'Bring parity b/w share buy back-secondary market'

New Delhi, Apr 23: In the backdrop of SENSEX scaling new heights almost daily, a FICCI study released here today suggests eliminating restrictions on buy back of shares, a review of the take over code and a clearer definition of 'independent directors' in a company.

The study notes that significant reforms relating to structural, operational and regulatory areas of the Indian capital markets in recent years have brought these to the level of the best practices available in the emerging markets.

It is, thus, not without reason that the Indian stock markets find primacy among global investors which have resulted in SENSEX moving northwards in a secular trend.

The paper argues that public deposit defaults should not be categorised as cognizable offence as they are driven by trade offs between risks and rewards.

It stresses the need of avoiding duplication of work relating to investor funds involving the Ministry of Company Affairs and Secutirties Exchange Board of India (SEBI).

It asks SEBI and the Minstry of Company Affairs to draw a clear distinction in terms of defaults. ''Penal provisions cannot be uniform for all defaults and the penalty must be reasonable and commensurate with the gravity of the offence. Besides a distinction needs to be maintained between economic and criminal offence.'' The study, which was jointly connducted with the Society of Indian Law firms, refers to the reccomendations of the Naresh Chandra Committee on Corporate Governors.

The Committee had suggested that non-executive and independent directors should be exempted from criminal and civil liability arising due to failure of statutory compliances. These include the Companies Act, Negotiable Instruments Act, Provident Fund Act, Factories Act, Industrial Disputes Act and Electricity Supply Act.

The study also suggested that the 'independent director' cannot be expected to go beyond the report and carry out an investigation to ascertain whether the statements made in the report are correct.

The functions of an 'independent director' cannot be of an investigative nature.

The study suggests that for investors protection, use of modern technology, internet and computers should be enabled to enhance the efficiency of the disclosure process.

Moreover, the disseminated information irrespective of it being financial or non-financial should be allowed and facilitated through electronic mode.

The study is of the view that the ultimate power for attachment of bank accounts of intermediaries should be given to the Central Board of Direct Taxes (CBDT).It, however, emphasises the importance of strong surveillance mechanism so that the regulator is in the know of things in advance.

The paper says there is an urgent need to review the 'Takeover Code Regulations' and 'Insider Trading' particularly with respect to creeping acquisition, definition of promoters, and norms prescribed for preferential allotment.

The study says that in the emerging global scenario where companies have to consolidate and reposition themselves, there should not be any restriction at all for buyback of shares.

In case of buyback of shares, gains are subject to Capital Gains Tax because the transaction is not through the exchange and there is no incidence of Securities Transaction Tax (STT).

UNI