Last week, media reports indicated that SEBI is considering imposing a requirement on listed companies to come out with a dividend policy that will compel (or at least nudge) profitable cash-rich companies to distribute their profits to shareholders. The introduction of more stringent requirements on companies to state their dividend policies will introduce a great deal of transparency on this...
SEBI Reforms – Part 3: From Listing Agreement to Listing Regulations
In most jurisdictions, several aspects of corporate governance and disclosures for listed companies are regulated through stock exchange listing requirements. These apply only to listed companies, and they are enforced by the stock exchanges. Operating as conditions to continuous listing, one of the enforcement mechanisms used is the threat (sometimes carried out) of delisting the securities...
Tighter Restrictions on Offshore Derivative Instruments
The issue of offshore derivative instruments (ODIs) such as participatory notes (PNs) have been the subject matter of regulatory controversy for some time now. These are instruments issued by foreign institutional investors (FIIs) (now foreign portfolio investors (FPIs)) to investors overseas that mimic the risks and rewards on underlying securities held by the FIIs/FPIs in Indian companies...
SEBI Reforms – Part 2: Delisting
Delisting of securities tends to be somewhat controversial given that it represents the tension between the interests of the controlling shareholder who want to delist the company and the interests of minority shareholders who are caught between the options of exiting the company at the offered value or remaining in the company without the liquidity and protections that a stock exchange listing...
SEBI Reforms – Part 1: Insider Trading
Yesterday, SEBI’s board unleashed a series of capital market reforms. These relate to insider trading, delisting, enforceability of the listing agreement and several other matters. In this post, I briefly examine the implications of the reforms on regulations pertaining to insider trading. The SEBI board has approved a new set of regulations dealing with insider trading. While the text of the...
SEBI Informal Guidance: Scope of Prohibition
[The following post is contributed by Supreme Waskar, partner at Sterling Associates, Mumbai] Almondz Global Securities Limited (“AGSL”) is a stock broker and merchant banker registered with SEBI. On March 21, 2014 SEBI had prohibited AGSL from taking up any new assignment or involvement in any new issue of capital including an IPO, follow on issue etc, from the securities market in any manner...
Disclosure of “Encumbrances” on Shares
Recently, the Securities Appellate Tribunal (SAT) had to deal with two separate situations pertaining to the disclosure of pledge or other encumbrance over shares. In an order discussed earlier today, the SAT found that the acquisition of shares by a public financial institution through the invocation of a pledge was required to be disclosed in accordance with SEBI’s Takeover Regulations...
Invocation of pledge by PFI requires disclosure under SEBI regulations
[The following post is contributed by Supreme Waskar, partner at Sterling Associates, Mumbai] The Securities Appellate Tribunal (SAT) has upheld the order of SEBI against SICOM Ltd. (“SICOM”) imposing penalty of Rs. 5 lakhs for non-disclosure of acquisition pursuant to the invocation of a pledge under regulations 29(1) and 29(2) of the Securities and Exchange Board of India (Substantial...
With great power comes great responsibility: SAT
The abuse of extreme powers in financial regulatory laws has been subject matter of litigation for the past two decades – particularly since the mid-1990s when SEBI started using the (then) newly-introduced Section 11B of the SEBI Act, 1992. The power to “issue such directions as deemed fit” is a sweeping and general one. The use of such powers without even...
OECD on Public Enforcement of Corporate Governance in Asia
The principles and norms of corporate governance tend to operate through layers. On the one hand, there is the basic legislation, i.e. the Companies Act, SEBI Act and the like. Then there are specific norms in the form of clause 49 of the listing agreement that are mandatory for listed companies. Finally, there could be voluntary guidelines that exhort companies towards higher standards. That...
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