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SEBI allows infrastructure debt funds & NBFCs to file shelf prospectus for non-convertible debt securities

26 December, 2013

Market regulator Securities & Exchange Board of India (SEBI) has expanded the eligibility of firms which can come out with shelf prospectus by adding entities making public issue of tax free bonds, infrastructure debt funds and NBFCs.

Shelf prospectus enables frequent issuers of securities to raise money without having to file separate prospectus for regulatory clearance for every issuance. It cuts down on the clearance process, making it easier for firms to raise money.

At present, the Companies Act allows only banks and public financial institutions to file shelf prospectus.

In a board meet in Mumbai on Tuesday, SEBI decided to allow NBFCs, registered with RBI, housing finance companies registered with National Housing Bank (NHB) and entities which have listed their shares/debentures in the stock exchanges for at least three years, to file shelf prospectus.

It has, however, added a few more provisos, including that such NBFCs should have net worth of Rs 500 crore or more, track record of at least three years of distributable profits, credit rating of not less than “AA-” and no default history or regulatory action pending with RBI, SEBI or NHB.

In addition SEBI has allowed issuers authorised by the notification of CBDT to make public issue of tax free secured bonds to come with shelf prospectus.

To avoid fragmentation of the issues, which will affect the floating stock and thereby liquidity, it is stipulated that only a maximum of four issuances can be made under a shelf prospectus.

Further, companies filing a shelf prospectus with the Registrar of Companies are not required to file prospectus afresh at every stage of offer of securities, within the period of validity of such shelf prospectus i.e. one year. They are required to file only an information memorandum, containing material updations, with respect to subsequent issues.

IPO grading

SEBI has made grading for IPOs voluntary against the existing norm which makes it mandatory.

FPI regulations

The market regulator also noted provisions related to the new guidelines for foreign portfolio investors (FPIs) which are to replace the existing foreign institutional investors (FIIs). “As regards FPI regulations, the communication from the Department of Economic Affairs to the CBDT and to SEBI, conveying the decision that all three categories of FPIs would be given similar tax treatment as available to FIIs presently, was noted,” it said.

SEBI board also mooted certain changes in line with the powers bestowed by the Securities Laws (Amendment) Second Ordinance, 2013.

Procedure for search and seizure 

The new ordinance allows SEBI chief to authorise the investigating authority or any other officer of SEBI to search any premises where incriminating documents are lying and seize such documents for investigation. The ordinance also empowers SEBI to make regulations for executing the search operations and to ensure safe custody of any books of account or other documents that are seized.

In this respect, the board approved the SEBI (Procedure for Search and Seizure) Regulations, 2013, on the lines of the provisions in the Income Tax Act, and for providing the detailed procedures for such search and seizures by SEBI.

SEBI (Settlement of Administrative and Civil Proceedings) regulations

While the regulations lay down the stand-alone common substantive procedure for settlement of administrative and civil proceedings under all the securities laws, serious offences such as insider trading, etc. are excluded from the scope of settlement.

The regulations provide for the guiding factors for dealing with the settlement process and in order to impart transparency in the process, the roles of the internal committee(s) and high powered advisory committee are specifically defined. They also provide for terms of settlement in monetary as well as non-monetary terms or combination of both.

Regulation of Collective Investment Schemes

The ordinance provides for regulation of pooling of funds under any scheme or arrangement, involving a corpus amount of Rs 100 crore or more.

Accordingly, a proposal to amend the Securities and Exchange Board of India (Collective Investment Schemes) Regulations, 1999, providing a framework for regulation of such deemed Collective Investment Schemes and additional requirements for continuous compliance by a registered Collective Investment Scheme, was approved by the board.

(Edited by Joby Puthuparampil Johnson)


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SEBI allows infrastructure debt funds & NBFCs to file shelf prospectus for non-convertible debt securities

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