The SEBI board met in Mumbai on November 19, 2014 and approved of new regulation in place of existing insider trading regulations and amendment to delisting regulations. It has widened the definition of insider under amended insider trading norms and has reduced the time-line for completing delisting process.
Some of the changes approved by SEBI are outlined hereunder:
1)Amendment to Insider trading norms:
In order to strengthen the regulatory framework dealing with insider trading in India, SEBI has approved of new regulation in place of the existing Insider Trading regulations. The salient features of the proposed regulations are as under:
a)Definition of ‘insider’ broadened
: The definition of insider has been widened. Following persons have been included in the definition of ‘insider’:
Persons connected in any contractual, fiduciary or employment relationship that allows such persons access to unpublished price sensitive information (UPSI).
Immediate relatives would be presumed to be connected persons, with a right to rebut the presumption.
b)Insider trading norms aligned with international practices:
The requirement of communication of UPSI in the case of legitimate business transaction has been recognized, in law, and a safeguard has been provided.
c)Disclosure of UPSI in public domain
: Disclosure of UPSI in public domain has been made mandatory before trading, so as to rule out asymmetry of information in the market, as prevalent in other jurisdictions.
2)Insertion of uniform regulation in place of listing agreement:
SEBI has approved of conversion of Listing Agreement to Listing Regulations. Listing Regulations, interalia, would be comprehensive Regulations in respect of various types of listed securities. These Regulations would consolidate and streamline the provisions of existing listing agreements, thereby ensure better enforceability.
3)Amendment to delisting regulations:
SEBI has approved certain changes to SEBI (Delisting of Equity Shares) Regulations, 2009:
a)Conditions for delisting:
It has been proposed that delisting would be considered successful only when the shareholding of the acquirer together with the shares tendered by public shareholders reach 90% of the total share capital of the company, and
Atleast 25% of the number of public shareholders, (holding shares in dematerialised mode as on the date of the Board meeting approve of the delisting proposal) tender in the reverse book building process.
b)Exemption from reverse book building process:
Further, companies whose paid-up capital and net worth does not exceed Rs.10 crores and Rs.25 crores, respectively, as on the last day of the previous financial year are exempted from following the Reverse Book Building process.
c)Reduction in time-line to complete delisting:
Timelines for completing the delisting process has been reduced from 137 calendar days (approx 117 working days) to 76 working days.
4)Risk based supervision of market intermediaries:
SEBI is in the process of formalizing its risk based approach towards supervision of market intermediaries which will be in alignment with the global best practices. The system will be implemented in a phased manner.
5) Granting Single Registration to Depository Participants
: With a view to further simplify the registration requirements for Depository Participants (DPs), the Board has approved of the policy of granting single registration for the application of initial registration as well as the permanent registration for operating with both the Depositories.
6) Use of Secondary Market infrastructure for public issuance (“e-IPO”):
The Board has approved the proposal to frame suitable regulations for using Secondary Market infrastructure for public issuance (“e-IPO”) after going through the public consultation process
7) Imposing restrictions on wilful defaulters - Amendments to Regulations framed under SEBI Act, 1992:
The Board has approved of the proposal to review the policy in respect of restricting an issuer company / its promoter / directors, categorized as wilful defaulter, from raising capital after going through the public consultation process.