Monday, January 21, 2013

IRDA - its Bar ? - ICL reports on SEBI's new regulations on 'Investment Advisers' >


The IRDA’s misplaced leniency
<> In the present context, it may be worthwhile to recall that, IRDA , vested with powers of a 'regulatory' authority, is known to have often acted without much prudence or foresight as desired. One such instance, that almost rocked the boat of good governance, stuck out as a sore thumb not long before to the discomfort of the investors/stakeholders, is that was noisily debated “turf-” or “ego-” war, recklessly waged, and fought for sometime, by SEBI and IRDA on either side.
  • Though call selves or generally called by others as an 'agent', the fact of life, to one's understanding, is that mostly there is no such relationship of 'principal' and 'agent' in the legal or profound sense. To put it differently, the field reality is that insurance business, same as any other, is canvassed by self-appointed, or even if officially recognized by the operating concern itself , are acting as mere 'brokers' or intermediaries. That being so, there does not seem to have ever been,- till such time when IRDA conceived of and lately came out with a 'bar',- any control or monitoring , worth a mention, by either the operating company or regulatory authority over the functioning of such loosely called 'agents' . Perhaps, that has to be rightly regarded as the underlying whole truth, nothing but the truth.



    Client confidentiality privilege – Only for lawyers & not for accountants – UK SC

    I.A read also>

    A Warning to Wall St. About Misleading Clients

    I SEBI Investment Advisers Regulations – an overkill? @
     (see related/connected)>
    -->The term investment advice has been defined to cover advice relating to securities and investment products. This covers a very wide range of products. Investment products may also cover even real estate, gold, etc., i.e., non-financial products

    <> “The term investment advice has been defined to cover advice relating to securities and investment products. This covers a very wide range of products. Investment products may also cover even real estate, gold, etc., i.e., non-financial products.”
    On these limited observations, wish to share a few more thoughts:
    If the term ‘investment products ‘ were to be so liberally construed, that will mean, SEBI would be within its powers to try and overreach all and sundry, - including any non-financial product - regardless of whether or not it has the characteristics of the shares or stocks. What ought not to be forgotten is that, SEBI’s powers, in terms of the special statute of which it is a creature, are confined to regulating exclusively the market for the said financial products. In this context, one has to remember the ego war between SEBI and IRDA that raged the economic scenario not long ago. The worrisome controversy, though was eventually given a quietus, was hotly debated; for knowing more, recommended to read, besides the other material in public domain, the article
    @ .
    Nonetheless, in reality,the stock market, has, by its very nature, always been , and remained to be, vulnerable to, and many times widely impacted /impaired by so many other extraneous factors or considerations; that is, whether or not related directly or indirectly to ‘stock’.

    Legal advice privilege for tax advice given by non-lawyers




    <@ ITAT Order in re. Shantikumar D Majithia vs. DCIT (ITAT Mumbai)- A CRITIQUE

     Shantikumar D Majitia’s case

     Yogesh Sunderlal Shah v ACIT


    Widely framed Investment Advisers Regulations released
    Posted: 21 Jan 2013 10:08 AM PST
    SEBI has released today the SEBI (Investment Advisers) Regulations, 2013, to come into effect from the ninetieth day of their publication. While a more detailed post will follow, here are some first impressions.

    <>“SEBI has cast a very wide net, almost amounting to overkill.’

    This, to say the least, at best, is an overstatement (an ‘under kill’); if one were to consider the numerous exceptions/exemptions listed out.

    If one were to give an anxious consideration, there is prima facie no rhyme or reason in exempting “Insurance Agents/brokers” from the regulations. In a manner of speaking, the objective and aim of the measures have a direct correlation to the  specialised field of “Risk Management”. Should risk be likened to the core of all the attendant evils, then the cover there against i.e.  Insurance, can only be likened and be regarded as  the protective shell. In other words, both are so inter- related or connected that delinking one from the other, it appears, suffers from a faulty logic; hence the wisdom behind the referred exemption is rightly questionable.
    By the way, perhaps, the only reason one can think of for exempting the agents and brokers in the field of insurance from the SEBI current Regulations is keeping in mind the debacle rather the 'ego war' between the two authorities - SEBI and IRDA that reged the economic scenario  not long ago. Even so,  from the point of view of the larger interests of the stakeholders, whether it be investing in insurance products, or stocks and shares, there could be no two views on the point that the need for regulating the respective advisers' activities in someway cannot be sidestepped or wished away.

    More questionable is the other exemption of “Professionals CAs, CSs, ICWAs” in “providing investment advice incidental to their professional services”. The purport or import of the rider, couched in the words “incidental to their professional services”, is not readily understood. On the contrary, the exemption  is, if insightfully  perceived, not but  bereft of any merits. To be precise, for instance, in case of a CA, - that is, a mere CA without any special qualification or exposure or experience  in the field of ‘investment’ be taken to be so equipped as to be fit enough to offer and provide any sort of ’ investment advice’ as envisaged. In this context, one is perforce obliged to painfully remember the unsavoury role some of the professionals played and been responsible for the untold miseries of investors in house property - particularly in 'Apartments'. If interested in knowing more, one may look up among others the sordid stories galore narrated and available in public domain; for instance @ (for Specimen Post  see the KEY NOTE below.
    In any event, as of now, as to what extent the said reservation,  assuming it to be  justified, be fully taken care of / guarded against by the specified requirement  that,- “ Each such Investment Adviser will need to have prescribed qualifications/training and also the minimum net worth.”- seems to have been left uncovered / wide open.
    To be contd. >

    <> Reminiscing (in a lighter vein):

    A real life story, as narrated by an eminent tax lawyer (Nani A Palkhivala) in one of his annual budget speeches (used to be delivered almost as a ritual) reads, -
    In several parts of Africa when the rains do not come, the tribal chief conducts a ritual dance watched by the anxious members of the tribe. The dance does not bring rains , but it consoles and satisfies the people  who feel that their chief is doing something to  alleviate their misery. Our feverish changes in the law are intended to serve the same purpose as the tribal chief’s rain dance.

    Reflecting in a broader perspective or with deeper vision, the tribal ritual   ought not to  be brushed aside as a poor comparison or analogy, with  most of the laws or regulations being churned out, routinely and systematically, but having no regard to the wisdom or lack of it behind  the expectation of any welcome outcome or results of such efforts, even in the long run.  

    RTI on Registration of Apartment Owner's Association.
    Dear Shri Murali and Shri. Sanjay
    I understand that at present the registration work of Associations/Societies under Karnataka Societies Act, 1960 is transferred to Co-operative Department since 01-08-2008 as per Government Order No. G.O KE/152/MNM/2008. Earlier it was handled by Stamps & Registration Department.
    I spoke to the Concerned department in Co-operative Department and made enquiries about Re-registering the Apartment Owners Associations which are already registered under the Karnataka Apartment Ownership Act, 1972 and the connected Karnataka Ownership Flats (Regulation-----------Transfer) Act, 1972 by registering the Deed of Declaration along with the Bye-laws of the Association. He emphatically told me that the Apartment Owner's Associations already registered under KAO Act, 1972 and KOF (Regulation-------------& Transfer) Act, 1972 are not being registered under Karnataka Societies Act, 1960.
    But there are instances where Apartment Owner's Associations already registered under KAO Act, 1972 and the connected KOF Act,(---) 1972 were also registered under Karnataka Societies Act, 1960 though it is legally not correct. The KAO Act, 1972 and KOF(--------) Act, 1972 are special Acts enacted for the purpose of providing for ownership of an individual apartment in a building and make such apartment heritableand transferable property and to provide for various matters connected therewith ( like  maintenance, repair, replacement, improvement, painting & colouring of Buildings and  common areas and facilities ). There are few Advocates and Chartered Accountants who are misguiding Apartment Owner's Associations to again register their Associations under the Societies Act, 1960. Based on such advices few Associations are passing resolutions in AGMs for registering their Associations under Karnataka Societies Act, 1960 without comming out from the Karnataka Apartment Ownership Act, 1972. Some Associations also pass resolution to follow the rules of BOTH the Acts. An association can not be controlled under 2 acts for its routine managements. THERE IS TOTAL CONFUSION ON REGISTRATION ISSUE.
    Is it possible to take a written guideline from the Head Office of the Co-operative Department (Societies Registration section) stating that the Apartment Owner's Associations already registered under Karnataka Apartment Ownership Act, 1972 need not/ should not/ can not be registered under Karnataka societies Act, 1960? Is it possible to file RTI to the concerned department in view of the confusion among the members of various Apartment Ownership Associations in Karnataka? What is the procedure to be followed to file such RTI application? Can PRAJA take this issue with the Head Office of the Cooperative Department?
    Can PRAJA take up the issue of filing an RTI to know the Competent Authority under Karnataka Apartment Act, 1972?[ The same procedure followed by Mr. C.N.Kumar in the Karnataka Ownership Flats (Regulation of the Promotion of Construction, Sale,Management and Transfer) Act, 1972]
    Ajit N. Naik

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