The launch of the country’s first exchange-traded gold fund by Benchmark Mutual Fund has paved the way for investors to invest and trade in the yellow metal just like in any other equity investment. 
 
But the scheme, called Gold BeES, may not attract investors in large numbers as having a demat account is mandatory for investing in the ETF. Besides, investors may not be keen to invest in this product since on redemption, the repayment is done in cash and there is no physical delivery of gold. 
 
These requirements hit fund houses’ plans to garner big investments for such schemes as number of demat account holders in the country is small compared with the that of bullion investors. Traditionally gold has been a safe-investment for future. 
 
In a bid to overcome this issue, the fund houses are tying up with depository participants (DPs) and offering demat account services to investors, said officials. 
 
“We have tied up with a few top DPs who on request by the investor would open a demat account within 24 hours,” Rajesh Bhojani, president – sales, UTI Mutual Fund, said. The MF is expected to list its gold ETF scheme by the end of the month. 
 
At present, India accounts for 23 per cent of the world’s jewellry demand and around 35 per cent of global investment in gold comes from the country. 
 
However, a large number of investors put their money in gold, not only to see value of their investment grow, but also to use the metal for making jewellry later. 
 
The MFs are also working out a strategy to pay back investor in the form of bullion. 
 
“The physical delivery of gold on redemption is possible, new regulations are to be put in place,” Sanjiv Shah, executive director of Benchmark Mutual Fund, said. 
 
Benchmark BeES has collected around Rs 100 crore during its new fund offer period and received applications from 22 states in the country. 
 
The minimum subscription for the scheme was Rs 10,000, while it is Rs 20,000 for the UTI’s GETF scheme. 
 
Besides Benchmark and UTI, five other MFs have also lined up to launch their gold ETF schemes. 

-Business Standard

Mumbai, March 19: India`s first gold exchange traded fund (GETF) Gold Bees by benchmark Asset Management Company (AMC) was listed on the National Stock Exchange on Monday.

The listing of the gold bees (benchmark exchange traded scheme) coincided with Gudhi Padwa, the Maharashtrian New Year`s Day that is considered auspicious for buying the precious metal.

“The listing of the gold-based product is to help common man to own gold,” Association of Mutual Fund in India (AMFI) Chairman A P Kurian said here after the listing ceremony.

It was a great moment for benchmark`s Sanjiv Shah and Rajen Mehta as the duo has waited for five years since they filed the offer document with SEBI in May 2002.

The Gold Bees can be bought and sold over the stock exchange in units of one gram, just like shares, through a demat account.

Benchmark`s new fund offer for the gold bees raised Rs 100 crore from around 15,000 applicants spread across 22 states, benchmark AMC Executive Director Sanjiv Shah said.

Gold Bees touched a high of over Rs 1,100 per unit immediately after listing but later stabilised around Rs 945 to Rs 948 level in tandem with international gold prices.

Benchmark`s allotment price for each unit of Gold Bees was Rs 945.7. The company has appointed authorised participants, who will deposit and offload gold for equivalent units of Gold Bees.

Bank of Nova Scotia has been appointed as the custodian bank for physical safekeeping of gold against, which the units have been issued to the subscribers.

The GETF is an investment option for those who traditionally buy gold for marriages, but don`t get the best deal from jewellers, Kurian said.

However, the scheme will not deliver physical gold to buyers but will allow them to store units in dematerialised form for future encashment.

“In the next stage the gold-based products from mutual funds will be able to deliver gold, we will start working on it now,” Kurian said.

Prices of gold bees units will be linked to international gold prices and won`t see much change as just the trading will shift from traditional way to the stock exchanges, Shah said.

Internationally GETFs are listed in Australia, South Africa and US markets and have assets under management worth USD 12 billion, Kurian said.

-Zee news

Following the amendment to Section 205B and insertion of Section 205C in the Companies Act, it has now become mandatory for companies holding any liabilities relating to any unclaimed dividends/matured deposits/debentures etc for over seven years to credit the same to the Investor Education & Protection Fund (IEPF).

This is a government-promoted fund maintained to educate the investors and create an awareness amongst them about the changes taking place in the equity market, mutual funds and related avenues of investments.

Investors who have not claimed their dividends/other outstandings from companies in which they have invested in, can claim the same by reproducing the cheques lying unencashed with them and by sending them back for revalidation to transfer and depositories agents (T&D agents) of such companies. They could also produce the debentures already redeemed by the company, but not claimed due to non-submission of same at the time of redemption for.

But all this can happen only before the expiry of seven years. The claim on such outstandings has become time-barred. The transfer to IEPF happens following the completion of seven years from the date of disbursal of such dividends/ maturity of deposits/bonds.

What is important to note is that after seven years are over, shareholders’ still holding unclaimed dividend / redemptions can make no claim against the IEPF under any rule whatsoever to claim such an amount. It may be highlighted that in our country, over Rs 500 crore of funds unclaimed against dividend dues/ redemption proceeds of debentures, etc. are now in the kitty of government-managed IEPF, even though it is used from time to time for running such investor awareness campaigns.

As the introduction of demat system has been in operation in the stock market for a little over 10 years now, the number of investors still holding their shares in paper form now form a very nominal part of the system.

Only such investors holding their investments in paper form still continue to draw their dividends/ matured debentures and deposits, etc. from the companies in the form of cheques. But, sometimes for various reasons, investors fail to get the amount due to them credited to their bank accounts.

Change of address without intimating the same to the respective companies by investors, death of the actual investors in whose name such shares/debentures are actually held as per companies record and whose bank accounts cease to exist after their death, or even the laziness of the investor in monitoring his investments properly are some of the reasons.

There are remedies available in such cases, as such investors still keep getting the reminders to return the unclaimed dividend cheques/ and get them revalidated from the respective companies, or ask for fresh cheques in cases they have been misplaced. But, even this is restricted till seven years from disbursal of such amounts.

Since this system is slightly different than the earlier method, in which such unclaimed dues that were over three years old, used to be transferred by the companies to the General Reserve Account of government, investors have got to be all the more careful.

Under such a system that was in operation till a few years back, the advantage for aggrieved investors was that they were in a position to even claim back their unclaimed dues even from the General Reserve Account, after filling a required form.

But, such a liberty has now been taken away from the hands of investors, though the period for claiming dues from companies has been extended to seven years, from three years as per earlier system.

-EE Times

The Indian Banks’ Association has held talks with the Reserve Bank of India (RBI) for dematerialisation of fixed deposits (FDs). If the concept gets the green signal, then the practice of issuing physical FD receipts will be scrapped and customers can access deposits from anywhere in the country, reports Business Standard.   At present, customers can access FDs only at branch concerned.

The core banking solution being implemented across banks would give customers the flexibility of accessing fixed deposits from any branch.    At present, though physical FD receipts do not attract any stamp duty, there is no clarity on electronic receipts.   

The central bank has informed the IBA that as per terms of Article 53 to Schedule I of Indian Stamps Act, 1899, ‘receipt’, as defined under Section 2(23) for any money exceeding Rs 5,000, is required to be stamped. ‘Receipt’ under Section 2(23) also includes any note, memorandum or writing whereby any money is acknowledged to have been received. However, a ‘receipt’ given for money or security with a bank is exempted from stamp duty, provided it is given to the very person to whom the same is to be accounted for. It is on account of this exemption under Article 53 that, at present, bank FD receipts issued do not attract duty.

RBI has further advised that in case the receipt is in the form of electronic record, it should not attract stamp duty as it is levied on the document and not on transaction. The central bank’s observation comes in wake of state governments levying duties on all electronic securities transactions.

No one is born an NRI. Persons who leave India and go abroad for better career or business prospects are termed NRIs as per the Indian law. Such a person normally leaves behind certain assets including shares and securities that he had invested in when he was a resident Indian.  Now, after becoming an NRI, how do you continue to trade in the market? What are the rules and regulations regarding this? And more importantly what happens to the shares that you already owned as a resident before becoming an NRI?  

First things first, your existing demat account that you held as a resident cannot be used anymore to buy and sell shares after you become an NRI. It also cannot be converted into the NRI status, nor can the shares be transferred to the new NRI PINS account. You will need to close the resident demat account and transfer the shares into an NRO demat account (Non PINS) that you will have to open fresh.

Also, for investing in stocks using funds from abroad, you will have to open a fresh NRI PINS demat account.

So, in short, two new demat accounts will be created. One is the NRO demat account (Non PINS) that will hold shares that you bought as a resident Indian and second the NRI PINS demat account that will hold shares that you buy as an NRI. Your resident demat account will be closed.

 You essentially will be having two kinds of shares: the shares that you had already acquired when you were a resident Indian and those that you acquire by using foreign exchange after becoming an NRI. Lets take the first case of shares that you had already acquired when you were a resident Indian. Just like you deposit money in your bank, you deposit shares in your demat account. Just like your bank account where you can open an NRO account, in this case too, you can open a NRO demat account.  You will have to transfer the shares from your resident demat account to your NRO demat account and then if desired, sell the shares. So essentially, you cannot transfer the shares held in the resident demat account to your PINS demat account. The only options are: 

1. To transfer those shares into a NRO account (Non PINS) and continue to hold those shares OR
2. To transfer those shares into a NRO account (Non PINS) and sell the shares 

Though the NRO demat account is non-repatriable per se, it doesn’t mean that you cannot remit the funds abroad. RBI now allows all NRIs to remit up to $1 million per year representing the sale of their financial assets and immovable property. There is no lock-in on financial assets.  However, there is a procedure to be followed for all remittances from the NRO account. The NRI has to submit an undertaking and a certificate from a chartered accountant certifying that taxes if due on the amount intended to be remitted have been paid. Unlike earlier, there is no requirement to obtain a tax clearance certificate. Once all the paper work is submitted, the funds can be freely remitted, of course with a ceiling of up to $ 1 million. Now let’s talk about the shares that you acquire by using your funds from abroad or the funds lying in your NRE account. This you can do under the Portfolio Investment Scheme. (PINS) 

PINS (Portfolio Investment Scheme) is a scheme of the Reserve Bank of India (RBI) under which the NRIs can buy and sell shares, on a recognized stock exchange in India by routing all such purchase/sale transactions through their account held with a designated bank branch also known as the authorized dealer. Your bank will help you out with the necessary paperwork.

The shares acquired under PINS are repatriable, which means you can transfer the funds abroad after selling the shares. 

 To summarize, open a non-PINS demat account for your existing shares (before you became an NRI) and open a PINS demat account for your new shares that you purchase after becoming an NRI. That’s all. 

Also note that NSDL has made it mandatory from April 1, 2006 for all demat account holders to submit a copy of their PAN card. Those NRI that do not have a PAN should apply and obtain one for themselves. The application form can be downloaded from http://tin.nsdl.com

Government has asked market regulator Sebi to reallocate shares from persons who received shares illegally by opening benami demat accounts to eligible retail investors.
“Government has advised Sebi to reallocate the shares from the persons who did not deserve to be allocated the shares, to the persons who should have been allocated the shares,” Finance Minister P Chidambaram today informed the Lok Sabha.In a written reply, Chidambaram said subsequent to the issue of interim orders on December 15, 2005 and January 12, 2006 of Sebi in respect of Yes Bank and IDFC, SEBI had received complaints alleging irregularities in allotment of shares in various IPOs during 2005.

The enquiries and investigations made by RBI and Sebi indicate that a few entities opened thousands of demat accounts with Depository Participants (DPs) and accounts with banks in the names of fictitious, benami individuals, Chidambaram said.

He said investigations revealed that these persons had applied for shares in IPOs from these benami accounts in sizes permissible for retail individual investors (RIIs) and obtained allotment illegally.

Now the government has asked Sebi to reallocate these shares to eligible investors, he said, adding Budget 2007-08 has also proposed to make PAN the sole identification number for all participants in the securities market.

Further, RBI has directed banks to prohibit crediting ‘account payee’ cheques to account of any person other than the payee named therein, he said, reports PTI.

It’s the gift that keeps on giving. Back in late February, a near-10% decline in Chinese stock markets whipped up a miasma of selling that spread to Wall Street, Europe, and other parts of Asia. That was followed by a stretch of relatively stable markets globally—that stretch has ended. As evidence gathers that U.S. growth could be crimped by default worries in the subprime mortgage market, some serious wealth is getting vaporized again.

On Mar. 14 major regional markets in Asia took a nasty hit a day after a broad, roughly 2%, decline in the Dow Jones Industrial Average (see BusinessWeek.com, 3/13/07, “Stocks Tumble On Mortgage Worries”).

The closely watched Morgan Stanley Capital International Asia-Pacific Index lost 2.4% on concerns about the possible impact of a significant slowdown in the U.S.—an all-important export destination market for Japan, China, South Korean, and assorted Southeast Asian economies.

The Correction Continues

In Japan the Nikkei 225 index closed down 501 points to 16,676, a fall of 2.9%. Markets in Hong Kong, Shanghai, Seoul, Kuala Lumpur, and Manila posted losses in the 2% to 3% range. In India, the Bombay Stock Exchange Sensitive Index ended down 3.49%.

What’s more, with investors getting extremely edgy, there could be additional dips to come. “When a market corrects like it did two weeks ago, it normally takes a period of one or two months before it bottoms out,” says Garry Evans, pan-Asian equity strategist with HSBC (HBC) in Hong Kong. “I expect the correction to continue a bit longer.”

Back in Japan, the worst-hit stocks were big exporters with large exposure to the U.S. Toyota (TM), which sees about 60% of its earnings in North America, fell 3.2% to $65, while automaker Honda (HMC) slipped 3.5% to $35. In the electronics sector, Canon (CAJ) and Sony (SNE) also endured selling pressure, closing down 2.6% and 4.1%, respectively.

Risk Aversion Increasing

Appreciation of the yen vs. the dollar—always bad news for the price-competitiveness of exporters—didn’t help matters. At the end of currency trading in Tokyo, the yen had appreciated to a one-week high of 116 against the greenback.

Indian stocks were hit particularly hard on the theory that the rising interest rate trend in the U.S., Europe, Japan, and much of Asia will mean less money available to invest in more risky emerging market stocks. “Liquidity is becoming expensive around the world and there is an increasing aversion to risk in India,” says Rasesh Shah, managing director of Mumbai-based Edelweiss Capital.

Yet for all the gnashing of teeth, the current stock volatility is largely at odds with the strong, long-term, economic fundamentals across much of Asia—though it may take some time for that to sink in with investors. With Japan recovering, and India and China growing rapidly, few expect the recent selling wave to be prolonged over many months.

The Danger: Contagion in the U.S.

“It is important to remember that both corporate and economic fundamentals have not been this strong in Asia since the start of the 1990’s,” says Spencer White, Head of Asia Pacific Equity Strategy at Merrill Lynch (MER) in Hong Kong. However at the moment the danger is that credit market woes in the U.S. will encourage global investors to pull out of risky assets overseas. “What we are dealing with is risk appetite and the potential for contagion from subprime mortgage market to other asset classes,” he adds.

Japan—the region’s biggest economy—is in the midst of its longest postwar economic expansion and its revised fourth-quarter gross domestic product was an annualized 5.5%. Consumer spending, often blamed for Japan’s slow recovery from years of deflation, also shows signs of improving. Average household spending grew 0.6% year on year in January, marking the first increase in 13 months.

“Today’s losses are not caused by Japan’s economic fundamentals, but investors’ negative mentality,” says Seiichi Suzuki, a market analyst at Tokyo Tokai Securities. He adds that recent volatility in global equity markets is spooking investors. “There’s a negative impact on investor psychology.”

Most Remain Bullish

It’s a similar tale elsewhere. In Korea, for example, analysts say stock prices are bound to be affected by global trends given that foreign investors own around 40% of the market. An unwinding of the exchange-rate-sensitive yen carry trade (whereby investors borrow in Japan, and invest in higher yielding-assets denominated in other currencies) is another risk (see BusinessWeek.com, 3/2/07, “Stocks: Why Japan is More Worrisome than China”).

Yet most remain bullish on stocks. “Barring unlikely catastrophes in the global financial markets, Korean shares are expected to do relatively well this year,” says Kang Shin Woo, chief investment officer at fund manager Korea Investment Trust Management.

One big reason: The Seoul bourse’s average price-earnings ratio is just over 10, while in other emerging markets—with the notable exception of Thailand—they are hovering at 15 to 17 multiples. Kang adds he also expects the Fed to cut rates if the trouble in U.S. subprime mortgage loan market shows signs of spreading to the overall economy.

In some markets, such as Bombay, Shanghai, and Shenzhen, a cooling off period is actually somewhat welcome, given the torrid runup in share prices last year and in January. Says Edelweiss’s Shah, “The Indian markets have had a great run and this is part of a realistic consolidation phase.”

Recession’s a Long Shot

Chinese markets were due for a pause, regardless of what’s happening elsewhere in the world economy. The speculative excesses among Chinese investors have been obvious for some time (see BusinessWeek.com, 3/8/07, “Market Mania in China”).

Still, it’s hard to make a long-term bearish case against the high-speed Chinese economy, unless it overheats in the coming months. China remains on course to grow 10% or so this year and likely will overtake Germany as world’s third biggest economy in the same period. Nor does anyone really expect overseas fund managers to suddenly pull up stakes and stop investing in China because a much-needed correction in Chinese stocks finally took place (see BusinessWeek.com, 2/28/07, “Bourse Blowout Shouldn’t Brake China”).

Of course, no economy in the region would be completely insulated from a serious recession in the U.S., which still seems a long shot at this point. Despite the market instability in recent weeks, there is no sign that U.S. consumers at large have lost their appetite for Toyota sedans, Samsung LCD TVs, or Chinese-made sneakers. With any luck, that will be true at year-end as well.

-Business week

The stock market correction seems to be encouraging more and more investors to revive their demat accounts, perhaps to start buying shares, now that the prices have eased from their recent peaks. 
 
Over 5.5 lakh demat account holders have submitted their Permanant Account Number (PAN) cards to activate their accounts, more than two months after the mandatory requirement of the IT department’s number. 
 
As per the latest statistics, around 14.5 lakh demat account holders with share positions are yet to submit the PAN cards, the alpha-numerical number issued by the Income Tax department for tax assessment purposes. 
 
“On a conservative basis, the value of the shares in the frozen accounts of NSDL would be around Rs 120 crore,” said a depository official on condition of anonymity. At CDSL, the total value of the holdings would be around Rs 15 crore. 
 
The National Securities Depository Ltd (NSDL) has frozen 12.56 lakh accounts with share positions, and another 17.15 lakh accounts with zero positions. Around 78.58 lakh demat accounts are registered with the NSDL, as per the figures. 
 
The Central Depository Services (India ) Ltd on the other hand has around 21.5 lakh demat accounts, of which 5.19 lakh demat account holders are yet to complete the PAN verification process. Of this, two lakh accounts are with holdings, while 3.2 lakh have nil holding. 
 
“Since January around 89,000 account holders have submitted their PAN details and have unfrozen their account,” said a senior CDSL official. 
 
Account holders could submit their PAN card even now and can get their accounts activated immediately without any penalty being charged. Unless investors submitted their PAN details their accounts would not be debited. Credit could come into the accounts, but no trading could take place through them. 
 
The Securities and Exchange Board of India (SEBI) had earlier notified depository agents that every investor trading online should provide PAN details. 
 
Sebi had taken the measure to tighten the “know your client” norms, following the initial public offer scam. 
 
Instructions for closure of demat accounts are provided at the depository participant level (banks, stockbroking firms, financial institutions and custodians), where retail investors open demat accounts for dematerialised holdings and their transfers. 

- Business Standard

Demat accounts of investors who failed to furnish their PAN card details were frozen at midnight on Dec 31. Depositories National Securities Depository Ltd and Central Depository Services Ltd have frozen about 20 lakh DEMAT accounts following the failure of the account holders to submit PAN card details before December 31 deadline.

SEBI had made it mandatory for all investors to provide PAN card details for transactions in the cash market from January 1, 2007. However, the freezing of accounts is not an irredeemable event. The accounts can be re-started once the details are provided and verified.

Since January 1, 2007 , more than seven lakh accounts have been unfrozen because the account holders have provided their PAN CARDS to their DPs ( Depository Participants) ?

STEPS to unfreeze your DEMAT ACCOUNT:

• Check your DEMAT ACCOUNT status with your DP or from your transaction statement.
• If your account status is “Suspended for Debit” due to non – submission of PAN details, provide copy of your PAN CARD to your DP with the original for verification.
• Your DP will verify the same and update the PAN CARD details.
• Your DP will then unfreeze your account, after which your account will become operational.

MUMBAI/PUNE: The income tax department is set to offer depository participants (DPs) the service of verifying permanent account numbers (PAN) of clients opening demat accounts. DPs will have to register with the IT department which, in turn, will do the verification of PAN through an automated IT platform. The window that will be opened for DPs will be similar to the one provided to banks and other institutional investors such as stock exchanges.

“With the growing use of PAN by agencies other than the income tax department, it is imperative to have an institutional arrangement for batch verification,” said a senior official. All categories of investors opening demat accounts have to quote their PAN numbers. Even existing account holders won’t be able to operate their accounts if they don’t produce their PAN cards. A Sebi directive issued last year also placed the onus on DPs to verify the name of the demat account holder with the name appearing on the website of the I-T department.

A retail investor can have multiple demat accounts. But he cannot put in multiple applications — with different permutations and combinations of his name — while subscribing to an IPO. Similarly, it is not illegal for an individual to have multiple savings accounts.

But they will carry the same PAN. The service of PAN verification offered by the income tax department will help spot manipulation, if any, of demat and savings bank accounts by retail investors trying to corner a large chunk of shares in any IPO.

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