Sebi board resets rules on acquisitions

The country’s market regulator will gradually phase out share buybacks through stock exchanges by April 2025 as it works to create a fairer process for shareholders.

The Securities and Exchange Commission of India (Sebi) will create a separate window on stock exchanges to conduct buybacks until then. The regulator also increased the minimum use of funds allocated for redemptions through the stock exchange from 50% to 75%.

“These amendments are intended to streamline the acquisition process, level the playing field for investors and boost operations,” Sebi Chairman Madhabi Puri Buch told reporters after Tuesday’s board meeting. doing business easier”.

Sebi is reviewing some regulations and tightening corporate governance standards amid a sharp rise in fraud and underperforming IPOs that have hurt minority shareholders.

The regulator also reduced the time to complete the acquisition through the public offering route to 18 days. Sebi said the requirement to file a draft offer letter with the regulator would be eliminated, saving time for listed companies. “Over time, more and more companies will have to resort to the public offering route. Arguably, this is a fair way and will allow all shareholders to participate,” said Yash J. Ashar, partner and head of capital markets at law firm Cyril Amarchand Mangaldas.

Sebi also approved a working group’s recommendations on improving governance standards at exchanges — new rules include increased director accountability, tighter investment policies and data sharing.

The Sebi Board of Directors approved proposals designed to improve governance at market infrastructure institutions, including stock exchanges, clearing and custody corporations. These recommendations are particularly important in light of past failures and controversies involving the National Stock Exchange and the Multi-Industry Commodity Exchange (MCX).

According to Sebi, the function of market infrastructure institutions should be divided into three important categories of activities; regulation, compliance and risk management; and other functions, including business development. Sebi said key managers in charge of functions in the first two categories should have the same level of authority as those responsible for the third category.

Regarding board governance, Sebi said the process for appointing public utility directors (PIDs) would be streamlined by linking specific skills and expertise to the PID. The regulator also said that an internal review of the performance of market infrastructure organizations and their statutory committees will be conducted annually.

Buch said agenda items and minutes of the market infrastructure organization’s board regarding regulatory, compliance and risk management aspects should be published on websites. .

Sebi also approved a proposal to create execution-only platforms like Paytm and Groww to sell mutual funds directly. Prior to that, there was no clear regulatory framework for execution-only platforms.

The framework for execution-only platforms is intended to provide investors with greater convenience in investing.

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