Mumbai: In wide-ranging reform push, Sebi on Wednesday unveiled simpler delisting rules, tighter regulations to curb insider trading and imposed restrictions on wilful defaulters on tapping the capital market.
With an aim to ensure better enforceability as well as putting in place a comprehensive set of norms for listed entities, Sebi has also come out with listing regulations, among other measures to further safeguard investors' interest.
Unveiling a slew of measures after its board meeting here, Sebi said that in case of "minor violations" entities would be given an opportunity to settle enforcement proceedings even before issuance of formal show cause notice.
Making the whole process less cumbersome, the Securities and Exchange Board of India (Sebi) has decided to reduce the time taken for completing the delisting process by about half from minimum 137 days at present.
Delisting would be deemed successful only if at least 25 percent of the public shareholders have participated in the reverse book building process.
The regulator has further strengthened the norms to deal with insider trading activities by providing definition for connected person, among others, while making sure that legitimate business transactions are not adversely impacted.
"The new regulations strengthen the legal and enforcement framework, align Indian regime with international practices, provide clarity with respect to the definitions and concepts, and facilitate legitimate business transactions," Sebi said about the changed insider trading norms.
Cracking the whip on wilful defaulters, the watchdog has decided to impose restrictions on them in terms of raising funds from the capital market.
Curbs would be put in place on companies, promoters, and directors that are categorised as a 'wilful defaulter' from accessing the capital market.
Currently, Sebi norms bar wilful defaulters from issuing convertible debt instruments. However, there is no restriction on such entities from raising funds from the capital market by way of public or rights issues, among others.
Sebi also said that mutual fund companies, which are yet to comply with the requirement of minimum Rs 50 crore networth, can only launch a maximum of two schemes annually till the time they meet norms.
However, such permission would be considered on a case to case basis, depending on such fund houses demonstrating that serious efforts are being made by them to meet the networth requirements within the prescribed timelines.
The regulator hiked the minimum net worth requirement for mutual funds to Rs 50 crore from Rs 10 crore in a move to weed out non-serious players and to ensure stability of the financial system. They have been given three years to comply with regulations.
The regulator is said to have stopped clearing applications for any new fund offers (NFOs) of fund houses whose networth is below the required level.
According to industry experts, Sebi has received offer documents from many of these fund houses to launch new schemes, but it is not approving them.
The capital market regulator has approved one-time registration process for depository participants to operate on both CDSL and NSDL.
The initiative would help streamline and simplify the registration process and will reduce the regulatory burden and save the cost and time of the applicants.
Currently, the depository participants are required to obtain separate registration for both the depositories. Further, the applicants are granted initial registration for five years and then permanent registrations.
The board also took note of the recommendations -- regarding simple, formalised and risk-based supervision approach for market intermediaries -- made by consultant Oliver Wyman, which was appointed by Sebi.
Based on the recommendations, Sebi is in the process of formalising its risk based approach towards supervision of market intermediaries which would be in alignment with the global best practices. The system will be implemented in a phased manner, the release said.
Further, Sebi board has approved a proposal to allow Venture Capital Investors (FVCIs) in Core Investment Companies (CICs) for infrastructure sector to help attract overseas funds in this space.
The move will remove any hindrance for investment in the infrastructure sector through the FVCI route and to boost the infrastructure sector in the country.
Besides, Sebi has accepted the recommendations of 'Depository System Review Committee' on risk management, financial inclusion and expanding the reach of depository services and Investor Protection Fund of the depositories.
The committee was constituted to assess the depository system on the basis of CPSS-IOSCO principles so as to benchmark with global best practices and suggest areas for improvement.
Further Sebi's board approved the proposal to frame suitable regulations for using secondary market infrastructure for public issuance (e-IPO).
Also, Sebi has given nod to the proposal to initiate public consultation process on re-classification of promoters and the regulator also approved proposal regarding issuance of partly paid shares and warrants by Indian companies.
