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The Committee on Review of Eligibility Norms, constituted by markets regulator Securities and Exchange Board of India, has come out with its initial set of recommendations on which the regulator has invited public comments.
The 18-member panel, which was formed to revisit the eligibility norms and other functional aspects for various market intermediaries, has proposed changes in areas like net worth capital and infrastructure requirements for various market intermediaries.
The committee, which had representations from stock exchanges, law firms, brokerages and depositories, among others, reviewed the eligibility norms for market intermediaries including merchant bankers, asset management companies (AMCs), credit rating agencies, brokers and depositories. Public comments can be submitted until June 14.
A sub-group of the committee has recommended increasing the minimum net worth requirement for AMCs to Rs 50 crore from the current Rs 10 crore. The panel's report says that a higher net worth for AMCs is required to build up the minimum infrastructure sufficient to service investors. It, however, has added that existing AMCs should be given an appropriate period to build up their net worth.
On the credit rating agencies, the committee has recommended a deadline to separate the analytical and business development teams to prevent any conflict of interest. Given the vital role debenture trustees (DTs) play in securitised issues, the panel has recommended a higher net worth of Rs 2 crore to account for inflation.
Another sub-group of the committee has recommended a core capital of Rs 10 crore for merchant banking business, while that for registrar and transfer agents, the same has been recommended at Rs 1 crore and Rs 50 lakh, respectively.For custodians, net worth should be replaced with core capital, set at Rs 100 crore, says the committee.
Interestingly, different sub-groups have recommended different net worth requirements for the same intermediary. For example, the net worth for merchant bankers has been recommended at Rs 10 crore and Rs 5 crore by different sub-groups.
Stock brokers, says the committee, should have a net worth of Rs 1 crore in the corporate category and Rs 75 lakh for others. This should be raised to Rs 3 crore by 2012 and to Rs 1 crore for brokers with regional stock exchanges, it suggests. Another sub-group has recommended a minimum capital of Rs 5 crore for stock brokers and 12-15 per cent of net position as additional capital. Meanwhile, the committee has also recommended disbanding of sub-brokers as a category. Another sub-group says sub-brokers need not be registered unless such they issue contract note on its name.
