Tuesday, March 24, 2015

SEBI Board meets- approves norms of IFSCs, eases conversion of debt into equity by banks/FIs; nods to municipal bonds

The SEBI held its board meeting at New Delhi on 22.03.2015 and took the following decisions:

1.Introduction of framework for IFSC : SEBI has approved guidelines on regulation of International Financial Services Centre (IFSC) set up under Section 18(1) of Special Economic Zones Act, 2005. The key features of guidelines on IFSC are as under:

i. Gujarat International Finance Tec-City (GIFT City) would be country's first IFSC.

ii. Subsidiaries of domestic as well as foreign stock market intermediaries and clearing corporations of stock exchanges allowed to set-up and undertake business at IFSC. The guidelines permits issuance of depository receipts and debt securities by domestic as well as foreign companies under 'Foreign Currency Depository Receipt' Scheme

iii. The guidelines also provide for listing and trading of shares and other derivatives of foreign companies incorporated in India. All categories of investors such as - Non resident Indian, foreign investor, institutional investors and Resident Indian eligible under FEMA are allowed to participate in IFSC

iv. Mutual funds and Alternative Investment Funds set up in IFSC are also allowed to invest in securities listed in IFSC

2.Conversion of debt into equity by Banks/FIs made easier : The Board has approved a proposal to relax provisions relating to 'Issue of Capital and Disclosure requirements' and Take over Code while converting debt into equity of listed borrowers companies in distress by the lending institutions. The conversion of debt into equity would be allowed at face value or at new fair-price formula. The new guidelines aims to revive listed companies in distress and to provide more flexibility to the lending institutions to acquire control over the company in the process of restructuring

3.Review of continuous disclosure norms for listed companies : In order to enable investors to make well informed decision, the SEBI has proposed following changes to Listing obligations and Disclosure requirements by Companies:

i. Listed company shall have to disclose all events/information first to stock exchange(s) as soon as reasonably practicable and not later than 24 hours of occurrence of event/information. Further, listed entities are required to make public the outcomes of board meeting within 30 minutes of meetings

ii. The listed entity has to provide specific and adequate reply to queries of stock exchange(s) with respect to rumours. The listed entity is required to disclose on its website all events/information which is material and such information shall be hosted for a minimum period of 5 years. The listed entity must disclose all events/information with respect to its subsidiaries which are material.

4.Issue and listing of municipal bonds : The Board considered and approved regulations relating to issuance and listing of bonds by municipalities. The regulations are in line with guidelines issued by Govt of India for issue of tax-free bonds by Municipalities. The key features are as under:

i. Municipalities making public issue shall issue only revenue bonds. For private placement, issuer may issue general obligation bonds or revenue bonds. Minimum tenure of bonds will be of three years

ii. Issuer need to obtain credit rating from credit rating agencies and it is to be noted that Municipality must not have defaulted in previous 365 days and its net worth should be positive for three preceding years