CRB Capital Markets Fixed Deposits / Bonds Refund procedure (1996 issue)


There is a public notice dated 28/04/2011 issued by the Chairman of Disbursement Committee of  CRB Capital Markets Ltd. giving details of how investors of CRB capital markets can get refund of their investments.

The conditions are …
(1) Only investments less than 50,000 will be refunded
(2) Only principal will be refunded (not interest)
(3) The claimant has to be in the list of admitted FD / Bond Holders

The list can be obtained / downloaded at Official liquidator of Delhi High Court page, click on links to excel files in entries 13 , 14 and 15 (most investors will fall in to list 15)

The documents to be submitted are  :

1.Original Fixed Deposit Receipt / Bond duly discharged
(In case FD Receipt / Bond has already been submitted, please attach proof of 
submission)
2.Proof of identity in the shape of copy of Voter ID Card / PAN Card / Passport
3.Bank account details


The documents are to be sent at the working office of the committee which is :


Chairman
CRB Capital Markets Ltd.
Disbursement Committee

13, Panchkuin Road (Backside),
 New Delhi-110001. 

email of the committee  crb.disbursementcommittee@gmail.com 




Secured Non-convertible Debenture of India Infoline Investments Services Ltd. (IIISL NCD)

Public issue of secured non-convertible debentures of India Infoline Investments Services Ltd. (IIISL NCD) expected to open in first week of August 2011.




For more details keep watching this place  … 

India Infoline Investment Services Limited (IIISL or “the Company”), an NBFC subsidiary of India Infoline Limited (IIFL) will open, its maiden public issue of Secured Redeemable NCDs of the face-value of Rs. 1,000 each aggregating to Rs. 375 crore, with an option to retain over-subscription up to Rs. 375 crore, aggregating up to a total of Rs. 750 crore (the “Issue”). The NCD Issue with 3 investment options and yield on redemption of up to 11.90% (per annum) opens on August 4, 2011 and closes on August 12, 2011.
The NCDs will be listed on National Stock Exchange and Bombay Stock Exchange and will have a tradable lot size of 1 NCD. The face value of NCD is Rs.. 1,000 and minimum application is Rs. 5,000.

The proposed NCDs have been rated ‘[ICRA]AA- (stable)’ by ICRA, and ‘CARE AA-‘ by CARE, indicating high degree of safety for timely servicing of financial obligations.
There are three investment options:
Option I (Annual interest payment): The redemption date or maturity period is 36 months from the deemed date of allotment and the coupon rate is 11.7% p..a. The interest payment is annual and the face value plus any interest that may have accrued is payable on redemption.

Option II:.. NCDs will be redeemed at Rs 1446.18 at the end of 40 months from the deemed date of allotment with an effective yield of 11.7% per annum.
Option III (Annual interest payment): The redemption date or maturity period is 60 months from the deemed date of allotment.  The coupon rate is 11.9% p.a. for Category III investors and 11.7% p.a. for others. The interest payment is annual and the face value plus any interest that may have accrued is payable on redemption.
The funds raised through this Issue will be used by the Company for various financing activities.

IDFC Long Term Infrastructure Bonds U/s 80 CCF

Salient features of the issue:
❖ First public issue of bonds by an infrastructure finance company under Sec 80 CCF.
❖ Credit rating agency ICRA has rated the Bonds under this offer as “LAAA” with stable outlook, indicating highest safety.
❖ These bonds will be issued only to Resident Indian Individuals (Major) and HUF.
❖ The bonds are fully secured with first floating pari pasu charge over certain receivables of the Company and first fixed pari pasu charge over specified
immovable properties of the Company. The security cover is 1.0 times of the outstanding Bonds at any point in time.
❖The Bonds bear an attractive combination of coupon rate ranging between 7.5% and 8% p.a coupled with tax benefits of upto Rs. 20,000 under Sec 80 CCF.
❖ There are 4 investment options, suiting the needs of different categories of investors.

❖ No TDS shall be deducted.
❖ The bonds will be listed on NSE & BSE and can be traded after the 5 year lock – in period.
❖ Investors can mortgage or pledge these bonds to avail loans after the lock-in period.
❖ Under Section 80 CCF of the I.T. Act, an investor in such infrastructure bonds will be entitled to tax deduction of investments of up to Rs. 20,000. The deduction is over and above the Rs. 1,00,000 deduction available under section 80C, 80CCC & 80CCD read with section 80CCE.

Issue Highlights
❖ Issue size: Rs. 3,400 cr in one or more tranches.
❖ Face value: Rs. 5,000.
❖ Minimum Application: Rs. 10,000 or 2 bonds.
❖ Lock-in Period: 5 years.

Issue summary:
❖ Issue opens: 30th Sept 10
❖ Issue closes: 18th Oct 10
❖ Lead managers: ENAM Securities Private Limited, Citigroup Global Markets, Kotak Mahindra Capital Co.Ltd.
❖ Registrar: Karvy Computershare Pvt. Ltd. Debenture Trustees: IDBI Trusteeship Services Ltd.
CREDIT RATING BY ICRA : LAAA
ISSUE T&C :

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Introduction of IFCI INFRASTRUCTURE BONDs for Tax savings u/s 80CCF

Key, features and notification of IFCI Infrastructure Tax Saving Bonds u/s 80CCF :

1. This bonds will be called “Long Term Infrastructure Bond”
2. New section can be availed by individual or HUF only.
3. An Individual or HUF can invest Rs. 20000/- in a Financial year to avail deduction under section 80CCF
4. Rs. 20000/- limit is in addition to 100000/- limit of section 80C, 80CCC, 80CCD
5. The effective tax saving arising on the investment would be 6,180/- (30% tax+ 3% education cess) for investors in highest tax bracket.
6. Tenure of the Bonds will be 10 Years.
7. However Lock in period is 5 years ,after 5 years investor can withdraw money from the bonds
8. After lock in period, Investor can take loan against these Bonds

Section 80CCF of the Income-tax Act, 1961 : – Deduction – In respect of subscription to long-term infrastructure bonds – Notified long-term infrastructure bond. Investments up to Rs.20,000 in a financial year are eligible for tax benefit

HIGHLIGHTS
Issuer
IFCI Limited(“the Issuer”)
Instrument
Long term Infrastructure Bond having benefits under section 80 CCF of the Income Tax, 1961
Tax Benefit
Maximum tax saving of Rs. 6,180/- by investing Rs. 20,000/- in Long Term Infrastructure Bond
Eligible Investors
Resident Indian Individuals who are major and HUF
Face Value
INR 5,000/- each
Minimum Subscription
1 Bond and in multiples of 1 Bond thereafter
Tenure
·         10 years, and
·         10 years with a buyback option after five years
Investment Options
The Bonds are proposed to provide the following options –
·         Option I – Non-cumulative and Buyback after 5 years
·         Option II – Cumulative and Buyback after 5 years
·         Option III – Non-cumulative and no Buyback
·         Option IV – Cumulative and no Buyback
Interest rate
7.85% – 7.95% p.a. as per option availed
Listing
Proposed to be listed on BSE
Minimum Lock-in
Five years
Issuance
Demat form only
Allotment Date
September 15, 2010

NOTE : Demat account is necessary to invest as bonds are only available in demat mode.

Available Options for investment in Infrastructure Bonds.
 

Options I II III IV

Buyback / Non Cumulative Option Buyback / Cumulative Option Non Buyback / Non Cumulative Option Non Buyback / Cumulative Option
Minimum Application / Face Value 5,000/- 01/05/00 5000/- 01/05/00
In Multiples of 01/05/00 5000/- 01/05/00 5000/-
Buy Back Option Yes Yes No No
Interest Payment Yearly NA Yearly NA
Coupon 7.85% per annum 7.85% to be compounded annually 7.95% 7.95% to be compounded annually
Yield on Redemption 7.85% 7.85% 7.95% 7.95%
Coupon Payment Date* September 15 every year NA September 15 every year NA
Redemption Date September 15, 2020 September 15, 2020 September 15, 2020 September 15, 2020
Buy Back Period Every Year Between August 16 to August 31, starting from Year 2015 till Year 2019 Every Year Between August 16 to August 31, starting from Year 2015 till Year 2019 NA

Redemption Amount (in case the buyback option is exercised)       

Options I II III IV

Buyback / Non Cumulative Option Buyback / Cumulative Option Non Buyback / Non Cumulative Option Non Buyback / Cumulative Option
Year 6 5000 7868/-
Year 7 5000 8486/-
Year 8 5000 9152/-
Year 9 5000 9871/-
Year 10 5000 10646/- 5000 10745

Life insurers must reveal commission on policies

28 Apr 2010 IRDA

 

MUMBAI/NEW DELHI: Life insurance firms will now have to spell out to customers the commission they pay to agents on each policy.

 

The insurance regulator has told insurers to disclose explicitly the commission in the `benefit illustration’, a document that contains the benefits due to a policyholder upon maturity of an insurance policy.

 

A signed copy of the illustration along with the proposal form is mandatory for issuing a policy. In a circular to all life companies, the Insurance Regulatory and Development Authority (Irda) said companies will have to disclose the commission paid to agents with effect from July 1, 2010.

 

The regulator said this will bring about enhanced transparency by providing prospective policyholders the exact amount of commission/brokerage paid by insurers.

 

The circular is seen by life insurers as a fallout of the tussle between capital market regulator Sebi and Irda over regulating unit-linked insurance plans (Ulips), which have emerged as the hottest investment product in recent years.

 

Most insurers feel that Sebi has attempted to regulate Ulips after mutual funds complained that the bar on agent commission put them at a disadvantage to companies offering products similar to mutual funds. Irda’s latest directive could strengthen the case for life firms when the dispute reaches the courts.

 

The Irda move comes seven months after Sebi’s ban on entry loads on mutual funds took effect. Entry loads essentially arise out of commissions paid by mutual funds and the ban on loads effectively stopped them from recovering the commission money from investors. The decision also comes less than five months after the Reserve Bank of India (RBI) asked banks to disclose the commission on policies sold by them.

 

Insurance companies have resisted this move all along. However, in November `09, RBI forced banks to disclose the commission they receive for policies sold by them. “If you buy soap, the shopkeeper does not disclose what he earns on the sale. Why should it be any different for life policies,” said the CEO of a life company when questioned on disclosures.

 

However, of late, a section of the industry has come around to the view that such disclosures would be inevitable, particularly after the Irda-Sebi spat over Ulips and lobbying by mutual funds over high commissions paid on these products. “We welcome this move and look forward to working with Irda on disclosures. We also feel that the time is ripe for legalising rebates,” said a spokesperson for Bajaj Allianz Life Insurance.

 

“We are maturing as an industry and this will further help establish insurance products as a viable long-term investment option,” said Rajesh Relan, managing director, MetLife India Insurance Company.

 

Life insurance companies said the immediate impact of the disclosure would drive many insurance agents to rebate commissions. Although rebating commissions, giving back a slice of the money to policy buyers, is illegal, a large section of agents has been passing on commissions collected under traditional policies.

 

But after the life industry shifted to Ulips, rebating of commissions had come down as policyholders were given the impression that most of the premium was going into their account.

 

Internationally, rebates of commission are allowed and in many countries an agent can claim tax relief if he uses part of his commission to pay premium on behalf of his client. In India it is not possible for the regulator to allow commissions as this would require an amendment to insurance laws.

IRDA SEBI standoff FM intervenes

For the time being, investors as well as insurance companies can breath easy. Thanks to Finance Minister Pranab Mukherjee‘s mediation, status quo has been restored as far as the popular unit-linked insurance products (ULIPs) are concerned.

 

“Status quo ante has been restored on ULIPs,” Mukherjee was quoted as saying to the reporters in New Delhi after holding a meeting with the chairpersons of SEBI and IRDA.

 

Both the regulators, who are fighting tooth and nail with each other over ULIPs, would now jointly approach court to resolve the impasse for them. Insurance companies can continue to sell ULIPs till the court delivers its legally binding verdict on the contentious issue.

 

“To resolve any ambiguities and to ensure smooth functioning in the markets, the two regulators have agreed that they will jointly seek a binding legal mandate from an appropriate court,” Mukherjee is believed to have said.

 

Earlier today, SEBI chairman C.B. Bhave and IRDA chairman J. Hari Narayan met Finance Secretary Ashok Chawla and other Finance Ministry officials separately to present their case on the matter.

 

“Existing policy holders are completely safe, their claims and products are safe… there is no cause for anxiety at all,” IRDA Chairman, Harinarayan reportedly told media persons in the capital.

 

Though the two regulators have had differences for a while over the issue of who should regulate ULIPs, the same reached a flashpoint last weekend.

 

SEBI on Friday announced a ban on sales of ULIPs by 14 private insurance companies, saying they needed to register with the capital markets regulator before selling these products. Reports suggested that SEBI may impose a similar ban on nine other insurance companies, including LIC.

 

The IRDA on Saturday issued an order asking all insurance companies to continue selling ULIPs.

 

ULIPs are similar to mutual funds with an added life cover.

SEBI bans 14 insurance cos from selling ULIPs

The original SEBI order passed on 09/04/2010 is as follows

WTM/ PS /IMD/06/APR/2010
BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA
CORAM: PRASHANT SARAN, WHOLE TIME MEMBER
ORDER
DIRECTIONS UNDER SECTIONS 11 and 11B OF THE SECURITIES AND
EXCHANGE BOARD OF INDIA ACT, 1992 READ WITH SECTION 12(1B)
THEREOF.
1. It has been noticed that the following entities have launched several Unit Linked
Insurance Products (ULIPs) :-
a. Aegon Religare Life Insurance Company Limited
b. Aviva Life Insurance Company India Limited
c. Bajaj Allianz Life Insurance Company Limited
d. Bharti AXA Life Insurance Company Limited
e. Birla Sun Life Insurance Company Limited
f. HDFC Standard Life Insurance Company Limited
g. ICICI Prudential Life Insurance Company Limited
h. ING Vyasa Life Insurance Company Limited
i. Kotak Mahindra Old Mutual Life Insurance Limited
j. Max New York Life Insurance Co. Limited
k. Metlife India Insurance Company Limited
l. Reliance Life Insurance Company Limited
m. SBI Life Insurance Company Limited
n. TATA AIG Life Insurance Company Limited
2. Since, the ULIPs launched by the abovesaid entities were prima facie found to be
akin to the mutual fund schemes and were launched without obtaining registration
from the Securities and Exchange Board of India (hereinafter referred to as “SEBI”)
1
under the Securities and Exchange Board of India Act, 1992 (hereinafter referred to
as “the SEBI Act”) and the regulations made thereunder, notices were issued to these
entities on January 15, 2010 (except in case of HDFC Standard Life Insurance
Company Limited where the notice was issued on December 14, 2009). SEBI had
sought replies from the said entities as to how the ULIPs were launched without
obtaining the requisite certificate of registration from SEBI and why appropriate
action should not be taken against them under the provisions of the SEBI Act.
3. The entities replied to the aforementioned notices, inter alia, stating that:
a. sub-section (2) and (3) of section 11AA of the SEBI Act provide for conditions
for any scheme or arrangement to be classified as collective investment schemes
and exceptions to the sub-section (2) of section 11AA of the SEBI Act, 1992
respectively.
b. section 11AA (3) excludes contracts of insurance under the Insurance Act, 1938
from the purview of collective investment schemes.
c. ULIP is a life insurance product and not covered under the definition of
“securities” under the Securities Contracts (Regulation) Act, 1956.
d. the predominant feature of a ULIP is insurance cover which is dependent on
human life and the mere existence of an additional investment feature cannot
convert a ULIP into a mutual fund.
e. ULIPs have a mandatory insurance cover which forms a vital and inseparable part
of every ULIP.
f. unlike mutual fund schemes, the linked products are interlinked with the life of
the policy holder.
g. under a ULIP units are only notionally allocated and not physically issued and the
units are created for the purpose of determining the benefits payable under the
policy and are not owned by the policyholder.
h. under a ULIP only the risk on the investment portion lies with the policyholder
while the risk on the life insurance portion vests with the insurer.
i. mutual fund units can be transferred or traded freely whereas the rights and
benefits under ULIPs are transferable or assignable only for limited purpose.
2
j. Unlike a mutual fund, a ULIP is not established in the form of a trust. The fund is
held by the insurance company itself as required under the Insurance Act.
Ancillary features such as fund management, fund management charges etc., are
alone not sufficient to convert a life insurance product into a mutual fund scheme.
k. A ULIP is an insurance contract falling within the ambit of life insurance
business. “Life Insurance business” is defined under Section 2(11) of the
Insurance Act, 1938 inter alia to mean the ‘business of effecting contracts of
insurance upon human life’ or ‘the happening of any contingency dependent on
human life’. The said definition indicates that the policy is dependent on the
happening or the non-happening of an event linked to human life.
l. ULIPs fall under the definition of Life Insurance products. Unit Linked Life
Insurance Business is defined in IRDA (Investment) Regulations, 2000.
Regulation 3(3) states “every insurer shall invest and at all times keep invested
his segregated fund of units linked life insurance business as per pattern of
investment offered to and approved by the policy holders….”
m. “Linked business” is defined in IRDA (Registration of Companies) Regulations,
2000 which means life insurance contracts or health insurance contracts under
which benefits are wholly or partly to be determined by reference to the
underlying assets or any approved index.
n. the product was launched after following appropriate procedures and obtaining
unique identification number from IRDA, which is the regulator in case of life
insurance products. Thus, there was no need to obtain requisite certificate of
registration from SEBI.
4. Before considering the issues involved in the matter, I refer to the relevant provision
of the SEBI Act. Section 12(1B) of the SEBI Act provides as under:
“No person shall sponsor or cause to be sponsored or carry on or caused to be
carried on any venture capital funds or collective investment schemes including
mutual funds, unless he obtains a certificate of registration from the Board in
accordance with the regulations.”
3
5. I have carefully considered the replies of each of the entities, product brochures of
various ULIPs offered by them and the relevant material available on record. Since
the subject matter in the notices issued to the entities is identical and their replies are
substantially similar, I proceed to deal with issues involved in the matter by way of a
common order. Some of the entities have also sought an opportunity of personal
hearing. I note that each entity has been served with separate notices and each of them
has availed of the opportunity of making its written submissions. Therefore, under
facts and circumstances of the case, I do not consider necessary to give an
opportunity of personal hearing to the entities in the matter.
6. The question that arises for my consideration is whether ULIPs offered by the said
entities are a combination of investment and insurance and if so whether the
investment components are in the nature of mutual funds which can only be
offered/launched after obtaining registration from SEBI under section 12(1B) of the
SEBI Act?
7. From the examination of the product documents of such ULIPs, it is noted that in
addition to the insurance component, the ULIPs also have inter alia the following
characteristics –
a. the product is unit linked and money is raised from public through sale of units
to them.
b. the investment risk in chosen investment portfolio is borne by investors.
c. upon untimely death before the expiration date of the policy the policy holder
will be paid either the NAV (Unitized Fund Value) or the sum assured
whichever is higher.
d. upon survival at the maturity of the policy, the policy holder will be paid the
NAV (Unitized Fund value) of the investments.
e. premium will be used to allocate units in the fund chosen by the investor.
f. the product has characteristics such as fund management, fund management
charges, switch and partial withdrawal options.
4
8. It is observed that the various ULIPs launched/offered by these entities offer
investment options with varying degrees of exposure to equity and debt. It is also
noted that in their product brochure for ULIPs, the entities have under the heading
“risks of investments”, inter alia, disclosed and declared that:
a. unit linked life insurance products are different from traditional insurance
products and are subject to risk factors.
b. the premium paid in unit linked life insurance policies are subject to investment
risks associated with capital markets and the unit price of the units may go up or
down based on the performance of the fund and factors influencing the capital
market and the insured/policyholder is responsible for his/her decisions.
9. From the above, I find that the attributes of the ULIPs launched/offered by these
entities are different from the traditional insurance products and they are a
combination of insurance and investment. The attributes of the investment component
of ULIPs launched by these entities are akin to the characteristics of mutual funds
which issue units to the investors and provide exit at net asset value of the underlying
portfolio. The investment component of ULIPs is subject to investment risks
associated with securities markets which are entirely borne by the investors. I also
find that the entities by their own admission have stated that there are two
components of ULIPs – an insurance component where the risk on the life insurance
portion vests with the insurer and the investment component where the risk lies with
the investor. This establishes conclusively that ULIPs are a combination product and
the investment component need to be registered with and regulated by SEBI.
10. Now I proceed to deal with the specific contentions raised by the aforesaid entities.
11. Some of the entities have pleaded that the regulations issued by IRDA are special
laws for ULIPs and SEBI cannot apply the general laws applicable to tradeable
securities such as collective investment schemes or mutual funds to ULIPs. In this
regard, I find that in terms of section 11(1) of the SEBI Act one of the duties of SEBI
is to protect the interests of the investors in securities and to promote the development
5
of, and to regulate, the securities market by such measures as it thinks fit. Section
11(2) of the SEBI Act enumerates certain illustrative measures which can be taken by
SEBI without prejudice to the provision of sub-section (1). One such measure is
registering and regulating the working of collective investment schemes including
mutual funds. To carry out the purposes of sections 11 and 12(1B), SEBI has framed
various regulations including the Securities and Exchange Board of India (Mutual
Funds) Regulations, 1996 and the Securities and Exchange Board of India (Collective
Investment Scheme) Regulations, 1999. The SEBI Act and the regulations made
thereunder are also special laws made/laid before the Parliament and any investment
product or investment contract having any characteristic of securities or exposing
investors to securities market risks is under the jurisdiction of SEBI under the SEBI
Act.
12. It is also contended that a mutual fund is a fund established in the form of a trust for
raising money through the sale of units through the public and established under one
or more schemes for investing in securities. I find that in terms of section 12(1B) of
the SEBI Act “no person” can sponsor or cause to be sponsored a collective
investment scheme including a mutual fund unless he has been registered with SEBI
under the SEBI Act. I note that the emphasis is on the prior registration with SEBI
under the SEBI Act, notwithstanding who that person is. Therefore, an entity which is
not established in the form of a trust cannot launch or offer an investment product in
the nature of mutual fund without being registered with SEBI. The structure of the
entity is immaterial for compliance of section 12(1B) of the SEBI Act. For seeking
registration such person has to establish a trust for launching mutual fund schemes.
Thus, the “trust” structure is not a condition for compliance of section 12(1B) of the
SEBI Act though it is a requirement for getting registered as a mutual fund.
13. It is also contended by the said entities that ULIPs are predominantly life insurance
products having an investment component. In my opinion, if in a combination product
there is an investment component, in any proportion, exposing investors to risks of
6
securities market products, it can be issued only after obtaining registration from
SEBI and compliance of the applicable laws with respect to such component.
14. The entities have contended that the predominant feature of a ULIP is insurance cover
which is dependent on human life and the mere existence of an additional investment
feature cannot convert a ULIP into a mutual fund. Further, it has been said that ULIPs
have a mandatory insurance cover which forms a vital and inseparable part of every
ULIP. In this regard I note from one of the products offered by one of the entities that
for a sum assured of Rs. 15,00,000/- an annual premium of Rs. 1,50,000/- is collected
for 10 years. The premium allocated for insurance out of this is Rs. 7500/- in the first
year and Rs. 3000/- in subsequent years. (The annual premium for a term plan for 10
years for an identical sum assured for an identical life assured by the same company
is Rs. 3,342/-) Here, the insurance component is 2% of the premium paid. The
products offered by other entities also follow a broadly similar pattern. Thus, the
argument that insurance is both predominant and inseparable in a ULIP fails.
15. Some of the entities have contended that even if the ULIP is construed to be a mutual
fund the existing mutual fund regulations lay down terms and conditions which
cannot be complied with by life insurance companies while issuing ULIPs. Further, if
SEBI can regulate ULIPs, the SEBI Regulations as they currently stand cannot be
applied to the unique features of ULIP and since SEBI has not provided any guidance
for insurance companies, they cannot be penalized for any non compliance. I find it
unacceptable and untenable that having admitted ULIP as combination product with
an investment component, the issuers expect that they be allowed not to comply with
the existing Mutual Fund Regulations. The substance and spirit of SEBI Act and
regulations framed thereunder makes an over arching emphasis on investor
protection. It is imperative and incumbent upon every entity to comply with the
regulations. In my view, such products attract the SEBI Regulations and the entities
must seek registration from SEBI for launching such products. The existing
regulations have detailed scheme and procedure for registration and regulation of
7
mutual funds. Framing of special regulations for ULIPs under section 12 (1B) is not a
pre-requisite for compliance of said section.
16. It is noted that in some of its ULIPs, the entities offer the investors the guarantee to
encash the units at maturity at the highest unit price achieved by the fund over the
term of the policy. This reinforces that the ULIPs launched/offered by these entities
are a combination of insurance and investment. From the examination of the product
documents of the ULIPs and the investment options offered therein by the entities it is
noted that:
a. the contributions or payments made by the investor are pooled;
b. the contributions or payments are made to such ULIPs by the investor with a view
to receive profits, income;
c. the investment made by the investor in the ULIPs is managed on behalf of the
investor;
d. the investor do not have day to day control over the management and operation of
the ULIPs.
The aforementioned attributes are those of a collective investment scheme and also of
the mutual funds.
17. It is contended that section 11AA (3) of the SEBI Act excludes ‘contracts of
insurance’ from the purview of a collective investment scheme as enumerated under
section 11AA (2) of the SEBI Act. From the perusal of the product brochures of the
ULIPs it is noted that the said products are combination of investment and insurance.
The investor chooses between the options and decides as to how much be allocated
toward buying insurance and how much be allocated towards investment. The ULIPs
have a component of investment product and carry with themselves securities market
risk which is borne by the investors. I find that the ULIPs launched/offered by the
said entities are not purely in the category of “contracts of insurance” but have
components of investment products.
8
18. It is also contended that the contracts of insurance are exempt from the purview of a
collective investment scheme under section 11AA (3) of the SEBI Act. Here, it is
necessary to clearly understand the nature of collective investment schemes as
referred to in the section 11AA of SEBI Act. Collective investment schemes have
characteristics defined in Section 11AA (2); viz. pooled investments, investors not
participating in day to day control of investments etc. However, in terms of Section
11AA (3), collective investment schemes exclude all types of schemes/arrangements
which have financial bearing. viz. deposits taken by non-banking financial
companies, contracts of insurance, pension schemes and also mutual funds. Thus the
argument that Section 11AA (3) exempts insurance contracts from the purview of
collective investment schemes does not in any way exempt ULIPs which are a
combination of insurance and investment from Mutual Fund Regulations.
19. The entities have contended that ULIPs are an insurance contract falling within the
ambit of life insurance business and have quoted Section 2(11) of Insurance Act in
this regard. It has been established in the preceding paragraphs that ULIPs are a
combination of insurance and investment. Therefore, in my opinion, they must be
regulated under relevant/applicable Acts and Regulations. The investment component
should be registered with and regulated by SEBI.
20. It has been contended that ULIPs are a life insurance product and life insurance
products are not covered under Securities Contracts (Regulations) Act, 1956. Units of
ULIPS have the characteristics of units of mutual funds. Units of mutual funds are
“securities” as defined under Section 2 (h) of Securities Contracts (Regulations) Act,
1956. Merely because they are named as units of ULIPs, such units cannot be ousted
from the ambit of definition of “securities”.
21. The entities have also contended that units issued under ULIPs are not freely
transferable or have transferability for limited purpose, therefore, they are not units of
mutual funds. I find that not all the units of mutual funds are transferable, e.g., in the
case of open ended schemes of mutual fund the investor subscribes to and redeems
9
from the mutual fund directly. The units of an open ended mutual fund scheme are,
therefore, not transferable. Further, not in all cases are the units of mutual fund
schemes issued physically. I note that it is common among mutual funds to issue
statements of accounts. Therefore, the contentions in these regards are misconceived.
22. I find that the attributes of ULIPs launched/offered by the aforesaid entities have
components of mutual fund schemes. As discussed above, in spirit and substance, the
ULIPs have characteristics of mutual fund schemes and the arguments forwarded by
the entities have no merit. It is, therefore, necessary from the point of view of
protecting the interest of investors that such products should be offered/launched after
obtaining requisite certificate of registration from SEBI under the SEBI Act.
23. The entities have contended that their policies were launched after following
appropriate procedures and obtaining requisite permission from IRDA, which is the
regulator in case of life insurance products. The approval/registration from one
regulatory authority does not exempt the entity from complying with other applicable
laws administered by relevant regulators.
24. In view of the above, I conclude that ULIPs offered by the said entities are a
combination of investment and insurance and, therefore, the investment components
are in the nature of mutual funds which can only be offered/launched after obtaining
registration from SEBI under section 12(1B) of the SEBI Act.
25. However, the said entities have not obtained any certificate of registration from SEBI
though the ULIPs launched by them had an investment component in the nature of
mutual funds, as mandated by section 12(1B) of the SEBI Act. It is, therefore,
necessary to restrain the entities mentioned in para 1 of this order from raising further
monies/subscription, new and/or additional, from the investors for any product
(including ULIPs) having an investment component in the nature of mutual funds till
they obtain registration from SEBI.
10
26. Accordingly, in exercise of the powers conferred upon me by virtue of section 19 of
the SEBI Act read with sections 11, 11B and 12(1B) thereof, I hereby direct the
entities mentioned in para 1 of this order not to issue any offer document,
advertisement, brochure soliciting money from investors or raise money from
investors by way of new and/or additional subscription for any product (including
ULIPs) having an investment component in the nature of mutual funds, till they
obtain the requisite certificate of registration from SEBI. This order is without
prejudice to any action that might be taken by SEBI in respect of offer documents or
advertisements issued by these entities for products (including ULIPs) having an
investment component in the nature of mutual funds launched so far.
27. This order will not affect soliciting money/subscription from public with respect to
any pure contract of insurance or the insurance component of a combination product.
28. This order shall come into force with immediate effect.
DATE: April 9, 2010 PRASHANT SARAN
PLACE: MUMBAI WHOLE TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA
11

The significance of the same will be followed in this blog
ref. zee news breaking news

Markets to open at 9 am from tomorrow 4th jan 2010

The Dalal Street (bse & nse both) will start the first day of the new year an hour early at 9am from monday, as the exchanges have decided go ahead with the new timing, notwithstanding protests from brokerages.

With a view to better align the domestic markets with the Asian bourses, the both Bombay Stock Exchange and National Stock Exchange had late last month announced the advancing the trading timing to 9am with effect from January 4, from 9.55 am earlier.

However, the closing bell remains the same at 3.30 pm. “The new trade timing would be in the larger interest of the investors as they will get more time to trade.

Besides, it will help our markets integrate more with the global counterparts,” a top NSE official. The brokerages are, however, divided on their views as to whether the extended trading will benefit investors as a whole.

This appears to be the standard game of increase trading time, hence increase no of trades & volume, hence increase brokerage & transactions income for the government.

It needs to be seen if this goes through and trading time changes permanently amidst the brokers & investor protests.

Removal of Entry Load from all Mutual Fund Schemes

SEBI has mandated effective 1st August 2009, that there can be no entry load in any mutual fund scheme in India. This means the average 2 % entry load (charge) that was being deducted by AMC (Asset Management Companies) while investing / purchasing a mutual fund scheme, WILL NOT BE CHARGED from 1st august onwards.

This means all the money that you write check of is being used to purchase units at the prevailing NAV. Also there is a circuler restricting the charge of exit load to a maximum 1% till end of 1st year & no exit load from 2nd year onwards.

Essentially, investor friendly decision taken by SEBI.

Post Retirment Planning & Investment Risk

The standard advice to retirees is that they should invest in low-risk financial instruments during retirement. Alternatively, the advice of some advisors is that “safe” investments would simply expose your retirement fund to other risks. There is merit in both positions, which is why portfolio diversification across both fixed income & equity can be a great strategy at any life stage. Ultimately, retirees must invest so that they can sleep well at night and protect the real value of their investment. Retirees should base their investment decisions on the following:

1) Risk tolerance- Some people are aggrasive, while others are ultra-conservative. The main point about investing and risk is that you should be comfortable with the level of risk that you’re taking. No one else can tell you what your comfort-level is. You certainly should not invest exclusively in equity options that leave you permenantly worried.
2) Depth of reserves- The level of risk that you can withstand would be dependent on the depth of your reserves as well. Someone who invests 40% of his retirement fund in equity options would find that the nominal amount exposed to loss would be significant. 40% of a Rs.15,00,000 retirement fund is a significantly higher risk than the same percentage of a Rs.50,00,000 retirement fund in terms of the actual rupee value..
3) Inflation risk- Although you’re looking to provide security for your money, you may inadvertently cause a real loss or substantially lower real returns in the long-run. The thumb rule is that you should be beating the inflation by achieving at least double than inflation rate of return on your investments. (e.g if average inflation is 6% P.A., you should be getting at least 12% P.A. Average rate of return on your investments.
4) Understand the risk-return trade-off- The higher the risk associated with a financial instrument, the greater the potential return is. This trade-off is a primary reason that diversification should take place. This is because neither situation is optimal for the retiree. Low risk-low return increases inflation risk while high risk-high return increases the risk of loss. Conservative investing does not necessarily imply investing exclusively in low-risk funds. It suggests that the majority of your investment should be split between cash and income options and a relatively lower percentage assigned to growth/equity instruments.

Some retirees leave the bulk of their retirement funds in savings accounts, while their higher-order investments are NSC, PPF, Post office deposits & MIS. In our economy where the inflation rate is on an average above 6% , this is likely to do nothing for the preservation of your savings. This would mean that your fund would dwindle faster, especially if you didn’t optimise your choice. Even if you are making a low-risk investment, it is incumbent on you to choose the best-performing fixed deposit or money-market fund & a good mix of low allocation of equity to support this.
The argument that high-risk growth/equity options are not for retirees is a half-truth. The real truth is that the non-working retiree should not invest a significant portion of his savings aggressively. Given that retirees are living longer, they are more exposed to the risk of outliving their savings and inflation risk. Once portfolios are diversified according to risk tolerance, financial reserves and needs, then the retiree would be in a better position. Finally the caution: “Dying early is a risk, but living long is as big a risk if you don’t have enough money !”

For step by step post-retirement planning visit www.fabos.in log in with
Username: guest & Password: test or contact www.accordinvestments.com

How to file IT Return

I’m going to outline simple steps on how to file your IT returns for (Assesment Year ) FY 2009-10.

NOTE: Information provided pertains to assesses residing in India i.e. Resident Indians only. For others please ask.

Que:Do I need to File IT Return ?

Obligations of filing tax returns

It is a legal obligation for every individual to file a return of income, whose taxable income during the year has exceeded the exemption limit of Rs 100,000 (Rs 135,000 in case of females and Rs 185,000 in case of senior citizens).

Additional exemption limits stated above are not applicable to the individuals who are Non-Resident Indians.

Step 2 What Documents I need ?

Documents to keep ready

It is fruitless to go to the war front without proper arms and ammunition. Hence, it is always advisable to keep all the documents required for preparation of the income tax return ready and handy before calculating your tax liability and preparing your tax return. Some common documents required by an individual for preparing the return are:

  • Form No. 16 (received from the employer): This will help to know your income from salary and tax deducted by your employer from your salary income.
  • Form No. 16A (received from all the payers who have deducted tax): You will first have to get this form collected from the parties who have deducted tax while making payment to you during the year. This includes banks and companies (with whom you have kept fixed deposits), parties to whom you have given loan, tenant to whom you have rented your property, et cetera.
  • Summary of all bank accounts operated during the year: This summary will give an idea about all the income earned during the year and investments and expenditure incurred. This assures that no part of income is left out and you do not miss out any eligible deductions.
  • Details of property owned during the year: If you have bought some property during the year, you will need details of rent received and receipts of municipal tax paid during the year. In addition to this, if you have taken this property through a loan, do carry the loan details and a copy of certificate of interest paid during the year.
  • Sale & purchase bill / documents / contract note in respect of investments / assets sold during the year: You will also need purchase documents corresponding to the sales made during the year. In case of a large number of transactions, it is advisable that you prepare a statement of sale and corresponding purchase of these investments and arrive at the amount of profit or loss, before actually calculating your taxable income.
  • Details of tax payments made during the year: This is required only if you have made advance tax payment during the year.

Que: Which form do I need to fill up & where to get it ?

Which ITR Form is applicable to you:

With the introduction of new income tax return forms based on nature of income earned during the year, one needs to know relevance of each return form and select the right form.

For an individual, four forms have been introduced, the details of which are as under:

Form No. Applicability
ITR 1 Meant for Individuals, who have

a) Income from salary
b) Interest income (taxable / exempt)
c) Family pension
d) Income from agricultural activities

In other words, this form is not applicable in the following situations:

a) Individual having any income (taxable / exempt) other than mentioned above
b) Any brought forward loss of earlier years
c) Any income of other person to be included

ITR 2 Individuals / HUF not having any income on account of carrying out business / profession or on account of being a partner in a partnership firm.
ITR 3 Individuals / HUF who are partner in a partnership firm and does not carry out any other separate business / profession.
ITR – 4 Individuals / HUF who is carrying out business / profession under a proprietary concern.

Que: What is the deadline for filing my IT Return?

Last date for filing tax returns

The last date for filing return of income for the year ended March 31, 2007 is July 31, 2007 and for individuals who are required to get their books of accounts audited under the Income Tax Act, it is October 31, 2007.

Consequences for not filing tax return by the last date

If individuals file their returns after the last date mentioned above, they will be charged a penal interest at the rate of 1% per month of delay. However, if such a return is filed after March 31, 2008, apart from the penal interest, they will also be liable for a penalty of Rs 5,000.

Que: OK got that forms & docs ready…now what ?

How to file the tax return

Today there are two options available to the individuals to file their return of income:

  • Electronic filing;
  • Physical filing

Under Electronic filing, the individual will have to follow the following procedure:

  • Get the tax return in a valid XML format (through the Income Tax department site or other online tax preparation sites)
  • Visit the Income Tax site by clicking here.
  • Log on using the user-ID and password
  • Select the respective ITR form
  • Upload the XML file generated
  • Upon uploading, an acknowledgement will be generated.
  • If the file is uploaded with a digital signature, then the process of filing return is completed.

However if the file is uploaded without a digital signature, the individual will have to print form ITR-V and submit the same to the Income Tax department physically. The process of filing return will be completed only on physical filing of ITR-V.

For Physical filing, the individual will have to take a print out of the respective ITR form along with the Acknowledgment form and file it with the Income Tax Officer.

Whether it is electronic filing or physical filing, under the new procedure, individuals do not have to attach any documents or enclosures with the return of income.

Documents to preserve

Since the tax-payer is not required to submit any additional documents along with the return of income, the documents may be called at the later stage by the Income Tax Officer to check the correctness of the claim made. Hence, it is advised that the individual preserve all the documents required to substantiate the return of income filed. Some of the documents are enumerated below:

  • Detailed calculation of taxable income and amount of tax payable / refundable.
  • Form No. 16 / 16A (original).
  • Counterfoil of all the tax payments made during the year.
  • Copy of documents concerning sale of investments and properties.
  • Copy of bank statements.
  • Copy of proof for all the deductions and exemptions claimed in the return of income.

Common mistakes people make while filing tax returns

  • The most common notion among salaried employees is that since tax has already been deducted from their salary, there is no need to file their income tax returns. This is not at all true or legal. Even though tax has been deducted and there is no further liability to pay tax, an employee has to compulsorily file his / her income tax return. Form No. 16 received from employer is not their income tax return.
  • Employees do not include the interest that they receive on their savings bank account. The entire interest earned on your savings bank account is taxable.
  • Omission of income received by a minor child. A minor child is not required to file a separate return of income. However, this income has to be included in the hands of either of the parents, although it might be a small amount of bank interest.