Sebi tweaks norms to aid fund-raising, caps tenure of MD & CEO of exchanges

Sebi tweaks norms to aid fund-raising, caps tenure of MD & CEO of exchanges

New Delhi, Jun 22: The Securities and Exchange Board of India (Sebi) has made major changes in rules governing fund-raising, to provide flexibility to issuers and to boost capital formation.
The regulator tweaked norms governing stock exchanges, clearing corporations and depositories —known as market infrastructure institutions (MIIs) — capping the tenure of top officials and bringing in more accountability to the board structure.
Going ahead, a company will have to make public the pricing for its initial public offering (IPO) just two days before the opening as distinct from five days earlier. According to experts, this will help issuers handle market volatility better.
Also, a public issue will require financial disclosures to be made for three years against the current five.
Sebi also allowed mutual funds and insurers related to the investment banker handling an IPO to participate in the anchor investor category, where shares are allotted on a discretionary basis. The regulator, however, reduced shares available for anchor investors to Rs 20 million from Rs 100 million for so-called SME IPOs.
It also tweaked the definition of ‘promoter group’ to include immediate relatives, and revised the threshold for identifying promoter groups from 10 per cent to 20 per cent. The definition of group companies was also widened.
“The changes get rid of a lot of archaic disclosure requirements and help make disclosures in an offer document more meaningful for an investor. A reduction in the time period between advertising the price band and the opening of the issue will help issuers price deals better in a volatile market,” said Aditya Cheriyan, partner, Khaitan & Co. Sebi has also capped the tenure of managing directors at MIIs to a maximum of three terms, with not more than two terms at a single institution. This could mean that BSE Managing Director and Chief Executive Officer Ashish Chauhan may have to step down when his second term ends in November 2022. The regulator also issued an age cap of 75 years and said a second term would only be granted “subject to a satisfactory performance review.”
Sebi has synchronised shareholding norms for all MIIs. So the higher 15 per cent shareholding cap allowed for stock exchanges will now be extended to depositories. The move could be positive for the country’s only listed depository CDSL. The regulator also removed the concept of sponsor in case of depositories and gave existing sponsors up to five years to reduce their shareholding to 15 per cent.