Monday, January 21, 2013

SEBI’s Recent Securities Markets Announcements

Last week, SEBI took certain decisions in the form of minor reforms to the securities markets, both primary and secondary.

As part of a process that began nearly 3 years ago, SEBI has further liberalized the process for dilution of promoter shareholding in listed companies, since a deadline of June 2013 has been set to ensure minimum level of public shareholding in listed companies. This time, some measures have been adopted to make the “offer for sale through stock exchange mechanism” more efficient. While such measures may make such options more attractive, it is not clear if SEBI’s objective can be achieved within the timeframe given that several companies are yet to comply with the minimum public shareholding norms. It looks likely that SEBI’s enforcement mechanism and its determination in ensuring compliance will be put to rigorous test in a few months.

Some changes have also been suggested to SEBI’s Takeover Regulations that were promulgated in 2011. Several of them are clarificatory in nature or intended to address discrepancies or the lack of clarity that was experienced ever since the new regulations came into effect. However, one of the long standing critiques of the Takeover Regulations pertaining to their lack of appropriate fit with the delisting process has not been addressed in this round despite assurances from SEBI to relook at this issue.

Another announcement that came last week relates to the implementation of the curbs imposed on acquisition of shares by employee trusts in the secondary markets. SEBI’s decision and rationale were analyzed previously (here). Therefore, now any form of employee stock option or share purchase scheme must necessarily involve the issue of new shares from the company.

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