pri Gifts by SEBI to Stakeholders Gifts by SEBI to Stakeholders

SEBI in its Board Meeting held on November 17, 2014 and vide Press Release dated November 19, 2014 brought about the following decisions in respect of the following Regulations.

(I)  SEBI (Prohibition of Insider Trading) Regulations, 2014

The Board has approved a new regulation in place of the existing regulations. The new regulations strengthen the legal and enforcement framework, align Indian regime with international practices, provide clarity with respect to the definitions and concepts, and facilitate legitimate business transactions.

Definition of Insider

The definition of Insider has been made wider by including persons connected on the basis of being in any contractual, fiduciary or employment relationship that allows such person access to unpublished price sensitive information (UPSI). However directors, employees and all other persons in the deeming category covered under 1992 regulations would continue to be covered.

Insider will also include a person who is in possession or has access to UPSI. Now, immediate relatives will be presumed to be connected persons, with a right to rebut the presumption.

In the 1992 regulations, definition of connected person was largely position based.  In the case of connected persons the onus of establishing, that they were not in possession of UPSI, shall be on such connected persons.

Companies by law would be entitled to require third-party connected persons to disclose their trading and holdings in securities of the company.

Unpublished Price Sensitive Information

UPSI has been defined as information not generally available and which may impact the price. The definition of UPSI has been strengthened by providing a test to identify price sensitive information, aligning it with listing agreement and providing platform of disclosure. Earlier, the definition of price sensitive information had reference to company only; now it has reference to both a company and securities.

The definition of UPSI has been aligned with the listing agreement and has been made inclusive.

Insiders who are liable to possess UPSI all round the year would have the option to formulate pre-scheduled trading plans. Trading plans would, however, to be disclosed on the stock exchanges and have to be strictly adhered to. Trading plans shall be available for bona fide transactions.

Clear prohibition on communication of unpublished price sensitive information (UPSI) has been provided except legitimate purposes, performance of duties or discharge of legal obligations. Advance disclosure of UPSI at least 2 days prior to trading has been made mandatory in case of permitted communication of UPSI.

In line with Companies Act, 2013, prohibition on derivative trading by directors and KMPs on securities of the company has been provided.

Code of Fair Disclosure and Code of Conduct

Principle based Code of Fair Disclosure and Code of Conduct has been prescribed.

Repeated Disclosures

Repeated disclosures have been removed so as to ease compliance burden and to align with Takeover Code. Disclosure of any change of 2% for persons holding more than 5% shares or voting rights has been removed as they are prescribed under Takeover Code.

(II) Conversion of Listing Agreements into Regulations – SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2014

The SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2014 (Listing Regulations), inter-alia, will be comprehensive Regulation in respect of various types of listed securities.

This  Regulation would be applicable for the following type of securities:-

(i)         Specified Securities (includes equity and convertibles) – Listed on Main     Board and SME Platform

(ii)        Non-convertible Debt Securities

(iii)       Non-Convertible Redeemable Preference Shares  (NCRPS)

(iv)       Indian Depository Receipts

(v)        Securitised Debt Instruments

(vi)       Units issued by Mutual Fund Schemes

The Listing Regulations have been sub-divided into three parts viz.,

(a)  substantive provisions incorporated in the main body of Regulations;

(b) procedural requirements in the form of Schedules to the Regulations; and

(c) various formats / forms of disclosures to be specified by SEBI through circular(s).

Some of the important new provisions in the Listing Regulations include:

(i)       The overarching principles for making disclosures & obligations.

(ii)      Mandatory filing on Stock Exchanges  through electronic platform.

(iii)     Mandatory appointment of Company Secretary as compliance officer except for  units of Mutual Funds listed on Stock Exchanges.

(iv)       Introduction of enabling provision for Annual Information Memorandum.

(v)        Mandatory registration in SCORES by all listed entities for redressal of investor grievances.

(vi)       Mandatory for listed entities to co-operate with intermediaries registered with SEBI.

(vii)      Converged provisions for specified securities (equity segment) listed on Main Board and SME Platform with necessary  carve-outs for SMEs.

(viii)     Applicability of certain equity segment provisions, such as, submission of Form B (audit reports containing modified opinion), transfer and transmission of securities, etc.  to entities which have listed their Debt Securities and/or NCRPS.

(ix)       Necessity to execute a shortened version of Listing Agreement within six months of notification of these regulations.

Certain other changes include:

  • Removal of dichotomy regarding utilization of issue proceeds,
  • Manner of dealing with unclaimed shares,
  • Aligning connected provisions pertaining to disclosures on website and issuing advertisements,
  • Disclosures in Annual Report, documents and information to be provided to holders of securities,
  • Terms and structure of securities, and
  • Operational modalities in manner of review of audit reports with modified opinion, etc.

(III) Amendment to SEBI (Delisting of Equity Shares) Regulations, 2009

The following changes to SEBI (Delisting of Equity Shares) Regulations, 2009 have been approved:

Conditions for delisting to be called successful

(A) the shareholding of the acquirer together with the shares tendered by public shareholders reaches 90% of the total share capital  of the company and

(B) if atleast 25% of the number of public shareholders, holding shares in dematerialised  mode as on the date of the Board meeting which approves the delisting proposal,  tender in the reverse book building process.

Offer Price through Book Building

The offer price determined through Reverse Book Building shall be the price at which the shareholding of the promoter, after including the shareholding of the public shareholders who have tendered their shares, reaches the threshold limit of 90%.

Prohibition on Promoter/Promoter Group

The promoter/ promoter group shall be prohibited from making a delisting offer if any entity belonging to the said group has sold shares of the company during a period of six months prior to the date of the Board meeting which approves the delisting proposal.

Exemption from Book Building Process

Companies whose paid up capital does not exceed Rs.10 crores and net worth does not exceed Rs.25 crores as on the last day of the previous financial year are exempted from following the Reverse Book Building process.

The exemption would be available only if –

(a) there was no trading in the shares of the company in the last one year from the date of the board resolution authorizing the company to go for delisting and

(b) trading of shares of the company has not been suspended for any non-compliance during the same period.

Reduced Timeline for delisting

Timelines for completing the delisting process has been reduced from 137 calendar days (approx 117 working days) to 76 working days.

What if the delisting attempt fails?

If the delisting attempt fails, the acquirer would be required to complete the mandatory open offer process under the Takeover Regulations and pay interest @ 10% p.a. for the delayed open offer. 

(IV)  Amendment in SEBI (Mutual Funds) Regulations, 1996

AMCs who are yet to meet with the revised networth requirement of Rs. 50 crore have been permitted to launch a maximum of two schemes per year till the time such AMCs meet with the net worth requirements. Such permission would be considered on a case to case basis. 

(V)  Granting Single Registration to Depository Participants 

There will be a single SEBI registration for DP to operate in both the Depositories in India. SEBI would process the registration application only for the first time initial or permanent registration, as the case may be, through one depository and subsequent permissions to act as a DP of other depository, shall be granted by the concerned Depository after complying with the prescribed requirements.

(VI)  Recommendations of the Depository System Review Committee (DSRC)

The recommendations of the committee in the final report inter-alia are on risk management, financial inclusion and expanding the reach of depository services, Investor Protection Fund of the depositories, outsourcing policy and IT Infrastructure. The Board after deliberations accepted the recommendations given in the final report.

(VII) Notice for settlement of certain administrative and civil proceedings

SEBI (Settlement of Administrative and Civil Proceedings) Regulations, 2014 (Regulations) enables settlement of administrative and civil proceedings under the SEBI Act, 1992, the Securities Contracts (Regulation) Act, 1956 and the Depositories Act, 1996.

SEBI, has, decided that in minor violations intimation will be sent about the impending enforcement action to the concerned parties upon approval of the said actions by the competent authority and before a show cause notice is issued. This would enable parties to seek settlement of proceedings or make voluntary submissions even prior to receipt of a detailed show cause notice. If any party avails such an opportunity to respond to such a notice, the proposed proceedings may be settled(unless rejected) or discontinued on the basis of the submissions of the noticee (if any).

The notice of impending enforcement proceedings which will be treated as a show cause notice under regulation 4 of the Regulations, contain the charges and relevant extracts of findings of investigation/inspection. Such notices would only cover minor violations specified under Chapter VI and Column 2 of Table XII of Chapter VII of Schedule II of the Regulations. In these cases, procedure for settlement as specified in the Regulations will be followed.

(VIII)  Re-classification of Promoters as Public

The  Board approved the proposal to initiate public consultation process on re-classification of promoters on the basis of  the discussion paper placed before it. –

(IX)  Issuance of partly paid shares and warrants by Indian companies

The  Board approved the proposal to initiate public consultation process regarding issuance of partly paid shares and warrants by Indian companies on the basis of  the discussion paper placed before it. –

(X)  Use of Secondary Market infrastructure for public issuance (“e-IPO”)

The  Board approved the proposal to frame suitable regulations for using Secondary Market infrastructure for public issuance (“e-IPO”)  after going through the public consultation process. –

(XI)  Imposing restrictions on wilful defaulters – Amendments to Regulations framed under SEBI Act, 1992 

It has been approved to review the policy in respect of restricting an issuer company / its promoter / directors, categorized as wilful defaulter, from raising capital after going through the public consultation process.

(XII) Amendments in Securities and Exchange Board of India (Foreign Venture Capital Investors) Regulations, 2000

The FVCI Regulations till now did not allow investments in NBFCs except Equipment Leasing and Hire Purchase Companies. To encourage investments in infrastructure, the Board has approved amendments in FVCI Regulations to allow FVCIs to invest in NBFC-CIC (Core Investment Companies), as defined by RBI.

Disclaimer- While every care has been taken in the compilation of this information and every attempt made to present up-to-date and accurate information, we cannot guarantee that inaccuracies will not occur. We will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within this write-up or any information accessed herein.

The above has been compiled by CS Reema Jain, an Associate Member of ICSI. Her areas of interest include Corporate and Allied Laws and advisory services. For any queries or suggestions, she can be approached at

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