Banning of Unregulated Schemes Ordinance, 2019

In the aftermath of the Saradha scam, the Standing Committee of Finance (Committee) in its 21st report dated September 21, 2015 suggested the introduction of a comprehensive regulatory framework governing all entities engaged in activities involving acceptance of deposits from the public. While making this recommendation, the Committee observed that certain entities were engaged in financial as well as non-financial activities and therefore, it was difficult to identify the appropriate regulator for such entities. Such entities fall under the jurisdiction of various regulatory bodies and in spite of overlapping regulations, several such entities were not regulated by any regulator.

In view of the suggestions of the Committee, a high level Inter-Ministerial Group (Group) was formulated for identifying gaps in the existing regulatory framework. The Group suggested the enactment of a comprehensive central act to criminalise the solicitation, promotion, acceptance and/or operation of ‘unregulated deposit schemes’. In line with the recommendations of the Committee and the Group, the Banning of Unregulated Schemes Ordinance, 2019 (Ordinance) was promulgated on February 21, 2019. Continue Reading The Banning of Unregulated Schemes Ordinance, 2019

Prohibition of Insider Trading Regulations 2015 in India , Amendments

 

The Securities and Exchange Board of India (SEBI) ended the year with a bang by issuing a number of notifications on December 31, including the SEBI (Prohibition of Insider Trading) (Amendment) Regulations, 2018 (PIT Amendment Regulations). The PIT Amendment Regulations come into force on April 1, 2019 and will have significant impact on the manner in which listed companies and intermediaries navigate the market conduct framework. Continue Reading A New Year Ushers in the Insider Trading Regulations, 2015 Version 2.0

Last month, the Securities Appellate Tribunal (SAT) passed an order in favour of Factorial Master Fund[1] (Factorial). This overturned the order of the SEBI Whole Time Member who had held that Factorial had contravened the provisions of the SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations) by trading in the securities of L&T Finance Holdings Limited (LTFH), while in possession of unpublished price sensitive information (UPSI).
Continue Reading The Sound of SEBI’s Silence: Will the Factorial Order Change the Rules of the Game?

Technological innovation is the new normal in the financial services sector. The evolution of every aspect of this industry in the past few years has been truly transformational, whether it is access to funds, demand creation/aggregation or even payment systems. The inception and growth of peer-to-peer (P2P) lending platforms in India is one such example. P2P platforms effectively function as an online marketplace for lenders and borrowers, for a commission. A need for regulatory oversight was considered by the Reserve Bank of India (RBI), given the recent rise in the number of such operators and their integration into the financial services sector.

The RBI outlined its proposal to regulate such platforms in its consultation paper issued last year. Following notification on August 24, 2017 categorising P2P lending platforms as Non-Banking Financial Companies (NBFCs), the RBI has finally issued its widely anticipated master directions on October 04, 2017 (Master Directions).

Continue Reading One Size Fits All? Regulating Peer-To-Peer Lending Platforms

Offshore Derivative Instruments (ODI) have been a focal point for the Government in India and over the years, the regulatory boundaries of doing business in this space have been re-aligned by the Securities and Exchange Board of India (SEBI), quite frequently.

As a part of SEBI’s efforts towards increasing transparency and accountability in the ODI space as well as encouraging direct investments through the foreign portfolio investment (FPI) route, the SEBI Consultation Paper of May 29, 2017, titled ‘On streamlining the process of monitoring of Offshore Derivative Instruments (ODIs)/ Participatory Notes (PNs)’, proposed prohibiting the issuance of ODIs against derivatives, except for those used for hedging. SEBI had invited public comments on the matter until June 12, 2017. Thereafter, at a board meeting on June 21, 2017, the SEBI board approved this proposal, with the minutes specifically stating that “The Board has decided to prohibit ODIs from being issued against derivatives, except those which are used for hedging purposes. SEBI will issue a circular in this regard.

The question now is whether this is the right approach to bringing down volumes in speculative trades being undertaken in the derivatives market.

Continue Reading SEBI Circular on ODIs: Step too Far or the Right Balance?

India has historically been an economy driven by cash. With unique population demographics and modest literacy levels, it is a difficult market to “digitalise”. However, over the past decade, urban India has seen a significant rise in the use of pre-paid cards, mobile banking, internet wallets and e-payment instruments, in their various guises. They have created a relevant market of their own.

However, in the past few months, and as a consequence of the recent demonetisation, India has been witnessing a new wave of financial technology, with the introduction of innovative products and a wider customer base. Increased penetration has also compelled both the regulators and government to renew their focus on this migration to a “cashless” society. Consequently, the regulatory framework governing e-commerce and financial technology has seen various amendments recently.

Payment Systems in India

In India, the payment and settlement systems are regulated by the Reserve Bank of India (RBI), which exercises oversight over this market. Payment systems are required to obtain authorisation from the RBI to enable payment between a payer and a beneficiary; and while effecting such payment, they should provide payment, clearing and/or settlement services. Set out below are the key payment systems covered under the regulatory framework.

Continue Reading Payment Systems – The Digitalisation of Financial Services and its Future