In a meeting earlier today, the SEBI Board took several decisions which may have an important impact. 1. The Board decided to encourage promotion of dedicated exchanges/platforms for trading of securities for small and medium enterprises. Enterprises with a post issue paid up capital of less that Rs. 25 crore would be listed on such exchanges/platforms. 2. In a move which may have important...
The Effectiveness of IPO Grading
On April 30, 2007, the SEBI (Disclosure and Investor Protection) Guidelines were amended to introduce the novel concept of IPO grading. Following the insertion of clause 2.5A, companies going in for an IPO are required to obtain grading from at least one credit rating agency. Further, all grades obtained are required to be disclosed in the prospectus or red herring prospectus along with the...
Short Selling Restrictions Gain Traction
Due to allegations that the stock price of several financial institutions involved in the current crisis were beaten down by short sellers, several jurisdictions have recently introduced greater curbs on short selling. The U.S. Securities and Exchange Commission (SEC) has introduced temporary bans on short selling in securities of 799 financial companies (see this report on the Harvard Law School...
Simplifying Qualified Institutional Placements and Rights Issues
(In the following post, Shantanu Naravane examines recent changes to the SEBI DIP Guidelines made with a view to promoting qualified institutional placements and rights issues) The concept of Qualified Institutional Placements [“QIP”] was introduced in India, with effect from May 8, 2006, by virtue of an amendment to the SEBI (Disclosure & Investor Protection [“DIP”] Guidelines, 2000...
Stock Options for Nominee Directors
Nominee directors on Indian corporate boards are a unique category of directors. They are usually are nominated by a bank, financial institution or other large investor to be a director on companies in which such nominating entities have invested. Sometimes, nominee directors also find themselves in an unenviable position – in case of a conflict between the interests of the nominating institution...
Promoters’ Contribution: SAT Ruling in the Reliance Power Case
A few days ago, the Securities Appellate Tribunal (SAT) passed its order in the Reliance Power IPO Case. This is on an appeal from the decision of SEBI (that we had posted about earlier on this blog). I thank one of our readers who sent in a review of the SAT decision, which I reproduce below: Rajkot Saher v. SEBI, Reliance Power Limited Facts: The promoters of Reliance Power Limited...
Share Buyback: The Effect of Shareholders’ Resolution
In a recent case decided last week, the Securities Appellate Tribunal (SAT) had the occasion to decide on the effect of a shareholders’ resolution in the context of a buyback of shares. The SAT decision is available here. The facts of the case are fairly straightforward. The company involved, D-Link India Ltd, proposed to the shareholders a resolution for the buyback of its shares pursuant...
Recent Restrictions on Short Selling in the US: Comparing the Indian Position
The steep fall in prices of several US investment banks and financial institutions, such as Bear Stearns, Fannie Mae and Freddie Mac have been attributed to false rumours leading to panic selling, which has been further exacerbated by “naked” short selling. This has necessitated emergency action on the part of the Federal Reserve to rescue these institutions. Consequently, the SEC has imposed a...
Bulk Deals and Order Matching
The availability of income tax exemptions (on long term capital gains) for share transactions that are executed through stock exchanges have caused otherwise negotiated share sale and purchase deals to be implemented through the stock exchange mechanism. This would require parties to bear only the securities transaction tax (STT) at rates which are negligible compared to the erstwhile capital...
Creating Debt and Securitisation Markets in India
One of the constant criticisms of the Indian financial markets has been the lack of a liquid and vibrant market for debt securities on the one hand and that for securitised instruments on the other. In separate moves announced on the same day (June 19, 2008), SEBI has sought to alleviate both these concerns. Debt Securities The SEBI (Issue and Listing of Debt Securities) Regulations, 2008 sets up...
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