Market regulator Securities and Exchange Board of India has directed foreign institutional investors (FII) to disclose more information about their investment structure in India.
“It is not about FIIs investment, it is about what structures FIIs have for their investments in India,” SEBI Chairman C.B. Bhave told reporters on the sidelines of a capital markets conference organised by FICCI here on Tuesday.
SEBI had earlier asked FIIs which are registered on or before April 7 to declare whether they are a multi-class share vehicle (MCV), or structured as protected cell companies (PCCs) or segregated portfolio companies (SPCs).
“We are currently looking at an expansionary phase of the markets. However, it is for us to be facilitators in this process and in our hands to ensure that such growth is in an orderly and efficient manner,” Mr. Bhave said.
The country needs to cut several transaction costs to grow its capital markets, he said, adding that while volumes are large, the ticket-size of transactions remains small, which puts increased pressure on costs.
Mr. Bhave pointed out that the market regulator is also evaluating ways to cut brokerage costs related to the transaction of securities in the markets.
“There are three types of transaction costs — brokerage, taxes and impact costs. While we are most efficient in terms of impact costs, there is still a lot more that needs to be done in terms of brokerage costs,” Mr. Bhave said.
Commenting on the challenges ahead, Mr. Bhave said Indian companies need to start reporting as per uniform accounting standards soon. The language of accounting needs to be the same across the world if investors are to make comparisons between companies across the world, he said.
“One of the most difficult challenges that corporates are expected to face is the transfer to International Financial Reporting Standards (IFRS) beginning April 1, 2011,” Mr. Bhave said.
The market watchdog plans to introduce more currency derivatives products, beginning with options, to give a wider choice to investors.
“There is a lot of scope for expansion through diversification of products, but at the same time, the sensibilities of the consumer/investor must be kept in mind. We can not simply exist in a world of caveat emptor or buyer beware; there is a need for increased responsibility,” Mr. Bhave said.
He refused to comment on the ongoing tussle between SEBI and IRDA on the ULIPs issue.