Online Learning Portal
DAILY NEWS ANALYSIS
20 February, 2020
3 Min Read
Syllabus subtopic: Effects of Liberalization on the Economy, Changes in Industrial Policy and their Effects on Industrial Growth.
Prelims and Mains focus: about the move; benefits and significance; about share pledging
News: The Securities and Exchange Board of India (SEBI) has amended the SEBI (Depositories and Participants) Regulations by including an additional explanation that states that ‘pledge’ would also refer to ‘re-pledge of securities for margin or settlement obligations.’
Why?
A minor tweak in the manner ‘pledge’ is defined in the regulatory laws is expected to go a long way in minimising instances where stock brokers misuse client securities by pledging such shares for their own benefit in terms of meeting their margin requirements.
Background
Changes made
Likely benefits
The latest SEBI move comes close on the heels of the regulator developing an in-house system to track the movement of client securities that are collected as collateral by the brokers.
What is a pledged share?
Simply put, it is taking a loan against the shares one holds. It can be done by both investors and promoters.
Why do promoters pledge shares?
One of the methods promoters use to raise finance is to take loans against their holding in their company from banks or non-banking financial companies. For these financial institutions, these shares are collateral. Promoters can raise funds for various reasons-for meeting requirements of the business or personal needs.
Can banks sell the shares pledged by promoters?
What is the risk for retail investors in this?
High promoter pledged shares can wreak havoc in stock if price continues to fall and lenders sell these shares in the market. The sudden supply of shares can lead to further price fall and is a risk for retail investors who may have to sell the shares for a significant loss.
What should be the approach of retail investors in stocks with high pledged promoter holding?
Source: The Hindu
Oceanic Anoxic Event 1a from the Paris Basin (Environment) Paper-3 PMP OAE 1a refers to a period during the Cretaceous Period (145 million years ago and ended 66 million years ago) when Earth's oceans became depleted of oxygen, causing a significant disruption in marine life. Cause: The event is believed to have been
Viksit Panchayat Karmayogi (Good governance) Governance GS PAPER-2 PMP Dr. Jitendra Singh launched the ‘Viksit Panchayat Karmayogi’ initiative on Good Governance Day, celebrated to mark the 100th birth anniversary of former Prime Minister Atal Bihari Vajpayee. The initiative, which is part of the broader ‘Prashasan Gaon
Major programmes to control Air Pollution National Clean Air Programme? It was launched by the Ministry of Environment, Forests and Climate Change (MoEFCC) in January 2019. It is the first-ever effort in the country to frame a national framework for air quality management with a time-bound reduction target. The
Air pollution and Air quality Measures in India (Environment) GS Paper-3 P-M-P Air pollution may be defined as the presence of any solid, liquid or gaseous substance including noise and radioactive radiation in the atmosphere in such concentration that may be directly and/or indirectly injurious to humans or other l
Geopolitical Significance of Ports (IR) Act as geopolitical assets: Ports enhance the projection of strategic reach, which helps strengthen the country’s control over important sea and energy supply routes. E.g. Indian Navy’s staging base at Agalega Islands will enable marine patrols
Our Popular Courses
Module wise Prelims Batches
Mains Batches
Test Series