Market regulator Securities and Exchange Board of India (SEBI) has taken some crucial decisions related to the ownership rules of mutual funds, de-listing norms, setting up of gold exchange, social stock exchange, while also revising the framework for merger and acquisition (M&A) deals of listed companies. At its board meeting, SEBI also approved the investors charter for the securities market.
SEBI says an instrument representing gold will be called 'electronic gold receipt' (EGR). EGR will have trading, clearing and settlement features akin to other securities. EGRs will be notified as securities under the Securities Contracts (Regulation) Act 1956.
“The gold exchange, encompassing the entire ecosystem of trading of EGR and physical delivery of gold, is expected to create a vibrant gold ecosystem in the country commensurate with India’s large share of global gold consumption. The gold exchange would be a national platform for buying and selling EGRs with underlying standardised gold in India and also create a national pricing structure for gold. The Gold Exchange is expected to offer a host of benefits for the value chain participants as well as for the entire gold market ecosystem, such as, efficient, and transparent price discovery, investment liquidity, assurance in the quality of gold,” the market regulator added.
Investor Charter for Securities Market
SEBI board considered and approved an investor charter for investors in the securities market. The investor charter includes the mission statement of SEBI for investors, rights and responsibilities of investors, and do’s and don’ts for investors in securities market.
SEBI has also developed investor charters of recognised market infrastructure institutions (MIIs), registered intermediaries and regulated entities in consultation with various entities. “These investor charters will help the investors in securities markets to get the relevant information at one place, viz.- what rights they have, various services provided by entities to the investors, timelines related to various services provided to investors, and investor grievance redressal mechanism,” it added.
The market regulator says, its investor charter and the investor charters of various intermediaries and entities will be displayed on SEBI's website and also on the websites of the respective intermediary and entity.
The board also approved the creation of the social stock exchange (SSE), under the regulatory ambit of SEBI, for fund raising by social enterprises (SE).
According to SEBI, social enterprises will have to engage in a social activity out of the list of 15 broad eligible social activities approved by the board. Eligible non-profit organisations (NPOs) may raise funds through equity, zero coupon zero principal (ZCZP) bonds, mutual funds, social impact funds and development impact bonds.
Further, social venture funds under SEBI (Alternative Investment Funds) Regulations will be rechristened as social impact funds (SIFs). The corpus requirements for such funds would be reduced to Rs5 crore from Rs20 crore and the reference to ‘muted returns’ would also be removed.
SEBI chairman Ajay Tyagi said that while he cannot specify a timeline for the social stock exchange (for raising funds by social enterprises), he will coordinate with the government to take it ahead.
Finance minister (FM) Nirmala Sitharaman had proposed creating a social stock exchange in her Budget speech in July 2019.
The market regulator says it will engage with NABARD (National Bnak for Agriculture and Rural Development), SIDBI (Small Industries Development Bank of India) and stock exchanges to create a capacity-building fund of Rs100 crore.
After the board meeting, Mr Tyagi also said that if there is any violation of regulations in the Zee-Sony merger case, the market regulator will look into it.
The SEBI board has also approved a proposal to amend the de-listing framework after an open offer.
The revised framework is designed to make M&A transactions for listed companies a more rational and convenient exercise while balancing the interest of all investors in the process.
As of now, if an open offer is triggered, compliance with takeover regulations could take the incoming acquirer's holding to above 75% or perhaps even 90%; however, the acquirer would be forced to first bring his stake down to 75% as the regulator would not let the acquirer even to attempt at de-listing unless the holding is first brought down to 75%.
According to the new framework, if the acquirer is desirous of de-listing the target company, the acquirer must propose a higher price for de-listing with a suitable premium over the open offer price.
And also, if a company does not get de-listed under the open offer under this framework, and the acquirer crosses 75% due to the open offer, a period of 12 months from the date of completion of the open offer will be provided to the acquirer to make further attempts to de-list the company under the de-listing regulations using the reverse book building mechanism.
"If de-listing during this extended 12-month period is not successful, the acquirer then must comply with the minimum public shareholding norm within 12 months from the end of such period," SEBI says.
SEBI has also decided to relax the eligibility requirements related to superior voting rights shares.