Capital markets regulator Sebi is set to announce a slew of measures, including IPO and Offer For Sale reforms, to give a boost to the primary markets and make it easier for companies to raise funds.
These issues, along with new guidelines for research analysts, common Know Your Client (KYC) procedure for financial sector, changes to ESOP regulations and introduction of minimum penalty provisions, among others, are expected to be discussed at Sebi's board meeting here tomorrow.
The Sebi board will also discuss a proposal to make it mandatory for all listed PSUs to have at least 25 per cent public shareholding -- a move that will help the government raise close to Rs 60,000 crore through sale of excess shares in 38 state-run firms.
This will be Sebi's first board meeting since a new government led by Prime Minister Narendra Modi assumed office last month.
The board will also be apprised of the elaborate contingency plan put in place by Sebi during recent general elections. A strong vigil mechanism was put in place by Sebi, while RBI was also roped in to implement these measures.
With regard to primary market reforms, the Securities and Exchange Board of India (Sebi) has proposed relaxing the restrictions on sale of bonus shares held by promoters or other investors during an Initial Public Offering (IPO).
Another proposal before the board is expanding the framework of Offer for Sale (OFS) mechanism for selling shares and plans are on the anvil for providing discount for retail investors under this route.
OFS route was introduced in February 2012 as a fast-track mode for sale of shares by promoters. Since then more than 100 companies have sold shares through this mechanism to mop-up close to Rs 50,000 crore.
According to the official, the board is also expected to discuss the proposal for introducing minimum penalties in the monetary policy provisions under the securities law.
After extensive discussions with stakeholders, Sebi has also finalised elaborate norms for 'research analysts' to ward off any conflict of interest in their activities. The draft regulations in this regard are expected to be approved by the board during the meeting.
Under the proposed norms, foreign entities acting as research analysts for Indian markets or India-listed companies will need to tie-up with a registered entity in India, while domestic players will also be subjected to strict disclosures and scrutiny.
The board will also discuss the developments in the derivatives market.
ESOP
The Securities and Exchange Board of India (Sebi) is all set to announce a new set of ESOP regulations including purchase of shares by employee welfare trusts from the secondary market with adequate safeguards..
The Primary Market Advisory Committee of Sebi has suggested some changes and the market regulator had sought public comments on the recommendations.
The final norms have been prepared after taking into account these suggestions and they would be placed before Sebi's board tomorrow, a senior official said.
The proposed regulations shall be applicable to Employee Stock Options Scheme and Employee Stock Purchase Scheme, generally called ESOP guidelines, as well as on other general employee benefit schemes like in the case of accident, sickness, disability, death and scholarship funds.
If fresh shares are proposed to be issued against the employee benefit schemes, then the company may have the flexibility of either adopting the trust route or implementing it directly, Sebi said.
In case secondary market acquisitions are proposed under the scheme, the same must be implemented through a mechanism of trust.
"The trust route provides for better governance of the schemes. Considering that secondary market transactions necessitate adequate safeguards. Trust route may be made mandatory for schemes to undertake secondary market transactions," Sebi said.
The trust may hold the shares acquired from secondary market for a minimum period of six months.
However, within the said holding period of six months the trust may be allowed to tender shares in open offers/buybacks /delisting offers or any other exit offered by the company to its shareholders.
No off-market transfer may be permitted except to employees pursuant to the scheme, the market regulator said.
To ensure "independence of trustees and create an arm's length relationship" in the operation of trust, Sebi suggested that a person shall not be appointed as a trustee to hold the shares if he is a director, key managerial personnel or promoter of the company or the beneficiary holding ten per cent or more of the paid-up share capital of the company.
Those companies which have already acquired shares from secondary market in excess of maximum permissible limits could be given a longer time period of 5 years from the date of notification to come down to the permissible level.
For general employee benefit and retirement benefit schemes holding more than the prescribed limit is proposed to be given more than 5 years period from the date of notification to reduce the same to the permissible level.
Sebi has also proposed to extend the timeline for alignment of existing employee benefit schemes with the ESOP guidelines till June 30, this year.
