndia) of IDRs are required to comply with the provisions of the Foreign Exchange Management(Transfer or Issue of Any Foreign Security) Regulations, 2004.”

Since the one year period is nearing completion, it has become necessary to put in place,

the framework for redemption of IDRs.

The relevant legal/regulatory provisions of fungibility of IDRs are as under:-

Rule 10 of Companies (Issue of Indian Depository Receipts) Rules, 2004:-

“Procedure for Transfer and redemption of IDRs:-A holder of IDRs may transfer the IDRs or may ask the Domestic Depository to redeem theseIDRs, subject to the provisions of the Foreign Exchange Management Act, 1999 and other laws forthe time being in force.”

-43-


RBI’s circular dated July 22, 2009:-

“Fungibility:-Automatic fungibility of IDRs is not permitted.

Period of redemption:-IDRs shall not be redeemable into underlying equity shares before the expiry of one year periodfrom the date of issue of IDRs.”

Regulation 100 of Chapter X of SEBI (ICDR) Regulations, 2009:-“IDRs shall not be automatically fungible into underlying equity shares of issuing company.”

The extant regulatory frame work does not permit fungibility but only redemption.

Therefore, allowing redemption freely in the absence of two way fungibility could resultin reduction of number of IDRs listed, thereby impacting its liquidity in the domesticmarket.

In view of the above, SEBI has been decided, in consultation with the RBI vide issuingthis circular on June 3. 2011,bearing the following features that:

- After the completion of one year from the date of issuance of IDRs, redemption of theIDRs shall be permitted only if the IDRs are infrequently traded on the stockexchange(s) in India.

Explanation- For this purpose, IDRs shall be deemed to be “infrequently traded” if theannualized trading turnover in IDRs during the six calendar months immediatelypreceding the month of redemption is less than five percent of the listed IDRs.

- The issuer company shall test the frequency of trading of IDRs on a half yearly basisending on June and December of every year.

- When the IDRs are considered “infrequently traded” on the above basis, it shall be thetrigger event for redemption.

- The issuer company shall make a public announcement in an English and Hindilanguage newspaper with wide circulation in the prescribed format (including briefdetails about the trigger of the redemption event, time period for submission ofapplication and the approach for processing the applications) as well as notify thestock exchanges. Such announcement shall be made within seven days of closure of

the half year ending on which the liquidity criteria is tested. A suitable format for thispurpose shall be prescribed by the stock exchange(s).

- The IDR holders may submit their application to the domestic depository for

redemption of IDRs within a period of thirty days from the date of such publicannouncement.

-44-


- The redemption of IDRs shall be completed within a period of thirty days from thedate of receipt of application for redemption.

- Pursuant to such redemption, the domestic depository shall notify the revisedshareholding pattern of the issuer company to the concerned stock exchanges withinseven days of completion of the process of redemption.

- All intermediaries are directed to comply with the instructions contained in thiscircular.

- This circular shall be applicable with immediate effect.

-45-



PRE- FUNDED INSTRUMENTS / ELECTRONIC FUND TRANSFERS

Genesis

SEBI has permitted the Stock Brokers to accept Demand Drafts from their clients videCircular No. SEBI/MRD/SE/Cir – 33/2003/27/08 dated August 27, 2003.

It was observed that while receiving funds through pre-funded instruments like Demanddraft, stock brokers are unable to maintain an audit trail of the funds. This may result inflow of third party funds / unidentified money.


In the view of the above, it was decided as under;

If aggregate of pre-funded is equal to or more than Rs. 50,000/- per day per client,stock broker may accept the instruments only if the same are accompanied by the

name of the account holder and number of the bank account debited for thepurpose, duly certified by the issuing bank. Mode of certification may includefollowing;

i. Certificate from the issuing bank on its letterhead or on a plain paperwith the seal of the issuing bank.

ii. Certified copy of the requisition slip (portion which is retained by thebank) to issue the instrument.

iii. Certified copy of the passbook/bank statement for the account debitedto issue the instrument.

iv. Authentication of the bank account-number debited and name of theaccount holder by the issuing bank on the reverse of the instrument.

Maintain an audit trail of the funds received through electronic fund transfers to

ensure that the funds are received from their clients only.

Stock Exchanges are advised to;

a. issue necessary instructions to bring the provisions of this Circular to the notice oftheir constituents and also disseminate the same on their websites;

b. make amendments to the relevant bye-laws, rules and regulations for theimplementation of the above, as deemed necessary;

c. communicate to SEBI, the status of the implementation of the provisions of this

Circular by June 30, 2011; and

d. develop the monitoring mechanism through internal audit and inspections.

-46-



STANDARDISATION OF RATING SYMBOLS AND DEFINITIONS

Genesis

Credit Rating Agencies registered with SEBI use different rating symbols and definitions.

Objective

Need to have common rating symbols and definitions

For easy understanding of the rating symbols and their meanings by the investors

To achieve high standards of integrity and fairness in ratings.


Standardised symbols and their definitions have been devised for the following:

Long term debt instruments;

Short term debt instruments;

Long term structured finance instruments;

Short term structured finance instruments;

Long term mutual fund schemes; and

Short term mutual fund schemes

New symbols and definitions has been introduced, as given as Annexure 1 – 6.

Existing outstanding ratings, the CRAs shall;

Disclose new rating symbols and definitions on their websites;

Update their rating lists on their websites; and

Inform their clients about the change in the rating symbols and definitions andspecifying that this should not be construed as a change in the ratings.

-47-


CRAs shall;

Ensure compliance with the requirements as early as possible but not later than 4months from the date of issuance of this circular.

Shall communicate to SEBI, the status of the implementation of the provisions ofthis circular by October 31, 2011. They shall also place the compliance status of thiscircular before their Boards.

-48-


ANNEXURE 1

I. Rating Symbols and Definitions for Long Term Debt Instruments

Long term debt instruments: The instruments with original maturity exceeding one year

Rating symbols should have CRA’s first name as prefix

AAA - Instruments with this rating are considered to have the highest degree of safetyregarding timely servicing of financial obligations. Such instruments carry lowest credit risk.

AA - Instruments with this rating are considered to have high degree of safety regarding timelyservicing of financial obligations. Such instruments carry very low credit risk.

A - Instruments with this rating are considered to have adequate degree of safety regardingtimely servicing of financial obligations. Such instruments carry low credit risk.

BBB - Instruments with this rating are considered to have moderate degree of safety regardingtimely servicing of financial obligations. Such instruments carry moderate credit risk.

BB - Instruments with this rating are considered to have moderate risk of default regardingtimely servicing of financial obligations.

B - Instruments with this rating are considered to have high risk of default regarding timely

servicing of financial obligations.

C - Instruments with this rating are considered to have very high risk of default regarding

timely servicing of financial obligations.

D - Instruments with this rating are in default or are expected to be in default soon.

Modifiers {"+" (plus) / "-"(minus)} can be used with the rating symbols for the categories AA toC. The modifiers reflect the comparative standing within the category.

-49-


ANNEXURE 2

II. Rating Symbols and Definitions for Short Term Debt instruments

Short term debt instruments: The instruments with original maturity of upto one year


A1 – Instruments with this rating are considered to have very strong degree of safety regardingtimely payment of financial obligations. Such instruments carry lowest credit risk.

A2 - Instruments with this rating are considered to have strong degree of safety regardingtimely payment of financial obligations. Such instruments carry low credit risk.

A3 - Instruments with this rating are considered to have moderate degree of safety regardingtimely payment of financial obligations. Such instruments carry higher credit risk as comparedto instruments rated in the two higher categories.

A4- Instruments with this rating are considered to have minimal degree of safety regardingtimely payment of financial obligations. Such instruments carry very high credit risk and aresusceptible to default.

D - Instruments with this rating are in default or expected to be in default on maturity.

Modifier {"+" (plus)} can be used with the rating symbols for the categories A1 to A4. Themodifier reflects the comparative standing within the category.

-50-


ANNEXURE 3

III. Rating Symbols and Definitions for Long Term Structured Finance Instruments

Long term structured finance instruments: The instruments with original maturity exceedingone year


AAA (SO) - Instruments with this rating are considered to have the highest degree of safetyregarding timely servicing of financial obligations. Such instruments carry lowest credit risk.

AA (SO) - Instruments with this rating are considered to have high degree of safety regardingtimely servicing of financial obligations. Such instruments carry very low credit risk.

A (SO) - Instruments with this rating are considered to have adequate degree of safety regardingtimely servicing of financial obligations. Such instruments carry low credit risk.

BBB (SO) - Instruments with this rating are considered to have moderate degree of safetyregarding timely servicing of financial obligations. Such instruments carry moderate credit risk.

BB(SO) - Instruments with this rating are considered to have moderate risk of default regardingtimely servicing of financial obligations.

B(SO) - Instruments with this rating are considered to have high risk of default regarding timelyservicing of financial obligations.

C (SO) - Instruments with this rating are considered to have very high likelihood of defaultregarding timely payment of financial obligations.

D (SO) - Instruments with this rating are in default or are expected to be in default soon.

Modifiers {"+" (plus) / "-"(minus)} can be used with the rating symbols for the categoriesAA(SO) to C(SO). The modifiers reflect the comparative standing within the category.

-51-


ANNEXURE 4

IV. Rating Symbols and Definitions for Short Term Structured Finance Instruments

Short term structured finance instruments: The instruments with original maturity of upto oneyear


A1 (SO) – Instruments with this rating are considered to have very strong degree of safetyregarding timely payment of financial obligation. Such instruments carry lowest credit risk.

A2 (SO) - Instruments with this rating are considered to have strong degree of safety regardingtimely payment of financial obligation. Such instruments carry low credit risk.

A3 (SO) - Instruments with this rating are considered to have moderate degree of safetyregarding timely payment of financial obligation. Such instruments carry higher credit risk ascompared to instruments rated in the two higher categories.

A4 (SO) - Instruments with this rating are considered to have minimal degree of safety

regarding timely payment of financial obligation. Such instruments carry very high credit riskand are susceptible to default.

D (SO) - Instruments with this rating are in default or expected to be in default on maturity.

Modifier {"+" (plus)} can be used with the rating symbols for the categories A1(SO) to A4(SO).The modifier reflects the comparative standing within the category.

-52-


ANNEXURE 5

V. Rating Symbols and Definitions for Long Term Debt Mutual Fund Schemes

Long term debt mutual fund schemes: The debt mutual fund schemes that have an originalmaturity exceeding one year.


AAAmfs – Schemes with this rating are considered to have the highest degree of safety

regarding timely receipt of payments from the investments that they have made.

AAmfs – Schemes with this rating are considered to have the high degree of safety regarding

timely receipt of payments from the investments that they have made.

Amfs – Schemes with this rating are considered to have the adequate degree of safety regardingtimely receipt of payments from the investments that they have made.

BBBmfs - Schemes with this rating are considered to have the moderate degree of safetyregarding timely receipt of payments from the investments that they have made.

BBmfs - Schemes with this rating are considered to have moderate risk of default regardingtimely receipt of payments from the investments that they have made.

Bmfs - Schemes with this rating are considered to have high risk of default regarding timelyreceipt of timely receipt of payments from the investments that they have made.

Cmfs - Schemes with this rating are considered to have very high risk of default regardingtimely receipt of timely receipt of payments from the investments that they have made.

Modifiers {"+" (plus) / "-"(minus)} can be used with the rating symbols for the categories AAmfsto Cmfs. The modifiers reflect the comparative standing within the category.

-53-


ANNEXURE 6

VI Rating Symbols and Definitions for Short Term Debt Mutual Fund Schemes

Short term debt mutual fund schemes: The debt mutual fund schemes that have an originalmaturity of upto one year.


A1mfs - Schemes with this rating are considered to have very strong degree of safety regardingtimely receipt of payments from the investments that they have made.

A2mfs - Schemes with this rating are considered to have strong degree of safety regardingtimely receipt of payments from the investments that they have made.

A3mfs - Schemes with this rating are considered to have moderate degree of safety regardingtimely receipt of payments from the investments that they have made.

A4mfs - Schemes with this rating are considered to have minimal degree of safety regardingtimely receipt of payments from the investments that they have made.

Modifier {"+" (plus)} can be used with the rating symbols for the categories A1mfs to A4mfs.The modifier reflects the comparative standing within the category.

-54-


CIRCULAR - CIR/MRD/DP/07/2011 DATED JUNE 16, 2011

CHANGE OF NAME BY LISTED COMPANIES

Genesis

SEBI circular SEBI/MRD/Policy/AT/Cir-20/2004 dated April 30, 2004 required all listedcompanies seeking change in name to have atleast 50% of its total revenue in thepreceding 1 year period should have been accounted for by the new activity suggested bythe new name.

It was observed where the gestation period of the business is usually longer and therevenue stream often delayed; find it difficult to comply with the aforesaid provision.


It was decided to modify the above provision as follows;

At least 50% of its total revenue in the preceding 1 year period should have beenaccounted for by the new activity suggested by the new name.

Or

The amount invested in the new activity/project (Fixed Assets + Advances +

Works in Progress) is atleast 50% of the assets of the company. The ‘Advances’shall include only those extended to contractors and suppliers towards executionof project, specific to new activity as reflected in the new name.

To confirm the compliance the company shall submit auditor’s certificate to the exchange.


a. Implement the above by making necessary amendments to the bye-laws and Listing

Agreement, as applicable;

b. To bring the provisions of this circular to the notice of the listed companies and memberbrokers/ clearing members and also to put up the same on the website for easy access tothe investors; and

c. Communicate to SEBI the status of the implementation of the provisions of this circularand the action taken in this regard in the Monthly Development Report.

-55-



MODIFICATION TO INVESTOR PROTECTION FUND (IPF)/ CUSTOMERPROTECTION FUND (CPF) GUIDELINES

Genesis

SEBI vide circular no MRD/DoP/SE/Cir-38/2004 dated October 28, 2004 had issuedcomprehensive guidelines for regulation of Investor Protection Fund (IPF)/ CustomerProtection Fund (CPF) required to be maintained by Stock Exchanges.

Further vide circular No. MRD/DoP/SE/Cir-21/2006 dated December 14, 2006, SEBIissued a clarification to Clause 24 of the Annexure to Circular dated October 28, 2004,specifying that in case of defaulting brokers with multiple memberships, the residualamount after satisfying claims of SEBI, the concerned stock exchange, and all otherexchanges, would be credited to the IPF/CPF of the concerned exchange. The Circular

dated October 28, 2004 as clarified by Circular dated December 14, 2006 shall hereinafterbe referred to as the “Comprehensive Guidelines on IPF/CPF of Stock Exchanges” or“The Comprehensive Guidelines”.

Exemptions have been sought by Stock Exchanges from strict compliance with Clause 24of the Annexure to Circular dated October 28, 2004 on the ground that the residualamount remaining after satisfaction of claims against the defaulting broker should be

refunded to the broker and not credited to the IPF/CPF. On this, SEBI has decided tomodify certain clauses of the abovementioned Annexure, with a view to harmonise thepractices followed by various exchanges to meet investor claims.

Thus it has been decided to modify the Comprehensive Guidelines by issuing this circular onJune 16, 2011 bearing the below listed salient features:-

Clause 8 shall be substituted with the following –

8.”The specified period for inviting legitimate claims against a defaulter member, shall bea minimum of ninety days.”


13.”If any eligible claims arise within three years from the date of expiry of the specified

period such claims shall be borne by the stock exchanges without any recourse to theIPF/CPF.

Provided that any claims received after three years from the date of expiry of thespecified period may be dealt with as a civil dispute.

-56-


Provided further that in cases where any litigations are pending against the defaulter

member, the residual amount, if any, may be retained by the stock exchange until suchlitigations are concluded.”

Disbursement of Claims from the IPF/ CPF

Clause 22 shall be deleted.


23. “The compensation shall be disbursed to the investor from the IPF/ CPF incase thereis a shortage of defaulter broker’s assets after its realization.”

Clause 24, as it reads after incorporation of clarification vide Circular dated December 14,

2006, shall be substituted with the following –

24.”The Stock Exchange shall ensure that the amount realized from the assets of thedefaulter member is returned to the defaulter member after satisfying the claims of the

Stock Exchange and SEBI in accordance with the bye-laws of the Stock Exchange.

Provided that in case of a member broker having membership on multiple stock

exchanges, amount realized from the assets of the defaulter member shall be returned tothe said member only after satisfying eligible claims of the concerned stock exchange,SEBI, and other stock exchanges.”

4. For effecting these amendments, Exchanges are advised to

- make necessary amendments to the relevant bye-laws, rules and regulations for

the implementation of the above decision.

- bring the provisions of this Circular to the notice of the member brokers/clearingmembers of the Exchange and also to disseminate the same on the website.

- communicate the status of the implementation of this Circular in the MonthlyDevelopment Report to SEBI.

-57-



PERIODICAL REPORT- GRANT OF PRIOR APPROVAL TO DEPOSITORY

PARTICIPANTS

Genesis

With the amendments in SEBI (Depositories and Participants) Regulations, 1996, theDepository Participants would be required to take prior approval from SEBI for change incontrol.


The Depositories shall submit a periodic report to SEBI regarding the following changes;

a. Amalgamation, demerger, consolidation or any other kind of corporaterestructuring falling within the scope of section 391 of the Companies Act, 1956 (1of 1956) or the corresponding provision of any other law for the time being inforce;

b. Change in Director, including managing director/ whole-time director;

c. Change in shareholding not resulting in change in control;

d. Any other purpose as may be considered appropriate by the Depositories.

If there is no change during the relevant quarter, it shall be indicated in the report.

The Depositories are directed to;

a. bring the provisions of this circular to the notice of the Depository Participants andalso disseminate the same on their websites;

b. make necessary amendments to the relevant bye-laws, rules and regulations forthe implementation of the above decision in co-ordination with one another toachieve uniformity in approach;

c. communicate to SEBI, the status of the implementation of the provisions of thiscircular in their Monthly Development Reports.

-58-



PERIODICAL REPORT- GRANT OF PRIOR APPROVAL TO CREDITRATING AGENCIES

Genesis

With the amendments in SEBI (Credit Rating Agencies) Regulations, 1999, the

requirement of taking prior approval by the Credit Rating Agencies (CRAs) from SEBI forchange in status or constitution has been dispensed with; however, they would to takeprior approval from SEBI for change in control.


Commencing from half year ended September 30, 2011, all CRAs shall report thefollowing changes to SEBI while submitting action report in accordance with SEBI

Circular No. SEBI/MRSD/CRA/Cir-01/2010 dated January 06, 2010.;

a. Amalgamation, demerger, consolidation or any other kind of corporate

restructuring falling within the scope of section 391 of the Companies Act, 1956(1 of 1956) or the corresponding provision of any other law for the time being inforce;

b. Change in Director, including managing director/ whole-time director

e. Change in shareholding not resulting in change in control

If there is no change during the relevant half-year, it shall be indicated in the report.

-59-



PERIODICAL REPORT- GRANT OF PRIOR APPROVAL TO MERCHANTBANKERS

Genesis

With the amendments in SEBI (Merchant Bankers) Regulations, 1992, the requirement oftaking prior approval by the Merchant Banker from SEBI for change in status orconstitution has been dispensed with; however, they are still required to take prior

approval from SEBI for change in control.


Merchant Banker shall continue to report the following changes to SEBI through the half-yearly reports;


restructuring falling within the scope of section 391 of the Companies Act, 1956(1 of 1956) or the corresponding provision of any other law for the time being inforce


f. Change in shareholding not resulting in change in control

-60-



PERIODICAL REPORT- GRANT OF PRIOR APPROVAL TOUNDERWRITERS

Genesis

With the amendments in SEBI (Underwriters) Regulations, 1993, the requirement oftaking prior approval by the Underwriters from SEBI for change in status or constitutionhas been dispensed with. However, they are still required to take prior approval fromSEBI for change in control.


Underwriters shall continue to report the following changes to SEBI on a half yearly basiswithin 15 days of expiry of the half-year, commencing from the half-year endedSeptember 30, 2011.


restructuring falling within the scope of section 391 of the Companies Act, 1956(1 of 1956) or the corresponding provision of any other law for the time being inforce


c. In case of a partnership firm any change in partners not amounting to dissolutionof the firm

g. Change in shareholding not resulting in change in control

If there is no change during the relevant half-year, it shall be indicated in the report.

The above report shall be submitted in electronic form only to email id [email protected],with with the subject line ”Report on change of status or constitution submitted by aaa forthe half-year ended xxx yyyy” where aaa represents the name of underwriter, xxxrepresents the month at the end of the half-year and yyyy represents the year.

-61-



PERIODICAL REPORT- GRANT OF PRIOR APPROVAL TO REGISTRARSTO AN ISSUE AND SHARE TRANSFER AGENTS

Genesis

With the amendments in SEBI (Registrars to an Issue and Share Transfer Agents)Regulations, 1993, the requirement of taking prior approval by the Registrars to an Issueand Share Transfer Agents (RTI/STA) from SEBI for change in status or constitution has

been dispensed with; however, they are still required to take prior approval from SEBI forchange in control.


Merchant Banker shall continue to report the following changes to SEBI in the quarterlyreports commencing from the quarter ended June 30, 2011;

a. Amalgamation, demerger, consolidation or any other kind of corporaterestructuring falling within the scope of section 391 of the Companies Act, 1956(1 of 1956) or the corresponding provision of any other law for the time being in

force


c. In case of a partnership firm any change in partners not amounting to dissolutionof the firm

d. Change in shareholding not resulting in change in control


-62-


CIRCULAR - CIR/ISD/3/2011 DATED JUNE 17, 2011

SHAREHOLDING OF PROMOTER / PROMOTER GROUP TO BE INDEMATERIALIZED MODE

Genesis

SEBI issued a circular on September 2, 2010, on “trading rules and shareholding indematerialized mode” in order to moderate sharp and destabilizing price movements in

shares of companies, to encourage better price discovery and to increase transparency insecurities market.

The aforesaid circular inter-alia mandated securities of companies to be traded in normalsegment, if and only if, the company has achieved atleast 50% non-promotershareholding in dematerialized form and maintained the same on a continuous basis.

Objective

To further promote dematerialization of securities, encourage orderly development of thesecurities market and to improve transparency in the dealings of shares by promotersincluding pledge / usage as collateral.


The securities of companies shall be traded in the normal segment of the exchange if and

only if, the company has achieved 100% of promoter’s and promoter group’sshareholding in dematerialized form latest by the quarter ended September 2011 asreported to the stock exchanges.

In all cases, wherein the companies do not satisfy the above criteria, the trading insecurities of such companies shall take place in trade for trade segment.

For the above purpose the exchanges shall take the latest shareholding pattern as required to be

submitted by the listed companies with exchanges in pursuance to the Listing agreement as ofthe preceding quarter or of any subsequent date.


a) put in place the adequate systems and issue the necessary guidelines forimplementing the above decision.

b) make necessary amendments to the relevant bye-laws, rules and regulations asapplicable for the implementation of the above decision immediately.

-63-


c) bring the provisions of this circular to the notice of the listed companies/issuers andmember brokers of the Exchange and also to disseminate the same on the website.

d) communicate to SEBI, the status of the implementation of the provisions of thiscircular in the Monthly Development Report.

-64-



PERIODICAL REPORT- GRANT OF PRIOR APPROVAL TO BANKERS TO

AN ISSUE

Genesis

With the amendments in SEBI (Bankers to an Issue) Regulations, 1994, the requirement oftaking prior approval by the Debenture Trustees from SEBI for change in status orconstitution has been dispensed with; however, they are still required to take priorapproval from SEBI for change in control.


All bankers to an Issue shall report the following changes to SEBI in quarterly reportssubmitted in accordance with SEBI Circular No. MIRSD/DPS-2/BRI/Cir – 15/2008 datedMay 06, 2008;




h. Change in shareholding not resulting in change in control;


-65-



PERIODICAL REPORT- GRANT OF PRIOR APPROVAL TO DEBENTURE

TRUSTEES

Genesis

With the amendments in SEBI (Debenture Trustees) Regulations, 1993, the requirement oftaking prior approval by the Debenture Trustees from SEBI for change in status orconstitution has been dispensed with; however, they are still required to take priorapproval from SEBI for change in control.


The Debenture Trustees report the following changes to SEBI in quarterly reportssubmitted in accordance with SEBI Circular No. MIRSD/DPS-2/DT/Cir – 14/2008 datedMay 06, 2008;




i. Change in shareholding not resulting in change in control;


-66-



REVIEW OF INTERNET BASED TRADING (IBT) AND SECURITIESTRADING USING WIRELESS TECHNOLOGY (STWT)


The stock exchange shall ensure that the broker comply with the following –

e. The broker shall capture the IP (Internet Protocol) address (from where the orders areoriginating), for all IBT/ STWT orders.

f. The brokers system should have built-in high system availability to address anysingle point failure.

c. There should be secure end-to-end encryption for all data transmission between theclient and the broker through a Secure Standardized Protocol. A procedure of mutual

authentication between the client and the broker server should be implemented.

d. The broker system should have adequate safety features to ensure it is not susceptible

to internal/ external attacks.

e. In case of failure of IBT/ STWT, the alternate channel of communication shall haveadequate capabilities for client identification and authentication.

f. Two-factor authentication for login session may be implemented for all ordersemanating using Internet Protocol. Public Key Infrastructure (PKI) basedimplementation using digital signatures, supported by one of the agencies certified by

the government of India, is advisable. Further the two factors in the Two-factorauthentication framework should not be same.

g. In case of no activity by the client, the system should provide for automatic tradingsession logout.

These clauses shall be implemented within 9 months from the date of this circular.

Further to the above, the following practice is advisable –

h. The back-up and restore systems implemented by the broker should be adequate todeliver sustained performance and high availability. The broker system should haveon-site as well as remote site back-up capabilities.

The exchanges shall put in place a system for monitoring of specific complaints with regardto unauthorized access using IBT.

-67-


Exchanges are advised to;

a) make necessary amendments to the relevant bye-laws, rules and regulations for theimplementation of the above decision.

b) bring the provisions of this circular to the notice of the member brokers/clearingmembers of the Exchange and also to disseminate the same on the website.

c) communicate to SEBI, the status of the implementation of this circular in the MonthlyDevelopment Report.

-68-


CIRCULAR - CIR/DNPD/6/2011 DATED JULY 5, 2011

MODIFICATION OF CLIENT CODES OF NON-INSTITUTIONALTRADES EXECUTED ON STOCK EXCHANGES (ALL SEGMENTS)

Objective

With a view to rectify a genuine error in entry of client code of non-institutional tradesonly at the time of placing / modifying the related order, the SEBI has decided inconsultation with BSE, MCX-SX, NSE and USE that the Stock Exchanges may allowmodifications of client codes.


If a Stock Exchange wishes to allow trading members to modify client codes of non-institutional trades, it shall:

lay down strict objective criteria, with the approval of its Governing Board, foridentification of genuine errors in client codes which may be modified, anddisclose the same to market in advance,

set up a mechanism to monitor that the trading members modify client codes only

as per the strict objective criteria, and

ensure that modification of client codes is covered in the internal audit of tradingmembers prescribed by SEBI through its Circular No MRD/DMSCir-29/2008

dated October 21, 2008.

Notwithstanding the above,

the Stock Exchanges shall levy a penalty from trading members and credit thesame to its Investor Protection Fund as under:

‘a’ as % of ‘b’ Penalty as % of ‘a’

≤ 5 1

> 5 2

Where

a = Value (turnover) of non-institutional trades where client codes have been modified bya trading member in a segment during a month.

b = Value (turnover) of non-institutional trades of the trading member in the segmentduring the month.

-69-


The Stock Exchange shall conduct a special inspection of the trading member to

ascertain whether the modifications of client codes are being carried on as per thestrict objective criteria set by the Stock Exchange, as directed in Para 2 above, if ‘a’as % of ‘b’, as defined above, exceeds 1% during a month and take appropriatedisciplinary action, if any deficiency is observed.

SEBI shall examine implementation of this circular during inspection of the StockExchange.

This circular supersedes the circular No. CIR/DNPD/01/2011 dated January 3, 2011 andshall come into force from August 1, 2011.

-70-


CIRCULAR - CIR/MIRSD/12/2011 DATED JULY 11, 2011

CLARIFICATION REGARDING ADMISSION OF LIMITED LIABILITYPARTNERSHIPS AS\ MEMBERS OF STOCK EXCHANGES

Genesis

SEBI has received requests from various stock exchanges to permit Limited Liability

Partnerships (LLPs) to be admitted as members of stock exchanges so as to enable them toget registration as stock broker under SEBI (Stock brokers and Sub-brokers) Regulations,1992.However, Securities Contract Regulation Rules, 1957 (SCRR) do not explicitlymention LLPs as the Limited Liability Partnership Act, 2008 was a subsequentdevelopment. As per the LLP Act, LLP is a body corporate. Sub-rule 4A and 5 of Rule 8 ofthe SCRR provides that Limited Liability Companies (LLC) and partnership firms areeligible to be admitted as members of stock exchanges. In this context it may be statedthat LLPs are akin to LLC and partnership firms.

Salient features of the circular

Since the Parliament has put in place a legal framework for LLPs, Stock Exchanges may

consider granting membership to LLPs subject to LLP complying with the conditions laiddown in Rule 8(4A) of the SCRR, as far as it can apply to LLPs.

The stock exchanges are advised to:

- Bring the provisions of this clarification to the notice of the Stock Brokers and alsodisseminate the same on their websites.

- Make necessary clarificatory amendments to the relevant bye-laws, rules andregulations for the implementation of the above decision in coordination with one

another to achieve uniformity in approach..

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CIRCULAR - CIR/IMD/FIIC/11/2011 DATED JULY 29, 2011

ALLOCATION OF GOVERNMENT DEBT LONG TERM LIMITS TO FIIS

Genesis

SEBI has decided to allocate the unutilized limits in Government debt long term limits toFIIs based on the assessment of the allocation and the utilization of the limits to FIIs for

investments in debts.


The circular has been issued for the allocation

- through bidding process; and- through first come first serve process;

with the below listed salient features:

Allocation through bidding process:

The bidding for these limits shall be done on the BSE from 15:30 hrs to 17:30 hrs, on

August 05, 2011, in terms of SEBI circular IMD/FII&C/37/2009 dated February 06, 2009,subject to the modifications stated below:-

- In partial amendment to clause 3 (h) of the aforesaid circular IMD/FII & C/37/2009,no single entity shall be allocated more than INR 600 cr. of the investment limit.

- Where a single entity bids on behalf of multiple entities, in terms of para 7 of SEBIcircular CIR/IMD/FIIC/18 /2010 dated November 26, 2010, then such bid would belimited to INR 600 cr. for every such single entity.

- In partial amendment to clause 3 (c) and 3(d) of the aforesaid circular IMD/FII

&C/37/2009, the minimum amount which can be bid for shall be INR 100 cr. and theminimum tick size shall be INR 50 cr.

Allocation through first come first serve process (FCFS):

In terms of SEBI circular dated January 31, 2008, the Government debt long term limitsshall be allocated in the FCFS basis subject to the following conditions:-

- The remaining amount in Government debt long term other than bidding process

shall be allocated among the FIIs/sub-accounts on a FCFS basis.

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- The debt requests in this regard shall be forwarded to the dedicated email id

[email protected]. The window for FCFS process shall open at 08:30 AMIST, August 08, 2011.

- Maximum limit per request under this process shall be INR 49 cr.

- A non-utilisation charge would be levied at average successful bid premium (inbidding process) for non-utilized part from the allocation in FCFS.

Submission of fees:

- The fees for the bidding process shall be remitted to SEBI by the respective custodiansof the entities by August 10, 2011.

- In case of FCFS, non-utilisation charge as mentioned at para 3.4 above shall be

remitted to SEBI by the respective custodians of the entities within three working daysfrom the end of utilization period.

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CIRCULAR - CIR/ IMD/ DF/12 /2011 DATED AUGUST 1, 2011

INDICATIVE PORTFOLIO OR YIELD IN CLOSE ENDED DEBT ORIENTEDMUTUAL FUND SCHEMES

Genesis

Vide circular SEBI/IMD/CIR No. 14/151044/09 dated January 19, 2009 regardingindicative portfolio and yields in mutual fund schemes it was mentioned that mutualfunds shall not offer any indicative portfolio and indicative yield and that no

communication regarding the same in any manner whatsoever, shall be issued by anymutual fund or distributors of its products.

Further, in order to enable investors to make a more informed decision regarding thequality of securities and risk associated with different close ended debt oriented schemes,it is decided that Mutual Funds (MFs) / AMCs may make some additional disclosures inthe SID/SAI and KIM without indicating the portfolio or yield, directly or indirectly.

Features of the circular

- MFs/AMCs shall disclose their credit evaluation policy for the investments in debtsecurities.

- MFs/AMCs shall also disclose the list of sectors they would not be investing.

- MFs shall disclose the type of instruments which the schemes propose to invest viz.CPs, CDs, Treasury bills etc.

- MFs shall disclose the floors and ceilings within a range of 5% of the intended

allocation (in %) against each sub asset class/credit rating.

- All MFs/AMCs shall comply with the above requirements in letter and spirit.

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CIRCULAR - CIR/MIRSD/14/2011 DATED AUGUST 02, 2011

REVISED PROCEDURE FOR SEEKING PRIOR APPROVAL FOR CHANGEIN CONTROL THROUGH SINGLE WINDOW

Genesis

SEBI vide circular No.MIRSD/MSS/Cir-30/13289/03 dated July 09, 2003 addressed to allthe Stock exchanges specified, inter alia, the procedure for seeking prior approval fromSEBI by stock brokers for change in status and constitution. SEBI has recently amendedthe regulations for certain intermediaries, viz., Stock Brokers and Sub-brokers, MerchantBankers, Debenture Trustees, Registrar to an Issue and Share Transfer Agents,Underwriters, Depository Participants, Bankers to an Issue and Credit Rating Agencies,vide Notification No. LAD-NRO/GN/2011-12/03/12650 dated April 19, 2011. This has

already been communicated to you and a copy of the notification is also available onSEBI website www.sebi.gov.in. As per the amendments, the requirement of obtainingprior approval for change in status or constitution has been dispensed with. However, incase of change in control of the above intermediaries except for Sub-brokers, priorapproval of SEBI is required.

Now, with a view to expedite the process of granting prior approval, it has been decidedto adopt a “Single window clearance at SEBI‟, for the above intermediaries in case of

their having multiple registrations with SEBI.


In consultation with the major stock exchanges and market participants, it has been decided toissue the stated circular for adopt the following procedure;

In case an applicant holds multiple registrations with SEBI, it shall make only oneapplication to SEBI accompanied by the following information about itself, the acquirerand the directors/partners of the acquirer;

- Whether any application was made in the past to SEBI seeking registration in anycapacity but it was not granted? If yes, details thereof.

- Whether any action has been initiated / taken under SCRA/SEBI Act or rules andregulations made thereunder? If yes, status thereof along with corrective action takento avoid such violations in the future.

- The acquirer shall also confirm that it shall honour all past liabilities / obligations ofthe applicant, if any.

- Whether any investor complaint is pending? If yes, steps taken and confirmation thatthe acquirer shall resolve the same.

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- Details of litigation, if any.

- That all the fees due to SEBI have been paid.

- That there will not be any change in the Board of Directors of incumbent, till the timeprior approval is granted.

- That the incumbent shall inform all its existing investors / clients in order to enablethem to take informed decision regarding their continuance or otherwise with theentity with new management.

Further, in case the incumbent is a registered stock broker and / or depositoryparticipant, in addition to the above, it shall obtain approval / NOC from all the StockExchanges / Depositories, where the incumbent is a member / Depository Participant

and forward a self attested copy of the same to SEBI.

The application shall be addressed to "Chief General Manager, MIRSD, SEBI".

The prior approval granted by SEBI shall be valid for a period of 180 days from the dateof communication.

While the above mentioned intermediaries are advised to ensure compliance with theprovisions of this circular, the stock exchanges and depositories are advised to:

- bring the provisions of this circular to the notice of the Stock Brokers/ Depository

Participants and also disseminate the same on their websites.

- make amendments to the relevant bye-laws, rules and regulations as deemednecessary for the implementation of the above decision in coordination with oneanother to achieve uniformity in approach.

- communicate to SEBI, the status of the implementation of the provisions of thiscircular in their Monthly Development Reports.

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CIRCULAR - CIR/MIRSD/15/2011 DATED AUGUST 2, 2011

SMS AND E-MAIL ALERTS TO INVESTORS BY STOCK EXCHANGES

Genesis

SEBI receives complaints from investors against stock brokers which include allegedunauthorized trading in their accounts. SEBI has taken steps in the past to address this issue.Now as an additional measure, it has been decided in consultation with the major stock

exchanges and market participants that the stock exchanges shall send details of the transactionsto the investors by the end of trading day, through SMS and E-mail alerts.

Applicability

These guidelines are applicable to equity - cash and derivative – segments of the stockexchanges.

Features of the circular regarding uploading of mobile number and E-mail address bystock brokers are as follows:

Stock exchanges shall provide a platform to stock brokers to upload the details of theirclients, preferably, in sync with the UCC updation module.

Stock brokers shall upload the details of clients, such as, name, mobile number, addressfor correspondence and E-mail address.

Stock brokers shall ensure that the mobile numbers/E-mail addresses of theiremployees/sub-brokers/remisiers/authorized persons are not uploaded on behalf ofclients.

Stock Brokers shall ensure that separate mobile number/E-mail address is uploaded foreach client. However, under exceptional circumstances, the stock broker may, at thespecific written request of a client, upload the same mobile number/E-mail address formore than one client provided such clients belong to one family.

“Family” for this purpose would mean self, spouse, dependent children and dependentparents.

Verification by the stock exchanges

After uploading of details by the stock brokers, the stock exchanges shall take necessary steps toverify the details by any mode as considered appropriate by them which may include thefollowing:

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- By way of sending SMS and E-mail directly to the investors at the numbers/E-mailaddress uploaded by the stock brokers.

- By way of sending letters to the address of the investors uploaded by the stock brokers.

Sending of alerts by the stock exchanges

Upon receipt of confirmation from the investors, the stock exchanges shall commence sending

the transaction details generated based on investors‟ Permanent Account Number, directly to

them.

Handling of discrepancies, if any

If any discrepancy is observed by the stock exchanges in the details uploaded by the stockbrokers including non-confirmation by investors, bounced E-mails, undelivered SMS/letters,

etc., the stock exchanges shall inform the respective stock broker.

Meeting out the expenses for providing SMS and E-mail alerts

The stock exchanges may use the amount set aside from the listing fees for providing services tothe investing public, as provided vide SEBI communication dated SE/10118 dated October 12,1992, to meet the expenses for providing this facility.

Implementation

The stock exchanges shall put in place necessary infrastructure and implement the SMS andE-mail alert facility at the earliest and not later than four months from the date of this circular.

With this circular Stock exchanges are advised to :

- issue necessary instructions to bring the provisions of this Circular to the notice oftheir constituents and also disseminate the same on their websites;

- make amendments to the relevant bye-laws, rules and regulations for theimplementation of the above, as deemed necessary, in coordination with other stockexchanges;

- communicate to SEBI, the status of the implementation of the provisions of thisCircular in the Monthly Development Report to SEBI;

- develop the monitoring mechanism through the system of half-yearly internal audit

and inspections; and

- publicize widely the availability of this facility for the awareness of the investors.

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CIRCULAR - CIR/ IMD /DF / 14 /2011 DATED AUGUST 9, 2011

INVESTMENT BY FOREIGN INVESTORS IN MUTUAL FUND SCHEMES

Genesis

In the budget speech of 2011, Hon’ble Finance Minister announced the following:

“Currently, only FIIs and sub-accounts registered with the SEBI and NRIs are allowed to investin mutual fund schemes. To liberalise the portfolio investment route, it has been decided to permitSEBI registered Mutual Funds to accept subscriptions from foreign investors who meet the KYCrequirements for equity schemes. This would enable Indian Mutual Funds to have direct access toforeign investors and widen the class of foreign investors in Indian equity market.”

In order to facilitate the above and in consultation with the Government and RBI, it hasbeen decided that foreign investors (termed as Qualified Foreign Investors/ QFIs) whomeet KYC requirement may invest in equity and debt schemes of Mutual Funds (MF)through the following two routes:

- Direct route - Holding MF units in demat account through a SEBI registereddepository participant (DP).

- Indirect route- Holding MF units via Unit Confirmation Receipt (UCR).

Features of this circular

The investment through the above mentioned routes shall be subject to the followingconditions :

- Qualified Foreign Investor (QFI) shall mean a person resident in a country that is

compliant with Financial Action Task Force (FATF) standards and that is a signatoryto International Organization of Securities Commission's (IOSCO’s ) MultilateralMemorandum of Understanding,

Provided that such person is not resident in India,

Provided further that such person is not registered with SEBI as Foreign Institutional Investoror Sub-account.

Explanation- For the purposes of this clause:

(1) the term "Person" shall carry the same meaning under Section 2(31) of theIncome Tax Act, 1961

(2) the phrase “resident in India” shall carry the same meaning as in theIncome Tax Act, 1961

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(3) “resident” in a country, other than India, shall mean resident as per thedirect tax laws of that country.

- MF shall ensure that QFIs meet the KYC requirements as per the FATF standards,Prevention of Money Laundering Act, 2002(PMLA) rules and regulations madethereunder, and SEBI circulars issued in this regard before accepting subscriptionsfrom QFIs.

- The aggregate investments by QFIs under both the routes shall be subject to a totaloverall ceiling of US $10 billion for equity schemes.

- In addition to the above, the aggregate investments by QFIs under both the routes for

debt schemes which invest in infrastructure (“Infrastructure” as defined under theextant ECB guidelines issued by RBI) debt of minimum residual maturity of 5 years,shall be subject to a total overall ceiling of US $3 billion within the existing ceiling of

USD 25 billion for FII investment in corporate bonds issued by infrastructurecompanies.

- MF can accept subscriptions from QFIs till such time the investments by QFIs under

both the routes reaches US $ 8 billion in equity schemes and US$ 2.5 billion in debtschemes and the remaining limit of US $ 2 billion in equity schemes and US$ 0.5billion in debt schemes shall be auctioned by SEBI through bidding process.

- MF shall file with SEBI a report about the total subscription and redemption by QFIson a daily basis as per the format at annexure. MF shall prepare such report on actualreceipt and payment basis. SEBI will disseminate on an aggregate basis the totalamount of investments by QFIs in equity and debt schemes of the MF on SEBI’s

website. When the total investment reaches US $ 8 billion in equity schemes or US$ 2.5billion in debt schemes, MF shall stop accepting fresh investment from QFIs unlessthey get allotment of limits out of the remaining limit of US $ 2 billion in equity

schemes or US$ 0.5 billion in debt schemes respectively in the auction processstatedabove..

- MF/ DP shall ensure that the units held by QFIs by way of UCR/demat holding are

non transferable and non tradable.

- MF/ DP shall capture the bank account details of the QFIs designated overseas bankaccount and shall ensure that all subscriptions are received from that overseas account

and redemption proceeds are also transferred into the same overseas account. MF/DP shall also ensure that the overseas bank account which QFIs has designated for thepurpose is based in countries which are compliant with FATF standards and aresignatory to MMOU of IOSCO.

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- In case of subscription, MF shall allot units based on the NAV of the day on whichfunds are realized in the MF’s scheme bank account in India and in case of

redemption, units shall be redeemed on the day on which transaction slip/instructionis received and time stamped by MF, as per the applicable cut off time. The Schemeinformation documents of the MF shall clearly mention the applicable cut off time forQFIs and the other requirements / applicable guidelines for QFIs.

- MF shall ensure that Systematic Investments/ transfer/ withdrawals and switches arenot available to the QFIs. QFIs can only subscribe or redeem.

- MF/ DP shall ensure that units/ UCRs held by QFIs are free from all encumbrancesi.e. pledge or lien cannot be created for such units.

- MF shall comply with all the requirements as per the PMLA, FATF standards and

SEBI circulars issued in this regard on an ongoing basis.

- MF shall ensure that all the investor related documents/ records of the QFIs are

available with them.

- MF shall ensure compliance with laws (rules and regulations) of the jurisdictionswhere the QFIs are based and also ensure that the interest of existing unit holders of

the MF schemes are not adversely affected due to the issuance of UCRs/ demat unitsto the QFIs.

- In case of any penalty, pending litigations or proceedings, findings of Inspections or

investigations for which action may have been taken or is in the process of being takenby an overseas regulator against MF/ AMC, it shall bring such information to theattention of SEBI and unitholders of the concerned scheme.

- MF shall be responsible for the deduction of applicable tax at source out of theredemption proceeds before making redemption payments to QFIs.

- MF/DP shall require QFIs to submit necessary information for the purpose ofobtaining PAN. MF/DP may use the combined PAN cum KYC form to be notified byCBDT for QFIs. MF/ DP may take any additional information / documents from theQFIs other than those mentioned in the common PAN cum KYC from to ensure

compliance with Para 3.3 above.

Other conditions for direct route (demat account) .

- There shall be 3 parties under this route - QFIs, qualified DP and MF.

- A QFIs can open only one demat account with any one of the qualified DPs and shallsubscribe and redeem through that DP only. MF alongwith the DP shall haveadequate systems to ensure the compliance of the same.

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- To become a qualified DP, a SEBI registered DP shall fulfill the following:

DP shall have paid up capital of Rs.50 Crore or more,

DP shall be either a clearing bank or clearing member of any of the clearingcorporations.

DP shall have appropriate arrangements for receipt and remittance ofmoney with a designated Authorised Dealer (AD) Category - I bank

DP shall demonstrate that it has systems and procedures to comply with the

FATF Standards, PMLA and SEBI circulars issued from time to time.

DP shall obtain prior approval of SEBI before commencing the activitiesrelating to accepting MF subscription from QFIs.

- The qualified DP shall open a demat account for the QFIs after ensuring all therequirements as per the PMLA, FATF standards and SEBI circulars issued in thisregard.

- For the purpose of account opening, MF can rely on the KYC done by DPs. Further,MF shall obtain the relevant records of KYC/ other documents from the DP and

ensure compliance with para 3.14. However, MF shall comply with PMLA, FATFstandards and SEBI circulars issued in this regard from time to time on an ongoingbasis.

- The qualified DP shall open a separate single rupee pool bank account with adesignated AD Category -I bank, exclusively for the purpose of investments by QFIsin India.

- Process flow

Subscription

The QFIs shall place a purchase/ subscription order mentioning the name ofthe scheme/MF with its DP and remit foreign inward remittances throughnormal banking channel in any permitted currency (freely convertible) directlyto the single rupee pool bank account of the DP maintained with a designatedAD category - I bank.

DP in turn shall forward the purchase order to the concerned MF and remitsthe money to the MF’s scheme account on the same day as the receipt of fundsfrom QFIs. In case of receipt of money after business hours, DP shall remit the

funds to MF scheme account by next business day.

If for any reasons, the DP is not able to remit the money to the MF scheme

account within the stipulated timeframe as mentioned in 4.7.2, the DP shallimmediately return the money to the designated overseas bank account of theQFIs.

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MF shall process the order and credit units into the demat account of the QFIs.

If for any reasons the units are not allotted, MF / DP shall ensure that themoney is remitted back to the QFI’s designated overseas bank account within 3working days from the date of receipt of subscription of money in the single

rupee pool bank account of the DP maintained with a designated AD categoryI bank.

Redemption

QFIs can redeem, either through Delivery Instruction (physical/ electronic) orany another mode prescribed by the Depositories. On receipt of instructionfrom QFIs, DP shall process the same and forward the redemption instructionsto the MF. Upon receipt of instruction from DP, MF shall process the same and

shall credit the single rupee pool bank account of the DP with the redemptionproceeds.

The DP can make fresh purchase of units of equity and debt schemes of MF (ifso instructed by the QFIs) out of the redemption proceeds received providedthat payment is made towards such purchase is made within two workingdays of receipt of money from MF in the pooled bank account. In case nopurchase is made within said period, the money shall be remitted by the DPsto the designated bank overseas account of the QFIs within two working daysfrom the date of receipt of money from the MF in the pooled bank account.

Dividend

In case of dividend payout, the MF shall credit the single rupee pool bankaccount of the DP with the dividend amount. The DP in turn shall remit the

same to the designated bank overseas account of the QFIs within twoworking days from the date of receipt of money from the MF in the DP’srupee pooled bank account.

Other conditions for Indirect route( Unit Confirmation Receipts)

- There shall be four parties involved - QFIs, UCR issuer (based overseas), SEBIregistered Custodian (based in India) and MF.

- QFIs can subscribe / redeem only through the UCR Issuer.

- MF shall appoint one or more UCR issuing agent overseas and one SEBI registeredcustodian in India.

- UCR issuer appointed by MF shall act as agent of the MF.

- MF can appoint entities fulfilling the following conditions as UCR issuer:

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The entity is able to demonstrate that it has proven track record, expertiseand technology in the business of issuance of global depository receipts/global custody agency.

The entity is registered with an overseas securities market / banking

regulator.

- MF shall seek no objection from SEBI before appointing any UCR issuer and furnishthe details and information sought by SEBI about the UCR issuer. SEBI reserves theright to seek additional information / clarification and direct action, including nonappointment / revocation of appointment of that UCR Issuing Agent.

- MF shall comply with all the requirements as per the PMLA, FATF standards andSEBI circulars issued in this regard on an ongoing basis.

- Custodians appointed by the MF shall comply with the SEBI (Custodian of Securities)Regulations, 1996, circulars and guidelines issued by SEBI.

- The rupee denominated units of the MF would be held as underlying by the custodianin India in demat mode against which the UCR issuer would issue UCR to be held by

QFIs.

- MF shall ensure that for every UCR issued by UCR issuer, Custodian in India shall

hold corresponding number of units against it i.e., there shall be one unit of MFscheme for every unit of UCR.

- MF shall receive money from UCR issuer either in foreign country by opening bankaccount overseas (in accordance with the relevant extant FEMA regulations) or inIndian rupees in the respective MF scheme account held in India.

- MF shall mandate the UCR issuer regarding the requirements for KYC, Customer duediligence process and documents and information to be collected from the QFIs interms of the requirements mentioned in para 3.13 above

- MF shall obtain the relevant records of KYC/ other documents from the UCR issuer inorder to comply with FATF standards, PMLA and SEBI circulars issued in this regardand ensure compliance with para 3.14.

- Units purchased and redeemed through UCR issuer shall be settled on gross basis andunder no circumstances shall be netted against other investors of UCR issuer

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- Process flow:

The QFIs places a purchase/ subscription order through the UCR issuer.

In case of MF opening bank account overseas (in accordance with the relevant

extant FEMA regulations)

UCR issuer shall forward the order of QFIs to the MF/Custodian. Upon receipt

and transfer of funds to India; the MF shall issue units to the custodian andcustodian in turn confirm to the UCR Issuer to issue UCR to the QFIs.

In case of redemption, UCR issuer shall confirm receipt of redemption requestto the MF and Custodian. Upon receipt of instruction, MF shall process thesame and shall transfer the redemption proceeds to the MF overseas bankaccount for making payment to the designated overseas bank account of the

QFIs.

In case of dividend payout, the MF shall transfer the dividend amounts to theMF overseas bank account for making payment to the designated overseasbank account of the QFIs.

In case MF receives money in India from UCR issuer.

UCR issuer shall forward the purchase order to MF and Custodian, and remitthe funds into MF scheme account (in rupee terms). Upon receipt of funds; theMF shall issue units to the custodian and custodian shall in turn confirm to theUCR Issuer to issue UCR to the QFIs.

In case of redemption, UCR issuer shall confirm receipt of redemption requestto the MF & Custodian. Upon receipt of instruction, MF shall process andremit redemption proceeds to the UCR issuer which in turn shall remitredemption proceeds to the designated bank account of the QFIs.

In case of dividend payout, the MF shall remit the dividend amount proceedsto the UCR issuer which in turn shall remit the dividend amount to thedesignated bank account of the QFIs.

The investment by the QFIs in MF equity and debt schemes under this scheme shall also

be subject to the relevant and extant FEMA regulations and guidelines issued by theReserve Bank of India under FEMA, 1999 from time to time.

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8/3, 2nd Floor, W.E.A, Karol Bagh, New Delhi-110005


Text of the relevant Annexure as mentioned in the circular

Daily data on QFI Investment in Mutual Funds

A) QFI investments in equity schemes

B) QFI investments in debt schemes

C) Total QFI investments in equity and debt schemes

Mutual Funds shall report on actual receipt and payment basis (cash system)

Mutual Funds shall aggregate the data received from Custodian and Depositories on adaily basis and report

The RBI reference rate may used for reporting the amounts in US $.

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CIRCULAR - CIR/DNPD/7/2011DATED AUGUST 10, 2011

SHORT-COLLECTION/NON-COLLECTION OF CLIENT MARGINS(DERIVATIVES SEGMENTS)


In consultation with BSE, MCX-SX, NSE and USE, SEBI has been decided that StockExchanges shall levy penalty specified hereunder on trading members forshortcollection/ non-collection of margins from clients in Equity and Currency

Derivatives segments:

For each member

‘a’ Per day Penalty as %age of ‘a’

(< Rs 1 lakh) And (< 10% of applicablemargin)

0.5

(≥ Rs 1 lakh) Or (≥ 10% of applicablemargin)

1.0

Where a = Short-collection/non-collection of margins per client per segment per day

If short/non-collection of margins for a client continues for more than 3 consecutive days,then penalty of 5% of the shortfall amount shall be levied for each day of continuedshortfall beyond the 3rd day of shortfall.

If short/non-collection of margins for a client takes place for more than 5 days in amonth, then penalty of 5% of the shortfall amount shall be levied for each day, during the

month, beyond the 5th day of shortfall.

Notwithstanding the above, if short collection of margin from clients is caused due to

movement of 3% or more in the index (close to close value of Nifty/Sensex for all equityderivatives) and in the underlying currency pair (close to close settlement price ofcurrency futures, in case of all currency derivatives) on a given day, (day T), then, thepenalty for short collection shall be imposed only if the shortfall continues to T+2 day.

All instances of non-reporting shall amount to 100% short collection and the penalty as

applicable shall be charged on these instances in respect of short collection. 6. If duringinspection it is found that a member has reported falsely the margin collected fromclients, the member shall be penalized 100% of the falsely reported amount along withsuspension of trading for 1 day in that segment.

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The penalty shall be collected by the Stock Exchange within five days of the last workingday of the trading month and credited to its Investor Protection Fund.

SEBI shall examine implementation of this circular during inspection of the StockExchange.

The circular shall come into force from September 1, 2011.

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