Compliance

Indian Regulator Recommends Increase In Net Worth For AMCs, Banks, Brokers

Vanessa Doctor, Asia Editor, 16 May 2010

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A panel under the Securities and Exchange Board of India is seeking amendments to the minimum net worth asset management companies need to be considered stable.

Under present laws, AMCs, brokers and merchant bankers need only Rs10 crore ($2.2 million) to build the minimum infrastructure necessary to operate and show their commitment to their business. The panel is asking that the minimum be raised gradually, in three years at least, to Rs50 crore ($11.05 million), citing that a higher net worth would shield the firm in the event of a market breakdown and would provide an ample cushion for growth.

As of merchant bankers and stock brokers, the committee is recommending an increase from Rs5 crore to Rs10 crore and Rs30 lakhs to Rs3 crore, respectively. Exceptions can be applied based on the types of products offered by the firm, as with exchange traded funds, which do not necessitate a wide distribution network and huge infrastructure.

SEBI says it welcomes comments from the public until 14 June 2010.

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