Although put and call options are quite common in investment agreements, its enforceability under Indian law has been in serious doubt due to age-old provisions in securities laws which have not been updated to meet with the requirement of the times. I have discussed the issue in detail in this paper and also called “for a reconsideration of the legal regime so that physically settled options...
Extension of Date for Implementation of Modified ESOP Rules
Earlier this year, SEBI had announced the implementation of amended rules for the issue of employee stock options (ESOPs), which restricted the types of schemes to only those that comply with SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. Particularly, curbs were imposed on the acquisition of shares in the secondary markets by ESOP trusts. The rationale...
Supreme Court on “Market Abuse”
In a judgment delivered last Friday, the Supreme Court came down heavily on “market abuse” not just on the case at hand but more generally on the practice to the extent prevalent in India. The case, N. Narayanan v. Adjudicating Officer, SEBI, arose in the form of an appeal from the Securities Appellate Tribunal (SAT) in relation to the appellant who was the whole time director of Pyramid Saimara...
SEBI Order in the Art Fund Case
Earlier this week, SEBI passed an order against Osian’s-Connoisseurs of Art Private Limited holding that the Osian Art Fund falls within the purview of the SEBI Act and the SEBI (Collective Investment Scheme) Regulations, 1999 (the CIS Regulations). Since the art fund had raised investments without registering with SEBI, it was ordered to wind up its scheme and refund monies collected by it and...
SEBI Adjudication Order in the IPCL Insider Trading Case
SEBI’s adjudicating officer yesterday passed an order exonerating Mr. Manoj H. Modi (MHM) and Mrs. Smita M. Modi (SMM) for insider trading charges in connection with the shares of Indian Petrochemicals Corporation Limited (IPCL). It deals with two primary legal questions as they were applied to the facts of the case, i.e. (i) whether MHM and SMM are “insiders” with respect to IPCL; and (ii)...
Corporate Communication Through Social Media
It is common for CEOs and other senior managers of company to communicate through social media platforms such as Facebook and Twitter. However, concerns have arisen whether that amounts to selective disclosure of company information if that is made available only on these specific platforms without being disseminated more widely to enable greater access to investors. The US Securities and...
Rights Offering: Kerala High Court Judgment Stayed by Supreme Court
Last month, we had discussed a decision of the Kerala High Court in Securities and Exchange Board of India v. Kunnamkulam Paper Mills Ltd, where it was held that in certain circumstances a rights offering by an unlisted company may amount to a public offering thereby conferring jurisdiction on SEBI. The company preferred an appeal to the Supreme Court, which has issued notice, and ordered that in...
Review of Insider Trading Regulations
SEBI has constituted a committee to review its regulations on insider trading. The committee is chaired by Justice N.K. Sodhi, retired Chief Justice of the Karnataka High Court and former Presiding Officer of the Securities Appellate Tribunal (SAT). The review comes two decades after SEBI’s Insider Trading Regulations were enacted in 1992. The initial decade witnessed very few investigations...
When a Rights Offering Becomes a Public Offering
In August last year, the Supreme Court unequivocally ruled in the Sahara case on the issue of when an offer of shares by an unlisted company would become a public offering thereby invoking SEBI’s jurisdiction. One of our readers, Sumit Agrawal, has brought to our attention a decision of the Kerala High Court in Securities and Exchange Board of India v. Kunnamkulam Paper Mills Ltd, where it was...
SEBI’s Recent Securities Markets Announcements
Last week, SEBI took certain decisions in the form of minor reforms to the securities markets, both primary and secondary. As part of a process that began nearly 3 years ago, SEBI has further liberalized the process for dilution of promoter shareholding in listed companies, since a deadline of June 2013 has been set to ensure minimum level of public shareholding in listed companies. This time...
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