India: Changes in Regulations Governing Capital Markets

SEBI has announced a number of changes in regulations governing capital markets. Some of the important decisions are:

1. Public issues by Insurance Companies

The Board noted that the SEBI (ICDR) Regulations, 2009, which are sector neutral, would also apply to insurance companies. The Board also noted and approved the recommendations of SEBI Committee on Disclosures and Accounting Standards (SCODA) for the following additional disclosures, having regard to the specific nature of insurance companies:

• Disclosure of risk factors specific to insurance companies;
• Broad headings under which an overview of the insurance industry shall be disclosed;
• Other disclosures specific to insurance companies;
• Formats for disclosure of financial information as specified by IRDA;
• Glossary of terms used in the insurance sector;

The Board also approved the two amendments to SEBI (ICDR) Regulations, 2009, viz., exemption from appointment of monitoring agency and disclosure of disclaimer clause of IRDA in the offer documents of insurance companies.

2. Preferential issue of equity shares or convertible securities or warrants to promoters and promoter group

In order to further tighten the preferential allotment framework, the Board decided that in case of preferential issues, where any promoter or any promoter group entity has previously subscribed to the warrants of the company but failed to exercise the warrants, the promoters and promoter group shall be ineligible for issue of equity shares or convertible securities or warrants for a period of one year from the date of expiry of the currency /cancellation of the warrants. The Board further decided that if any member of the promoters/ promoter group has sold shares in the previous six months, then the promoters/ promoter group would be ineligible for allotment on preferential basis.

3. Fixed Pay Date

In order to enable investors to manage their cash/ securities flows efficiently and to enhance process transparency, the Board decided to mandate companies to have a pre-announced fixed pay date for payment of dividends and for credit of bonus shares.

4. Enhancement of limit for defining retail individual investors

The Board decided that the maximum application size for retail individual investors may be increased to Rs.2 lakh across all issues.

5. Rights issue framework for IDRs

In order to facilitate simultaneous rights offering by the foreign issuers (who have listed their Indian Depository Receipts (IDRs) in Indian Stock Exchanges) in their home jurisdiction and in India, SEBI Board has decided to notify the framework for rights issue of IDRs. It is decided that for circulation in India, an additional wrap (disclosing information required in Indian jurisdiction and issue process relevant for the IDR holders) can be attached with the letter of offer, circulated by the overseas issuer in their home jurisdiction. Disclosure requirements for IDR rights would more or less be in line with the reduced disclosure requirements, applicable for domestic rights issues. Further, it is decided that IDR issuers, who are in compliance with the continuous listing requirements, can avail the facility of filing the offer document on fast track basis.

For complete details on these regulations see here.