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From the President's desk

The quarter gone by has been an eventful one, both for the financial markets as well as

for IAIP. After concerns threatened to derail the Indian economy and the equity markets in

April and May, the last two weeks of June brought back some cheer and optimism. Euro

problems have receded for the time being and the sharp fall in oil and commodity prices could not have come at a better time for India. Not withstanding the currency and monsoon fears, optimism on the policy front led, by statements emanating from the PMO cum FMs office have ensured that Indian equity markets continue to be the best performing YTD.

For IAIP, it has been a great quarter. We won two awards at the CFA Annual Conference held in May in Chicago. In fact, we

were the only society in the Asia-Pacific region to have won an award. Congratulations to all of you and specially the volunteers

who worked hard towards enabling the accolades. The quarter also marked the 50th anniversary of the CFA program on May 29.

To mark this event, bell ringing ceremonies were held in 26 stock exchanges across the globe. IAIP also got the privilege to host its own

bell ringing ceremony at the Bombay Stock Exchange, Asia's oldest. Another important event during the quarter was the resolution of the

legal dispute between the CFA Institute and AICTE. This resolution would enable the CFA exams to be held in India seamlessly.

The society events have been getting better with each passing day and the increase in the number of members attending the events is a testimony of

their value and acceptance. IAIP will endeavour to bring many more reputed speakers and aid continuing education efforts for its members. As mentioned

earlier, we will also be increasing the footprint of IAIP and organize more events in major cities outside Mumbai. Off course, we will continuously need the help of

volunteers in all these efforts. Membership value is the mantra of IAIP for the coming year. We do realize that we have a young membership base and members

need lot of assistance. Apart from speaker events, we will be focusing a lot on networking, employer outreach and career assistance. IAIP stands very committed to

work towards the welfare of its members and create a base to differentiate our members amongst the already crowded financial market professionals.

Thanks and best wishes!

April 2nd, 2012IAIP's Fourth Annual Forecast Event & Survey 2012-13Mumbai

April 23rd, 2012IAIP - High Frequency Trading, Algorithmic BuySide Execution and Linguistic SyntaxMumbai

IN THIS ISSUE

Elizabeth has been actively helpingsociety for various events organizedby it and issues faced by members.You could reach her atsecretary@india.cfasociety.org

Kindly visit for detailnotes and more photographsof the events.

iaip.wordpress.com

Sunil Singhania, CFA

April 23rd to 30th, 2012Outlook for World Economy andMajor Financial MarketsNew Delhi, Bangalore, Chennai and Mumbai

May 24th, 2012IAIP - Corporate Governance – Lessons from AsiaMumbai

May 29th, 201250th Anniversary Global Celebration of theCFA Program Mumbai

IAIP Newsletter - June 2012

MEMBER SOCIETY OF

IAIP Newsletter - June 2012

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IAIP is delighted to have received CFA Institute's Society Excellence Awards for Best

Member Communication and Best Volunteer Management Programs. The local society has

been bringing out newsletters on quarterly basis for almost 2 years now. It covers almost all the

events viz. the speaker events, research challenge, annual forecast event, India Investment Conference

etc. Last calendar year we started adding post-event notes on in the following week or

two of the event along with lots of photographs of the members. This is very useful to those who missed the

event and those who stay outside Mumbai and can't travel for these events.

We have developed a communication platform at www.iaipirc.org used exclusively for communicating and

coordinating IAIP Challenge (Research Challenge) at the regional and national levels within the country. Last year 32 colleges

participated in the competition and as many volunteers acted as either graders, mentors, judges or event organizers. The site was

very useful in conducting the event smoothly and well in time.

We also revitalized our society group on the by sending invites to members, regularly posting links to useful articles

including post event notes, reminding of upcoming events, and also recruiting members for various committees. Volunteer Management

Program uses emails, web-forms, www.linkedin.com, phone calls and SMS both for communicating & filling volunteer opportunities.

Two of our active volunteers were part of APAC task force on volunteer development. Following this we had our first Volunteer Day organized on

October 16th 2011 wherein 22 new members participated on a Sunday. Out these 5 flew from distant cities. Now we have few events being organized in cities like

Delhi, Kolkata, Bangalore and Chennai. This extension of activity to other important centers in India and active participation by members & volunteers are an even bigger

wins for our society.

iaip.wordpress.com

www.linkedin.com

RECENT EVENTSJuly 5th, 2012

v Celebration on Wining 2 Awards

v Investing in India - Positioning for a new Dawn By Navneet Munot

FORTHCOMING EVENTSv

v

July 30th, August 1st, 3rd, 6th Speaker Event Jeremy Bolland Delhi, Mumbai, Bangalore, Chennai

thAugust 24 2012Speaker EventLouis BoulangerMumbai

MEMBER SOCIETY OF

Sunil Singhania, CFA, IAIP President (R) andChetan Shah, CFA (L)

ANNOUNCEMENTSociety Excellence Awards for

Best Member Communications andBest Volunteer Management Program

IAIP Newsletter - June 2012

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IAIP's Fourth Annual Forecast Event 2012-13

April 2nd, 2012

Continuing its past trend IAIP organized its Fourth Annual Forecast Event at the

iconic venue of Rotunda, at BSE. The event went on very well with excellent set of

panelist and anchor Nikunj Dalmia from ET Now, a leading business news channel, which

broadcasted part of the program live. This event was well attended by both IAIP members and

non-members. BSE, ET Now and Outlook Business were the sponsors for this program.

In his keynote address Ashish Kumar Chauhan, Deputy Managing Director of the BSE, talked about pickup in

volumes on the exchange and innovation being brought by it. These include introduction of emerging market

index futures viz. Brazil, China, Russia, and South Africa in the derivatives segment on the BSE and launch of SME

Exchange allowing small and medium sized companies to raise capital.

After a brief address by Amit Khurana, CFA, Director IAIP, Anil Ghelani, CFA, Chair Programming, CE and Networking, IAIP,

introduced each of the panelists and invited them to take their seats on the podium. Just before the question and answer session,

Jayesh Gandhi, CFA, Director, IAIP ran through the findings of the recently concluded Annual Forecast Survey for FY13. Vidhu Shekhar,

CFA, Vice President, IAIP concluded by giving vote of thanks

Panel moderator Nikunj, in his customary style, poised number of questions, some really tough and pointed ones, to which the experts

responded with equal calm and confidence. Questions ranged from the most attractive asset class which could chip in best returns vis-à-vis fixed deposits,

to the most attractive sectors & industries for investment, to global & local economic indicators, to major concerns and risks facing the investors. The

following are the excerpts of the views expressed by the panelists.

MEMBER SOCIETY OF

From left: Sunil, Dr. Shubhada, Nikunj, Rajeev,Prabhat and Naganath

IAIP Newsletter - June 2012

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Rajeev Anand, Managing Director and CEO, Axis Asset Management.

Global economies continue to remain fragile and hence liquidity and central bank

actions will continue to be dominant factors ahead of political ones (many countries are

going for elections) going forward. With most of the currencies being debased Gold should be a

part of the portfolio. It could also act as insurance against inflation. Rajeev expects repo rates to come

down by 50-75bps in the current year. The supply pressure for the long term bonds will continue and

hence he remains cautious at the long end of the curve for the coming 6-months. The yield on short term papers

for-example 1 year CD rateswhich are currently ruling high above 10.5% are likely to come down and one should

position the portfolio here to capture gains.

Naganath Sundaresan, President & CIO, DSP Blackrock Investment Managers.

When asked whether Nifty has a good support at 5000, Naganath agrees to the same based on price action; though he thinks it

depends on how factors unfold. These include the trajectory of inflation globally, which may continue its upward trend, following

monetary easing on the one hand and the extent to which the bank credit shrink (as they prepare to meet increased capitalization &

provisioning norms) and constrain supplies on the other. Hence investor will have to weigh in inflation while deciding asset allocation. As long as

Gold is viewed as an alternate currency it will do well. The demand for gold within the country continues to remain good going by the latest numbers.

On pressed to choose amongst the best option for investment from 6 months horizon Naganath prefers short term debt. But from 3 to 5 year

perspective he would choose diversified equity funds.

Dr. Shubhada Rao, Chief Economist, Yes Bank.Headline inflation has continued to rule above RBI's comfort zone and current

account deficit too has ballooned. This has resulted into delay in monetary easing by RBI to a certain extent. Shubhada expects inflation to be 120bps lower than last

fiscal, GDP growth to increase to 7.4% in FY13 and repo rate cut by 75bps. Gross government borrowings program of Rs5.75lac crore in the current fiscal is a major

concern. Liquidity deficit in second half will be Rs2.5lac crore. Hence both CRR cut of 50bps and OMO (Open Market Operations) of Rs1.25lac crore will be required. Again

starting 2015 onwards the repayments of government borrowings are going to be large – to the tune of Rs1.5lac crore to Rs2.0lac crore per annum. Unless there is substantial cut in

subsidies or increased tax receipts managing liquidity will be challenging in the long run.

Prabhat Awasthi, Managing Director & Head of Equities, Nomura.Both the US doing well and China moderating its growth rate and rebalancing have positive implications for India. The investment to GDP ratio which were above 50% in China are likely to come down; thereby reducing the demand for commodities. This will ease pressure on commodity price mainly crude oil which could work out in favor of India. US doing well again will be beneficial for Indian exporters.

Some long term investors are positive on this interplay over the coming 4 to 5 years. Prabhat believes that interest rates are at a peak and it is question of when they start coming down. Hence he favors financials.

Looking at lower gross capital formation figures he has little comfort with industrials and capital goods. LTRO was a response to trouble in the Euro z o n e . H o w e v e r , t h e fundamental problems still need to be addressed.

MEMBER SOCIETY OF

IAIP Newsletter - June 2012

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IAIP - Fourth Annual Forecast Survey - FY13

Annual Forecast Surveys are important traditions at the CFA Institute world wide,

and IAIP has been consistently conducting this exercise for the last four years in the

month of March, just before the beginning of the new financial year. The survey tries to

gauge the outlook of finance and investment professionals across the asset classes for the

coming financial year. Like in the past this year too the response was overwhelming with nearly 650

people filling in the online survey. The participants came from various segments of financial services

industry viz. asset management companies, brokerages, insurance companies, banks, private

wealth managers, financial advisors, distributors, stock & commodity exchanges, regulators and others.

The key findings are as follows:

Ÿ Nearly 42% of participants have selected equities as the best asset class to be invested in during FY13 whereas 20%

prefer investment in fixed income

Ÿ Around 41% of them expect Sensex to register returns between 6-14% as indicated by target range of 18,500-20,000

Ÿ The yield on 10 year government paper is expected to fall to 7-8% according to 52.9% of the participants

Ÿ As far as real GDP growth is concerned opinions are equally strong for the intervals spanning 7%-8% and 6%-7% with 44% and 39% votes

respectively

Ÿ So is the case with inflation with 46% and 42% choosing the range from 7%-9% and 5%-7% respectively

Ÿ The curve is flat for crude prices and gold as is shown in the table below

Ÿ Spike in oil prices and slow pace of reform remain key concern for the investors

Ÿ While government policy actions could be one of the key drivers of equities

Sunil Singhania, Head - Equity Markets, Reliance Capital Asset Management.Markets are forward looking. Most of the factors like higher inflation, which are a concern now, could turn favorable 6 months down the line. While there are challenges, Sunil remains optimistic about the future and the only one to look at the beaten down industrials & capital goods amongst the panelist at this juncture. This sector has higher operating leverage, so whenever their order book and prospects improve, there can be huge upside. Other sectors to look for are technology, which could benefit from Rupee depreciation, and pharmaceuticals where companies are likely to provide higher growth than FMCG and are yet available at lower P/E multiples on relative basis. In India investors usually look for growth though higher multiples could affect returns. One has to balance between growth, quality and valuations. Good companies do not necessarily form good stocks. In response to a question as to whether you should follow FIIs, Sunil says you need not follow anybody to make money as the history has proven that more money flows into the market near the peak like in 2007-08 and more is withdrawn at the bottom like in 2008-09.

Nikunj conc luded the panel discussion with the following quote “Good News and Good Buys don't come together”.

To view the video clipping of this Annual Forecast Event, kindly follow linkhttp://economictimes.indiatimes.com/et-now/daily/4th-iaip-annual-forecast-event-fy-2013/videoshow/12506771.cms

MEMBER SOCIETY OF

IAIP Newsletter - June 2012

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Sr. No.

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

Question / Economic Variable Option or Rangewith Maximum Response

Second best Option orrange & response

For the complete details of the response to IAIP's Forth Annual Forecast Survey FY13 kindly visit

Contributions by: Chetan Shah, CFA, Jayesh Gandhi, CFA, Jignesh Kamani, CFA, Rohan Ghalla, CFA and Vipul Badjatya, CFA; all IAIP Volunteers.

For the complete article and photographs kindly visit

www.cfasociety.org/india

http://iaip.wordpress.com/2012/04/05/iaip-fourth-annual-forecast-event-fy13/

Best asset class to beinvested in for FY13

India’s real GDP growth in FY13

India’s average Inflation (WPI) for FY13

Yield on 10 year GOI Securitiesat end FY13

Crude Oil (Brent) Price atend FY13 (USD / bbl)

Gold Price at end Fy13(USD/ounce)

INR/USD rate at end FY13

BSE Sensex Target at end FY13

Biggest concerns forIndia’s outlook

Key Economic agendafor the Indian Government

Important Drivers for IndianEquities over 12 months

NoR = Number of responses in percentage terms.

EquitiesNoR = 42.3%

Between 7% and 8%NoR = 44.3%

Between 7% and 9%NoR = 45.9%

Between 7% and 8%NoR = 52.9%

Between 110 & 120NoR = 32.0%

Betw. 1600 & 1800NoR = 36.1%

Between 48 and 50NoR = 40.8%

Between 18,500 & 20,000NoR = 40.7%

Spike in Oil PricesNoR = 26.5%

Controlling Fiscal DeficitNoR = 31.3%

Government Policy ActionsNoR = 49.6%

DebtNoR = 20.0%

Between 6% and 7%NoR = 39.3%

Between 5% and 7%NoR = 42.0%

Between 6% and 7%NoR = 20.2%

Between 100 & 110NoR = 25.1%

Betw. 1400 & 1600NoR = 31.1%

Between 50 and 52NoR = 25.1%

Between 17,000 & 18,500NoR = 25.1%

Slow pace of reformsNoR = 25.2%

Accelerate investment in the economyNoR = 20.4%

RBI Monetary PoliciesNoR = 11.8%

MEMBER SOCIETY OF

IAIP Newsletter - June 2012

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To get a better perspective on HFT and how the concept could be used for the

benefit of Buy side clients, IAIP had an opportunity to host Dan Di Bartolomeo,

Pres ident & Founder, Northf ie ld Information Services Inc., at the speaker

event in Mumbai on April 23rd. Based in Boston since 1986, Northfield develops

quantitative models of financial markets. The firm's clients include nearly three hundred

financial institutions in twenty countries.

As per Dan trading is zero sum game and HFT trade makes money at expense of other investors like retail,

HNI or other institutional investors. Main reason for opting for HFT is to trade quickly as trading is exposed to

two type of risk 1) Uncertainty risk: Longer the trade remain un-executable long risk of uncertainty (of price

movement) (2)opportunity cost: If price move adversely and trade is not executable it is loss of opportunity.

For developing any HFT three steps are followed 1) Understanding process of particular client: where risk profile of

a client and his return expectation is taken into account, based on this information composition and various strategy of underlining

portfolio is finalised 2) Trade scheduling: where a large equity orders is broken into a series of smaller trade and time limit for

execution is finalised. 3)Micro management: Size and frequency of smaller trades are decided in order to hide large trade so it would be

difficult for market participant to gauge its impact. Size and frequency of orders is also altered depending upon flow of news, price movement and

other live parameters at time of execution of trade.

There are some caveats of HFT which should be taken into consideration while executing trade. HFT trade process fastens whenever when ever prices

are favourable (i.e. lower for buy orders and higher for sell orders) and slows trades while prices are unfavourable. Hypothesis behind this process is stock

price momentum will moderate and hence stock prices will come back to its steady state level as time passes. However there may be cases that prices continue

to rise or continue to fall and trade is executed at unfavourable prices or it is not at all executed resulting in opportunity loss.

IAIP - High Frequency Trading, Algorithmic Buy Side Execution and Linguistic SyntaxApril 23rd, 2012; Mumbai

High-frequency trading (HFT) is the use of sophisticated technological tools to trade securities like stocks or options. HFT compete on a basis of speed with other high-frequency traders, and compete for very small, consistent profits. As a result, high-frequency trading has been shown to have a potential Sharpe ratio (measure of reward per unit of risk) thousands of times higher than the traditional buy-and-hold strategies. By 2010 high-frequency trading accounted for over 70% of equity trades in the US and is rapidly growing its popularity in Europe and Asia.

MEMBER SOCIETY OF

Dan Di Bartolomeo making presentation

IAIP Newsletter - June 2012

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Contribution from: Jignesh Kamani, CFA, IAIP Volunteer

For the complete article and photographs kindly visit

http://iaip.wordpress.com/2012/05/04/iaip-high-frequency-trading/

At the time of any announcement or news stock volatility (and hence risk) increases. On back of higher risk associated, person demands higher return. Since risk has increased, as per various model like WACC and others, positive news will have less positive impact on stock prices and negative news will have sharp negative impact on the stock prices. As positive impact is less and negative impact is high, an HFT trade is generally skewed toward short position during time of news or announcement.

About the Speaker:Dan Di Bartolomeo is President and founder of Northfield Information Services, Inc. Based in Boston since 1986, Northfield develops quantitative models of financial markets. The firm's clients include nearly three hundred financial institutions in twenty countries. Dan is a Visiting Professor at the CARISMA Research Centre of Brunel University in London. In addition, he serves on the Board of Directors of the Chicago Quantitative Alliance and the advisory board of the International Association of Financial Engineers. He is also an active member of the Financial Management Association, and “QWAFAFEW”. Dan has a long list of more than thirty publications including books, book chapters and research papers in professional journals such as Financial Analyst Journal, Quantitative Finance a n d J o u r n a l o f I nve st i n g . D i Bartolomeo has a lso written extensively for the CFA Research Foundation. His most recent publication is “Equity Risk, Credit Risk, Default Correlation and Corporate Sustainability” which was published in the Journal of Investing in December of 2010.

MEMBER SOCIETY OF

IAIP Newsletter - June 2012

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He described, in detail, the present economic situation and how it is likely

to evolve in the US, Euro zone and in various Emerging market economies in

Latin America, Asia Pacific, Middle East and Africa. The data and questions were

thought provoking and exposed the fallacy of popular views and stories. The event was

well attended and highly appreciated by both members and non members of the society. This

event qualified for 1.5 CE credit hours.

Starting with the US economy, Michael showed that there is an output gap of 1.5% (Actual GDP

growth rate at 1.5% vis-à-vis Potential GDP growth rate at 3%. Also, the unemployment rate is 8.2% vis-à-

vis the full employment rate of 5-6%). ISM indexes for the service sector and manufacturing sector are above

the boom-bust line. Savings rate is at 3%. The commercial banking system's excess reserves ballooned from a

monthly average of $1.5 billion in April 2011 to a monthly average of $1.5 trillion in April 2012. This high level of “Excess

reserves” reflects that US banks are still not lending out to businesses and consumers. Credit is not flowing to businesses

and consumers. Instead, US banks are lending to the US government. The Fed's monetary base increased from $2500

billion in April 2011 to $2825 billion in April 2012. Over the past year, M0 is up 6%. Therefore, firstly, the key question in the US

economy is when the Fed will withdraw this stimulus. Secondly, the bond market is not reacting in the US. Current 10 year Treasury bond

yield is at 2% when the Inflation is at 3%, and Federal funds rate of 0.1% is below the Target rate of 0.25%. Clearly, the bond market is working

with a doom scenario. However, the current 10 year Treasury yield will increase when good economic data comes up. Finally, the recent increase

in profit margins of US businesses should not be expected to continue in the future. This is a transient cyclical thing because unit labor costs decreased due

to a weak labor market.

Outlook for World Economy andMajor Financial MarketsApril 23rd to 30th, 2012New Delhi, Bangalore, Chennaiand Mumbai

IAIP hosted Dr. Michael Ivanovitch, President MSI Global Inc, in number of cities in India starting with New Delhi on April 23rd followed by Bangalore on April 25th, Chennai on April 27th and finally Mumbai on April 30th. Rooted with factual economic data Dr. Ivanovitch made insightful presentation on the Outlook for World Economy and Major Financial Markets.

MEMBER SOCIETY OF

Dr. Michael Ivanovitch making presentation

IAIP Newsletter - June 2012

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Clearly, China is seeking growth based on domestic demand. Real GDP

growth rate is at 10% with the targeted inflation at 3%. Presently, China is

holding its currency down.Japan is an example of a country that lost

control of its domestic economy because Japan based its economy on exports. China is

trying to avoid this. The Japanese Yen moving up will be a big blow to Japan's export led

economy.

In India, inflation is a big problem. The actual inflation is at 10% vis-à-vis the RBI's comfort zone of

4-8%. India needs structural reforms to combat inflation. As an example, allowing more FDI in Retail is

a structural reform. Brazil is a recession-proof economy because of its big and diversified commodity exports.

From the data on various currencies worldwide, Michael concluded that the Asian countries were buying Euro and

gold with their excess US Dollar currency reserves. He first pointed to the identity that “World's Balance of Payments = 0”.

The data on “current account” positions shows that East Asia is a capital exporter. [Jan 2012: Current account deficits of $473.4

billion in US and $45.1 billion in Euro zone vis-à-vis Current account surplus of $446.3 billion in East Asia].

Secondly, the data comparing the “change in US dollar currency reserves over the last 12 months” to the “change in holdings of US

Treasuries over the last 12 months”, shows that for every Asian country (with the exception of Singapore and South Korea), the “change in USD

currency reserves” figure is positive and much higher than the “change in holdings of US Treasuries” figure, which is also positive. However, for

Singapore and South Korea that stood out as exceptions, the opposite holds true. This shows that Singapore and South Korea are manipulating their

currencies. Most importantly, the data begs the question: Where are the remaining US Dollar currency reserves of the rest of Asian countries going? The

answer: into buying Euro and gold.

The data on the Euro zone vis-à-vis other developed countries, rejects the popularly expressed view by the business media that the Euro zone would break up. The “structural budget deficit” for the Euro zone (at -6.3%) is much lower compared to many developed economies: USA (-10.7%), UK (-10.4%), Japan (-7.8%) and France (-7.1%). Furthermore, “the public debt (i.e. the government debt) as a percentage of GDP” for the Euro zone (at 98%) is lower in comparison to many developed countries: US (99%) and Japan (200%).

Moreover, as a percentage of the global currency reserves, the currency Euro has increased from 0% to 30%, whereas the USD has decreased from 75% to 60% in the same time period. In addition, as per the Maastricht treaty, which is the law, the ECB cannot be a lender of last resort. Therefore, the ECB cannot print money to save individual members. ECB is a supranational entity. Therefore, ECB is the only genuinely “independent” central bank in the whole world. ECB targets inflation in the range of 0%-2%. The Euro “real short term interest rate” is 0.25%. Therefore, as per Taylor's rule, the Euro zone has an expansionary monetary policy. Hence, the Euro is overvalued at present, but in light of all of the above supporting data, Michael suggested to buy Euro at every dip. The Euro is emerging as a strong alternative to the US dollar.

China wants a different composition of its growth (moving away from exports a n d m o v i n g t o w a r d s growth due to domestic c o n s u m p t i o n a n d domestic investments).

MEMBER SOCIETY OF

IAIP Newsletter - June 2012

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The recent spectacular rise in the price of gold is a clear vote of no

confidence in political and economic governance. The world economy is

facing increasing geopolitical risks. For example, how events unfold in Iran will

have a huge impact on oil prices. If Israel attacks Iran, oil prices will rise up drastically.

In conclusion, Michael suggested that Equities and Commodities should be the preferred asset

classes. Also, it would be better to stay out of Fixed Income because it is highly likely to experience

serious downward corrections.

About the Speaker:Dr. Michael Ivanovitch is the Founder and President of

MSI Global Inc ( ) a New York based company dedicated to research on world economy,

geopolitics and investment strategy. Dr. Ivanovitch has also served as a Senior Economist at the Organization for

Economic Cooperation and Development (OECD) in Paris, and as an international economist at the Federal Reserve Bank of

New York. He has also taught at the Columbia Graduate School of Business, INSEAD and HEC (the two top-rated business schools

in Europe). Dr. Ivanovitch holds a Ph.D. (economics), M.Phil. and M.B.A. from Columbia, and a European law degree.

Contribution by: Manan Agrawal, CFA, IAIP Volunteer

For the complete article and photographs kindly visit

www.msiglobal.com

http://iaip.wordpress.com/2012/05/15/outlook-for-world-economy-and-major-financial-markets/

MEMBER SOCIETY OF

IAIP Newsletter - June 2012

12

IAIP organized this Speaker Event on Corporate Governance (CG) at Mumbai

on May 24th 2012 wherein Mak Yuen Teen, a founding director of the Corporate

Governance and Financial Reporting Centre and Lee Kha Loon, Head Standards

and Financial Market Integrity Asia Pacific, CFA Institute, shared their findings and

experiences in the Asian Region. The event was well attended and received by the members of

the local society.

Mak Yuen Teen focused on the essential elements of CG viz. robust regulatory framework and

enforcement, strong shareholder rights, regard for interests of other stakeholders, ethical culture, effective

board of directors, effective risk governance & management, high standards of disclosure and

transparency. Being skeptical of the effectiveness of self regulation and the dual role of exchanges as regulator as is

the case in Singapore (SGX) he expressed the need of a separate and effective regulator like SEBI in India. On

enforcement front it is very difficult and expensive for minority shareholders to get their concerns, grievances and issues

resolved & redressed in most of the Asian countries. There are 20-30 scandals reported in the companies listed on SGX mostly foreign

companies and it is very difficult to enforce rules on such kind of companies. Out of the 800 companies listed on SGX 40% are foreign

and around 50% of the foreign companies are from China. Rules are evolving and SGX has made it is easier to sue people for insider trading

etc. Australia on the other hand has strong corporate securities laws that really go after the directors of the companies. On the roles of independent

directors Mak feels and is lobbying for the restriction on number of boards an individual can sit on. Most of such independent directors are either not

aware of their duties or not adequately equipped to discharge their duties as directors. And as the AGMs bunch up during last few weeks of the deadline say

the month of April in Singapore they just rush from one meeting to another one. And during the time of crisis or scandal they are ones to quit! Mak dwelled in

details on the size, independence, competencies, diversity, commitments etc for the effective boards. Companies and boards need to develop strong whistle blowing

policies, anti-corruption programs, risk management committee which will look into matters as complex as tax evasion, money laundering etc.

IAIP - Corporate Governance -Lessons from AsiaMay 24th, 2012Mumbai

MEMBER SOCIETY OF

Mak Yuen Teen, second from left and Lee KhaLoon, third from left along with Navneet,Vidhu, Jayesh, Namit, Biharilal

IAIP Newsletter - June 2012

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About the speakers:Mak Yuen Teen is founding director of

the Corporate Governance and Financial Reporting Centre (CGFRC) and

Associate Professor of Accounting at the NUS Business School, National University

of Singapore. He holds a First Class Honors and Master degree in accounting and finance

and a PhD in accounting, and is also a fellow of CPA Australia. Prof. Mak conducts training for

regulators, directors and other professionals in corporate governance, speaks regularly in local

and international conferences, and is a regular media commentator on corporate governance

issues in Singapore and the region.

Lee Kha Loon is a Head, Standards and Financial Market Integrity Asia Pacific at CFA Institute. He has co -written

research papers on related party transactions, REITS governance, executive compensation disclosures, role of

independent non – executive directors, inter-corporate networks in Japan, shareholder activism in Asia and ethical

practices relating to selling of financial products. Prior to joining CFA Institute, Kha Loon had fifteen years of work

experience as a financial controller, auditor and treasurer in the financial services industry and worked for six years with a

securities regulator. You could read Lee Kha Loons articles & views at

Contributions by: Chetan Shah, CFA, & Sitaraman Iyer both IAIP Volunteers

For the complete article and photographs kindly visit

http://blogs.cfainstitute.org/marketintegrity/author/leekhaloon/

http://iaip.wordpress.com/2012/05/28/iaip-corporate-governance-lessons-from-asia/

This transaction, which should have sought shareholders' approval instead of merely board approval, didn't appear to be at arms length and was opposed by investors. To ensure fairness to the minority shareholders, countries in the Asian region like Malaysia, Singapore and Hong Kong have made it mandatory for the companies to take shareholders' approval through voting in AGM or EGM for RPTs valued over threshold limit of 5% of the net total assets and not just rely on board approvals. Malaysia requires even deviations from the threshold levels to be announced to the stock exchanges. Apart from listed corporation, regulators need to look at the governance on structures like REITs. K-REITs recently acquired 87.5% of its holding in Ocean Financial Centre from its parent Keppel Land with just show of hands of shareholders for this important resolution instead of voting by poll.

Mak and Lee also responded to queries from the audience like how differential voting rights affected corporate governance, why they were generally apprehensive of companies with differential voting stocks, corporate governance issues at Facebook in face of acquisition of Instagram, David Sokol case raising question on corporate governance structure at Berkshire, how compensation system was impl ic i t ly encourag ing REIT managers to conduct above m a r ket va l u e re a l e state transactions to drive up net asset value thus indirectly affecting REIT unit holders and so on. They praised India for the ease wi th which minority shareholders could exercise their proxy votes.

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IAIP Newsletter - June 2012

14

It should be noted that CFA Institute and CFA member societies around the

world either opened or closed 26 stock exchanges right from Hong Kong to New

York within a 24-hour period. Such a ceremony represent the greatest number of

stock exchanges worldwide opened or closed by one organization on a single day and marks

the international impact of the CFA Program.

The event began with the local tradition of lighting of the diya (lamp) by the board members of IAIP

and guest of honor Nehal Vora, Chief Regulatory Officer, BSE Ltd. This was followed by the opening

comments by IAIP Founding President Sunil Singhania, CFA, a short video clip from the CFA Institute and

address by Nehal Vora. The session was moderated by Anil Ghelani, CFA, Director, IAIP.

Sunil asked professionals to take personal responsibility to restore trust amongst investors and the 50 tangible steps

drawn out in CFA Institute Integrity List* which could be followed for the same. Nehal emphasized the need for all

professionals & institutions to keep themselves updated in the world that has become truly one and interlinked so as to survive

for centuries as BSE one of the oldest stock exchanges in Asia and second oldest in the world has done. Both Sunil and Nehal also

unveiled the book “Gold Standard – A Fifty-Year History of the CFA Charter” by Nancy Regan.

*The CFA Institute Integrity List is a collection of 50 tangible steps that investment professionals can take to restore trust in the industry. The list

was inspired by “real-world” ideas from CFA charter holders and members.

Contributions by: Chetan Shah, CFA and Sitaraman Iyer both IAIP Volunteers

For the complete article and photographs kindly visit

http://www.cfainstitute.org/about/vision/serve/Pages/integrity_list.aspx

http://iaip.wordpress.com/2012/05/31/iaip-50th-anniversary-global-celebration-of-the-cfa-program/

IAIP - 50th Anniversary Global Celebration of the CFA ProgramMay 29th, 2012

It was June 1963 when the first exam was offered and following this 268 investment professionals were awarded the CFA charter. Through the years the CFA Program has grown and today more than 100,000 professionals hold the CFA charter and practice the highest level of professional and ethical standards. To celebrate the 50th Anniversary of the CFA Program, IAIP, the member society of CFA Institute, got an opportunity to open the Bombay Stock Exchange at the bell ringing ceremony on May 29th; thanks to the kind support of the BSE Ltd.

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Chetan, Nehal, Jayesh, Sunil, Navneet, Namit,Biharilal, Amit, Rohan and Saurav

IAIP Newsletter - June 2012

15

iaip.wordpress.com

iaip.wordpress.com

www.cfasociety.org/india

http://www.cfasociety.org/india/Pages/EventRegistration.aspx

anil.ghelani@dspblackrock.com;jayesh.gandhi@morganstanley.com;

secretary@india.cfasociety.org

secretary@india.cfasociety.orgwww.cfasociety.org/india/

It has been a long cherished dream of our members to have some kind of

communication channel wherein we could cover the various IAIP speaker and annual

events as soon as we finish one. This will be useful for all and in particular to those who

missed the event or are unable to reach the same being in different cities and towns.

According ly, we have created one at . Brief notes as well as select

photographs of almost all the events since January 1st 2011 have been posted on this site. We hope you

would find it useful and would like it. Kindly visit the same and don't forget to provide us your feedback.

Events:Now you could register for the forthcoming event on the

page by clicking on the Events tab and Event Registration or follow the following link

Kindly send in suggestions on topics around which events should be organized. Members, having access to insightful speakers are

requested to come forward and help in facilitating events around them. This will enhance value to the member community. Please

email to the Programming, Events & Networking committee members viz. .

Want to Volunteer?IAIP is always looking to increase member participation and provide

networking opportunities. You are most welcome to volunteer for our society to make it more vibrant. It will offer you with an opportunity to interact with

members & the investment community, keeping in touch with the latest developments in the CFA Charter holder community & the financial industry and

provides one with a good platform for developing leadership qualities. It is also an excellent forum for giving back to the profession. To understand more and join one

of the committees reach out to any of us or Volunteer Committee or Elizabeth at You could also fill in the form on the website

under Membership tab and Volunteer option.

List of Contributors for this issueSunil Singhania, CFA, President, IAIPChetan Shah, CFA, Communication Chair, IAIPJignesh Kamani, CFAManan Agrawal, CFASitaraman IyerSalonee Sanghvi, CFAJayesh Gandhi, CFABiharilal Deora, CFARohan Ghalla, CFA Vipul Badjatya, CFA

For the complete list of committees and its active volunteers kindly visit page. Under “About Us” tab click on the committees button.

Feedback/Request For Articles:Please send feedback or interesting articles like book reviews, humor, lighter reading, personal experiences etc to covered in the Newsletter to

or or

Book reviews, light readings, humor, interesting personal experiences are also most welcome.

Join and update your profile on society portal at

Join IAIP member group on LinkedIn by searching for I n d i a n A s s o c i a t i o n o f Investment Professionals.

To know more about IAIP Challenge visit

www.cfasociety.org/india

chetan.shah@religare.com,namit.arora@sc.com,sunil.singhania@relianceada.com

www.iaip.in

www.iaipirc.org

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