Over the years, the Reserve Bank of India (RBI) has significantly tightened the regime relating to “wilful defaulters” who are declared as such through a process stipulated by the RBI. Upon such a declaration, the regulatory regime of the RBI effectively stifles the ability of a wilful defaulter from raising further bank financing. However, realisation seems to have dawned more lately on the fact...
SEBI Discussion Paper on “Revising the Capital Raising Process”
There is a concern that issuers have resorted to private placements and qualified institutional placements (QIPs) to raise capital from specified investors rather than to public offerings of shares. This is due to the excessive burden and costs associated with a public offering of shares. Being cognizant of this tendency, SEBI has proposed measures to nudge issuers to move away from private...
Year-End Reforms from SEBI
We wish our readers a very happy 2015! The end of 2014 was marked by a flurry of announcements from SEBI, some of which are briefly discussed in this post. Re-Classification of Promoters as Public The concept of “promoters” is quite significant in the Indian context as it is relevant for various purposes. While the existing SEBI regulations define a “promoter”, the circumstances are not entirely...
Insider Trading and Tippee Liability
In recent times, there has been a lot of discussion about how the regulators and the prosecution have been enormously successful in obtaining convictions in insider trading cases in the U.S. That momentum may have been somewhat restrained by a ruling of the United States Court of Appeals for the Second Circuit in United States v. Newman, et. al. In that case, analysts at several hedge funds...
Reverse Cross-Listings: Foreign Companies Accessing the Indian Capital Markets
Corporate and capital markets laws in India have allowed foreign companies to list in India in the form of Indian depository receipts (IDRs). While this facility was allowed with much fanfare, it has been accessed so far by only one company, i.e. Standard Chartered Bank. However, more companies might likely follow in the future. A new paper titled “Reverse Cross-Listings — The Coming Race...
New Delisting Regulations – tougher rather than easier
New regulations on delisting have been approved by SEBI. I wrote a column on December 1, 2014 (print edition) of the Business Standard, on how a new element of requiring at least 25% of the public shareholders as of a certain date to have participated in selling their shares, would nudge toward counter-productive outcomes. I have pasted the copy below. Earlier, Umakanth had commented...
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...
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