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The Satyam ripple: new share rules
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Added by
apesphere on 21 Jan 2009
From: www.google.com
Indian markets regulator SEBI has initiated the first big capital markets reform since the Satyam scandal broke.
Under the new rules, a company's controlling shareholders will have to disclose the value of sahres that have been pledged to lenders as collateral for loans.
It was the liquidation by lenders of just such a pledge of 8% of Satyam stock that precipitated a fall in the share price and the discovery of the $1 billion accounting fraud at the company.
Now there are fears that other family-owned companies may have significant amounts of stock pledged by way of collateral, and that other lenders may bring about share falls by liquidating holdings. Disclosure will enable investors to avoid such companies.
It is a first step towards cutting through the fog surrounding India's large family-controlled businesses.
Under the new rules, a company's controlling shareholders will have to disclose the value of sahres that have been pledged to lenders as collateral for loans.
It was the liquidation by lenders of just such a pledge of 8% of Satyam stock that precipitated a fall in the share price and the discovery of the $1 billion accounting fraud at the company.
Now there are fears that other family-owned companies may have significant amounts of stock pledged by way of collateral, and that other lenders may bring about share falls by liquidating holdings. Disclosure will enable investors to avoid such companies.
It is a first step towards cutting through the fog surrounding India's large family-controlled businesses.
Andrew Newton is the author of The Handbook of Compliance: Making Ethics Work in Financial Services
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