Slew of measures to boost investor confidence

Process of demutualisation and corporatisation of stock exchanges is expected to be completed during the course of the year

Union Finance Minister Yashwant Sinha told Parliament today that in view of the various disturbances that have occurred in the capital market it is important to boost investor confidence and to strengthen market integrity.

Accordingly, the following measures are being taken :

1.The process of demutualisation and corporatisation of stock exchanges is expected to be completed during the course of the year, to implement the decision to separate ownership, management and operation of stock exchanges. The Securities and Exchange Board of India (SEBI) has already prohibited the induction of broker members in management positions in stock exchanges.

2.Legislative changes will be proposed, during the Budget Session, in the SEBI Act, 1992 for investor protection, and to enhance the effectiveness of SEBI as the capital market regulator.

3.Following certain developments overseas, and within the country, regarding accounting standards and effectiveness of auditors, it is proposed to strengthen regulation in this area.

4.Foreign institutional investors (FIIs) can invest in a company under the portfolio investment route beyond 24% of the paid-up capital of the company with the approval of the general body of the shareholders by a special resolution. Now FII portfolio investments will not be subject to the sectoral limits for foreign direct investment except in specified sectors. Guidelines in this regard will be issued separately.

Further, measures have been taken to develop and deepen the capital market like:

1.Badla trading has been banned and practically all trading of stocks is now in the rolling settlement mode.

2. Exchange traded derivatives have become wider with a greater choice of instruments and deeper in terms of liquidity.

3.Individual stock options and index stock options were introduced in July 2001, and individual stock futures in November 2001.

4. Foreign Institutional Investors (FIIs) are now permitted to trade in all stock traded derivative products within specified trading limits.

5. An Investor Education and Protection Fund has been set up from October 1, 2001 to credit certain unclaimed and unpaid amounts.

6. A package of measures for reforming the US-64 scheme and the Unit Trust of India (UTI) has been announced which seeks to balance investors' interest while ensuring systemic safety. The long overdue reform for making US-64 NAV based has been implemented. Further legislative changes in the UTI Act to put in place other needed reform measures will be proposed during the year.

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