Sebi’s move is absolutely welcome: PwC India

Sebi’s move is absolutely welcome: PwC India

Dinesh Kanabar, Tax Head, PwC India feels that in any emerging market, you need to move towards maturity and maturity requires transparency, maturity requires regulation and from that perspective, he believes that Sebi’s move is absolutely a welcome move. He thinks that some of M Damodaran’s announcements today were very heartening.

Q: This move towards regulating the markets, what is your take on the transitional and how its been handled?

A: In any emerging market, you need to move towards maturity and maturity requires transparency, maturity requires regulation and from that perspective. I would like to believe this is absolutely a welcome move and I thought as I heard the Sebi chief today, he made some announcement which were very heartening.

Q: Such as?

A: One has to see the fine print. But the fact that the one-year timeframe which one needs a track record, is something, which it is willing to relook at it. If you look at when you register as an FII, what are the two key concerns which come in.

One is that you need a one-year timeframe. Second is the issue that you need to be registered regulated in the country where you are setup in the home country. Both of these are areas of concern. So far as one-year is concerned, it becomes a real big issue because over the last one-year, there have been several India funds which have been setup; India being the flavour of the day.

And if these funds suddenly cannot make investment because I’m aware of several funds which have raised hundreds of millions of dollars specifically, India-specific and these are not proprietary books. The question is how will they make investments suddenly with this new regime and therefore, the ability of the regulator to go beyond this one-year mechanism; look for example the track record of the people who are managing it or what is the other transparency which is available is very critical factor. Second issue is that one always wants regulated money.

But the question is that there are certain funds, which could have been actually registered and not regulated is that sufficient? Is that not sufficient?

So bit of discretion available in the transitionary phase, which is going to be something, which is very welcome, and today as I heard Mr. Damodaran he was open to this, he was welcoming those suggestions and will probably incorporate some of those when things come out on 25th.

Q: Did you feel at all in the interaction that Mr. Damodaran had with FIIs, that on October 25, there would be a softening or some kind of relaxing in the stance that Sebi has taken in the proposals?

A: There are two things, one is a procedural aspect, which has become a very significant roadblock. It was how long does it take for an FII to be registered and the apprehensions to whether Sebi will be quick on its feet.

Mr. Damodaran made a categorical statement, which is very welcome. It was that they will be quick on their feet. Somebody misunderstood the 24-hour notice to mean that they get registered in 24 hours and that cannot happen. Of course, Mr. Damodaran did say that there are FIIs which submitted incomplete applications and things like that, but those are few and far between.

Q: Are there language problems and stuff like that?

A: What is needed is a clear set of guidelines, which should come out, because this is a procedure and not a law. Therefore, its not documented and anything that is not documented, anything which is not in the public domain and of which people are not aware how to tackle becomes a subject matter of discretion and that is something which causes anguish.

For example- we as advisors tell FIIs what they need to do to qualify to be registered with Sebi. When you do not have transparent guidelines, problems arise.

Today, what Mr. Damodaran said is that he is willing to quicken the process and hopefully, it will come out with a transparent set of guidelines. So, that is going to soften the blow very significantly.

Q: Have you heard anything on the buzz about turnover tax perhaps being coming in on P-notes?

A: All sets of rumors are going around. I do not think I have heard anybody talk concretely about this matter. But there has been this issue that when P-notes get sort of unofficially traded, there is no security transaction tax. Probably the rumor seems to be around that instead of a security transaction tax, can we have a turnover tax on P-notes. I do not know whether it is feasible and how it can be monitored. But that seems to be the discussion going around.

Q: Ever since these proposals came to light and into the public arena, there has been this question of whether these moves were being made to control the quantum of flow or to monitor the quality of flows. Is there any light on that debate?

A: I do not know as I saw the three page policy paper which came out. It categorically speaks of both quality and quantity and one was a bit surprised with that.

But today as we heard Mr. Damodaran, he was quite clear that he was not worried about the quantum of flows. He had no concerns with that, he was only worried about the quality of the flows.

Q: In fact I thought that the Finance Minster in New York said something that was not really exactly what Mr. Damodaran was saying, isn’t it?

A: Today, the fears seemed to be allayed. To say that we are really looking at transparency and that was the buzz word. But the policy paper is in black and white and speaks about both quality as well as quantity.



Other related stories:

Sub A/Cs need to inform within 24 hrs to register: Sebi
Foreign money welcome, only through front door: FM
Were FIIs concerns addressed?
How does Sebi's talk impact sub A/cs?
Sebi move to help achieve stable mkt: Oppenheimer
PNs can invest in India, but as FIIs: FM


SEBI justifiably nervous of Participatory Notes
SEBI has enough replies on P-Notes curb
SEBI probing FII price manipulation in crash
SEBI to make FII registration public





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