SEBI Board Meeting 09 February 2013

SEBI, at its Board Meeting held on 8th March 2013 inter alia approved the Regulations for issuance and listing of non-convertible redeemable preference shares. Key highlights of the same are:


Ms. Anjali Aggarwal
Vice President
+919971673336
anjali@indiacp.com
1. Approval of the Regulations for issuance and listing of non-convertible redeemable preference shares. Key highlights of the same are:
  • The Regulations shall be called SEBI (Issue and Listing of Non-Convertible Redeemable Preference Shares) Regulations, 2013.
  • The Regulations aim to provide a comprehensive regulatory framework for not only public issuance of non-convertible redeemable preference shares but also listing of privately placed redeemable preference shares.
  • Considering the risks involved in the instrument, certain requirements like minimum tenure of the instruments (three years), minimum rating (“AA-” or equivalent) etc. have been specified in case of public issuances. For listing of privately placed non-convertible redeemable preference shares, minimum application size for each investor is fixed at Rupees Ten Lakhs.
  • As per Basel III norms, Banks can issue non-equity instruments such as Perpetual Non-Cumulative Preference Shares and Innovative Perpetual Debt Instruments, which are in compliance with the specified criteria for inclusion in Additional Tier I Capital. The proposed Regulations shall, mutatis mutandis, be applicable to aforesaid instruments issued by banks, subject to compliance with the provisions of Companies Act, 1956 or/ and any other applicable laws and such other conditions that may be specified by SEBI and subject to making adequate disclosures and relevant risk factors in the offer document.
In our opinion, this would surely open up more avenues of fund raising by the Corporates. From the Corporates' point of view, a Preference Share has an advantage that there is no dilution of the voting capital in the Company. And from the Shareholders´ perspective, they are entitled to a preference in the dividend being declared by the Company, that too a tax free one. So, Preference Shares seem to be more lucrative and acceptable Securities.

As per the extant Security Laws, there are no explicit provisions for listing of the Redeemable Preference Shares on the Bourses. These Regulations would fill in the gap that existed.

As per Capital Markets and media Sources, in the past 3 years, more than Rs 25,000 Cr have been raised through issuance of Preference Shares by appx 295 issuers. In FY 2011-12, as many as 147 issuers raised appx Rs 10,000 Cr.

2. Simplification of registration requirements for stock brokers proposed:

The Board has proposed to simplify and rationalize the registration requirements for stock brokers and for this the Board has decided to amend the regulations for stock brokers.

Present Scenario
Picture after the amendment of Stock Broker Regulations
  1. Separate Certificate of Registration for different segments of a stock exchange (equity, equity derivatives or currency derivatives)
  2. Separate Certificate of Registration for different category (trading member, trading cum self clearing member, professional clearing member)
  1. One certificate of registration per stock exchange.
  2. Approval for other segments or categories to be taken from the Stock Exchange which shall be subject to compliance of all regulatory requirements.
  3. Stock Exchanges to keep SEBI informed about such approvals through their periodical reports.

3. Changes in provisions of RGESS eligible schemes:

The Board has approved the amendment proposed in respect to SEBI (Mutual Fund) Regulations, 1996 insofar their applicability to RGESS is concerned. The amendment entails the following changes:

S. No:
Change with Respect to
Earlier specification
Specification as amended
1.
Initial Offering Period for RGESS eligible schemes
15 days
30 days
2.
Timeline for refund of money and sending statement of account
5 working days from closure of initial subscription
15 days from closure of initial subscription
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