MUMBAI: Securities and Exchange Board of India (SEBI) chairman CB Bhave on Tuesday lambasted merchant bankers and promoters for being “greedy”, while speaking at an IPO seminar. According to Mr Bhave, the decline in the Sensex from 21,000 points to 15,000 points does not necessarily mean that it is a bad time for initial public offerings. “Is it really a bad time for IPOs, or is it the price?” the regulator questioned.
Mr Bhave said that during his interaction with merchant bankers, he was told that the promoters are greedy. But according to him, even merchant bankers are equally greedy. On the need for further reforms in the primary market, Mr Bhave said the regulator was looking to change the way in which investors subscribe to public issues. He said investors should pay only for the shares allotted to them and not have to wait for refunds. “There is no reason why an investor’s money should leave his bank account when he is not assured about allotment of shares. Technology will enable us to do that,” Mr Bhave said.
He said that he has asked the intermediaries to operationalise it on a voluntary basis. “What do you do with this money for 21 days?” he questioned. The regulator is mulling an instrument which would be blocked by the bank for the full application amount till the shares are allotted. The amount would continue to remain in the client’s account but would not be available for withdrawal or cheque payment.
It would, therefore, continue to earn interest in the intervening period. On receipt of advisory from the registrar about the allotment of shares, the bank would release the amount equal to the cost of total number of shares the client has been allotted. The move would apply to both physical and electronic applications.
Though it may take a while to implement the same, early availability of funds would help the investors from facing any liquidity shortage. The new measures are aimed at making the IPO process more efficient and transparent. Sebi chairman also said that regulator is making efforts for a more vibrant market for small and medium enterprises.
Sebi modifies Clause 49
Sebi has modified Clause 49 — relating to independent directors — by including some mandatory and non-mandatory provisions. According to a Sebi circular, at least one-half of the board of the company should consist of independent directors if the non-executive chairman is a promoter or is related to promoters or persons occupying management positions at the board level or at one level below the board.
Another mandatory requirement of Clause 49 would be that relationships between directors would have to be disclosed in specified documents/filings. While the minimum age for independent director has been fixed at 21 years, the regulator does not want the gap between removal of an independent director and the appointment of a new one to exceed 180 days.
However, this provision would not apply in case a company fulfils the minimum requirement of independent directors in its board (one-third or one-half as the case may be) even without filling the vacancy created by such resignation/removal.
Among the non-mandatory provisions, Sebi wants companies to ensure that the person who is being appointed as an independent director has the requisite qualifications and experience, which would be useful to the company and that he can contribute effectively in his capacity as an independent director.
The market regulator has asked all stock exchange to make the necessary amendments to the listing agreement to include the said modifications. Further, stock exchanges have been advised to “communicate to Sebi, status of implementation of the requirements of this circular in the next Monthly Development Report”.
“There is no reason why an investor’s money should leave his bank account when he is not assured about allotment of shares. Technology will enable us to do that,” Mr Bhave said.
He said that he has asked the intermediaries to operationalise it on a voluntary basis. “What do you do with this money for 21 days?” he questioned. The regulator is mulling an instrument which would be blocked by the bank for the full application amount till the shares are allotted. The amount would continue to remain in the client’s account but would not be available for withdrawal or cheque payment.
It would, therefore, continue to earn interest in the intervening period. On receipt of advisory from the registrar about the allotment of shares, the bank would release the amount equal to the cost of total number of shares the client has been allotted. The move would apply to both physical and electronic applications.
Though it may take a while to implement the same, early availability of funds would help the investors from facing any liquidity shortage. The new measures are aimed at making the IPO process more efficient and transparent. Sebi chairman also said that regulator is making efforts for a more vibrant market for small and medium enterprises.
Mr Bhave said that during his interaction with merchant bankers, he was told that the promoters are greedy. But according to him, even merchant bankers are equally greedy. On the need for further reforms in the primary market, Mr Bhave said the regulator was looking to change the way in which investors subscribe to public issues. He said investors should pay only for the shares allotted to them and not have to wait for refunds. “There is no reason why an investor’s money should leave his bank account when he is not assured about allotment of shares. Technology will enable us to do that,” Mr Bhave said.
He said that he has asked the intermediaries to operationalise it on a voluntary basis. “What do you do with this money for 21 days?” he questioned. The regulator is mulling an instrument which would be blocked by the bank for the full application amount till the shares are allotted. The amount would continue to remain in the client’s account but would not be available for withdrawal or cheque payment.
It would, therefore, continue to earn interest in the intervening period. On receipt of advisory from the registrar about the allotment of shares, the bank would release the amount equal to the cost of total number of shares the client has been allotted. The move would apply to both physical and electronic applications.
Though it may take a while to implement the same, early availability of funds would help the investors from facing any liquidity shortage. The new measures are aimed at making the IPO process more efficient and transparent. Sebi chairman also said that regulator is making efforts for a more vibrant market for small and medium enterprises.
Sebi modifies Clause 49
Sebi has modified Clause 49 — relating to independent directors — by including some mandatory and non-mandatory provisions. According to a Sebi circular, at least one-half of the board of the company should consist of independent directors if the non-executive chairman is a promoter or is related to promoters or persons occupying management positions at the board level or at one level below the board.
Another mandatory requirement of Clause 49 would be that relationships between directors would have to be disclosed in specified documents/filings. While the minimum age for independent director has been fixed at 21 years, the regulator does not want the gap between removal of an independent director and the appointment of a new one to exceed 180 days.
However, this provision would not apply in case a company fulfils the minimum requirement of independent directors in its board (one-third or one-half as the case may be) even without filling the vacancy created by such resignation/removal.
Among the non-mandatory provisions, Sebi wants companies to ensure that the person who is being appointed as an independent director has the requisite qualifications and experience, which would be useful to the company and that he can contribute effectively in his capacity as an independent director.
The market regulator has asked all stock exchange to make the necessary amendments to the listing agreement to include the said modifications. Further, stock exchanges have been advised to “communicate to Sebi, status of implementation of the requirements of this circular in the next Monthly Development Report”.
“There is no reason why an investor’s money should leave his bank account when he is not assured about allotment of shares. Technology will enable us to do that,” Mr Bhave said.
He said that he has asked the intermediaries to operationalise it on a voluntary basis. “What do you do with this money for 21 days?” he questioned. The regulator is mulling an instrument which would be blocked by the bank for the full application amount till the shares are allotted. The amount would continue to remain in the client’s account but would not be available for withdrawal or cheque payment.
It would, therefore, continue to earn interest in the intervening period. On receipt of advisory from the registrar about the allotment of shares, the bank would release the amount equal to the cost of total number of shares the client has been allotted. The move would apply to both physical and electronic applications.
Though it may take a while to implement the same, early availability of funds would help the investors from facing any liquidity shortage. The new measures are aimed at making the IPO process more efficient and transparent. Sebi chairman also said that regulator is making efforts for a more vibrant market for small and medium enterprises.
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