Regulatory Reforms in the Capital Markets

SEBI has taken steps in the last few weeks
to bring about reforms in the capital markets, particularly in the primary
market segment.
The first set of reforms essentially gives
effect to decisions taken at SEBI’s board
meeting
on August 16, 2012. These include matters relating to both the
equity markets, where the SEBI (Issue of Capital and Disclosure Requirements)
Regulations 2009 have been amended,
and to the debt markets, where the SEBI (Issue and Listing of Debt Securities)
Regulations, 2008 have been amended.
The more
contentious set of reforms relates to additional protection that SEBI has
sought to offer investors in initial public offerings (IPOs). This is by way of
two measures,
(i) a proposal for a mandatory safety net mechanism by way of a discussion
paper
; and
(ii) the issue of the SEBI
(Framework for Rejection of Draft Offer Documents) Order, 2012
that deals
with specific circumstances where SEBI is entitled to reject an offer document.
These
reforms have generated a substantial discussion, principally on the ground that
a safety net mechanism takes away the equity risk of an investor, and that the
guidelines on rejection of offer documents effectively introduces merit-based
regulation of capital markets that was done away with the abolition of the
Controller of Capital Issues (CCI) following the liberalised economic policies
introduced in 1991.
A
detailed discussion and analysis of these proposals are available at the
following sources:
Somasekhar
Sundaresan
in Business Standard;
Report
in the Economic Times; 

Discussion in the Financial Express; and
Discussion
on The Firm – Corporate Law in India.

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.

1 comment

  • Sir,
    I want to know whether any other country follows a concept similar to the "safety net mechanism"?

    If yes, which are those countries and what are the concerned regulations?

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