Securities laws continue to remain interesting by constant tweaking of the regulations by the SEBI to keep them with times, even if some of which may be ill-considered. Some SEBI orders too create good precedents and, at times, place on record happenings in companies which can be disturbing and even disillusioning. Then there are informal guidances handed out, which are akin to advance ruling in substance which, even if they do not have binding effect, usually reflect the view that SEBI is likely to take even in other cases. Let us discuss some of such developments in recent weeks briefly.
SEBI’S INFORMAL GUIDANCE - EARNINGS BY INTERMEDIARIES FROM REFERRALS OF CLIENTS TO OTHERSProviding as many services as possible under one roof makes business sense and good customer service, helping common branding and savings in costs in the financial services industry. However, this also presents scope for conflicts of interest. For example, a merchant banker who manages an issue could face a conflict with other departments which recommend investments to clients. An investment adviser who must give an impartial recommendation to clients on their investment portfolio faces a potential conflict with other entities in the group, such as mutual funds. SEBI’s general approach to dealing with such conflicts has been multi-pronged. Firstly, full disclosure must be made of all conflicts by various intermediaries. Secondly, certain conflicts are wholly pr
