Sunday, June 15, 2014

Complete liberty on pricing of public issues


  • Complete liberty on pricing of public issues has resulted into manipulation of financial statements, false turnover, manipulations of profitability as well as share prices in the formal as well as grey market. It is important to prescribe that in case the actual share price went below 10% of the issue price in the 1st year, then on the basis of average price during the year, the number of shares allotted to the public shareholders will be proportionately increased to compensate. The promoters may also have the freedom to bring in additional money at same price. It will eradicate the lure of manipulating price & will bring back confidence of the investor in the new issues. Investor protection through immaculate regulatory mechanism & strong governance practices should be in place.
  • Investor Courts to be established at district level, state level and national level, in lines of Consumer Courts, to enable investor to claim compensation arising out of mis-statements in prospectus, financial statements and reports.
  • Independence of Auditors: The majority shareholders, shareholders in-charge of management and promoter of public interest companies, to be prohibited to vote at Audit committee as well as at AGM in respect of Auditors appointment, remuneration and removal, being an interested party. Similarly, collaborators, JV partners or investors including FII and non- residents holding 10% or more shares should not be able to influence the appointment, remuneration, removal, retirement of auditors. Alternatively, Joint Statutory Auditors may be appointed by minority shareholders, excluding the aforesaid classes.
  • Derivatives promoting Gambling and Price Fluctuation: Buying and Selling of derivative in the stock exchanges, currency exchanges as well as commodity exchanges have only fuelled speculation and manipulation and have not served the real purpose of hedging. This has actually become organized and legalized betting, gambling and has given birth to legal casinos all across the nation. Derivative Trading should be restricted only to hedging.
  • SEBI functions should be restricted to regulation and vigilance. The investigation wing and the adjudication (involving prosecution and imposing fine) to be undertaken by independent separate wing of the government. The judiciary should only be authorized to impose fines, penalty and prosecution, except minor fines for very routine administrative matters that can be within the purview of SEBI's powers.

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