Introduction of Automatic Process and Common Pool of Arbitrators for Stock Exchanges

Currently, the arbitration mechanism of the stock exchanges is decentralized i.e. the selection of arbitrators is done by the respective stock exchanges. However with a view to bring greater transparency and in order to protect the interest of the investors SEBI has made the following changes -

• List of arbitrators maintained by all the stock exchanges having nation wide terminals will be pooled centrally and will be known as "Common Pool" this will be displayed on the website of the stock exchanges
• The arbitrators will be chosen by the parties to the arbitration and the parties fails to choose the Arbitrator it will be chosen by an "Automatic Process" where neither the parties to the arbitration nor the concerned stock exchange will be directly involved. It will be done through automatic computer process
• The Automatic Process will also send a real time alerts to all the entities involved

Arbitration process is widely used by the parties and a centralized process will avoid manipulation. 

SEC Allowed companies to use Social Media

Recently SEC has allowed company's and its executives to use social media like Facebook, Twitter, etc. to communicate informations to the public.

This is considered to be a bold step with the increasing connect of the public with the social media. As per the press release SEC say's that using social media is almost equivalent to the press release and that the company's can use these media provided the investors know which outlet the company intends to use.

This step was taken by SEC as a result of a facebook post by the Cheif Executive of Netflix  in July stating that the streeming - video company has exceeded one billion hour in a month for the first time which resulted in a sharp increase in firms share price.

SEC took up the investing in December to find out if the post has violated the protocol which restrains the company's from selective disclosure. After several months of investigation SEC concluded that social media can be used as a medium to communicate information as long as they make it clear which media the company will be using.

Rationalisation of Debt Limits by SEBI

SEBI has eased the norms for debt limits of foreign institutional investors. This step has seen to be inline with the RBI policy to ratinalise the foreign investment in debt market.

The new circular issued by SEBI on 1st April 2013 states that the debt limits of FII will be classified into two categories -

Category	Amount in $ billion
Government Securities	25
Corporate Bonds	51

SEBI has clarified that eligible FII and QFI can invest in -

• Treasury Bills upto $5.5 billion within the limits of $25 billion and
• Commercial Papers upto $ 3.5 billion within the limit of $51 billion

Prior to this the debt limits were as under - 

Category	Sub-category	Amount
Government Securities	Government Debt - Old	$ 25 billion
	Government Debt - Long Term	$15 billion
Corporate Bonds	Corporate Debt Old FII	$20 billion
	Corporate Debt Old QFI	$1 billion
	Corporate Debt - Long Term	$5 billion
	Corporate Debt - Long Term Infra	$12 billion
	QFI Investment in Debt fund which invest in infra	$3 billion
	Investment in IDF	$10 billion

Other Modification made by this circular

1. Current SEBI auction mechanism of allocating debt limits for corporate bonds shall be replaced by the "on tap system" which is currently in force for infrastructure bonds
2. Current practice of Dissemination of fortnightly debt utilization status shall be discounted

My Book on ISCA - CA Final

My Book on ISCA for CA Final

Recent Amendments by SEBI

SEBI in its board meeting dated 18^th January 2013 made the following amendments –

Changes in Offer for Sale Mechanism

Offer for Sale is one of the mechanism allowed by SEBI for the Promoters to off load there shares in order to meet the minimum public shareholding criteria. In order to make it simpler following changes have been made for Institutional Orders –

Conditions for 100% Upfront Margin Orders	·         Institutions may place orders/bids with 100% upfront margin ·         Modification/cancellation of such orders/bids shall be permitted ·         Settlement of funds and securities shall take place on T+1 day
Without Upfront Margin	·         Institutions may place orders without upfront margin in line with secondary market practice ·         Such bids cannot be modified/cancelled ·         Upward revision in the price or quantity is permitted

Amendment to SEBI Takeover Regulation

Relevant Date for PA in case of combined modes of acquisition	Where open offer obligations are triggered in combination of ay modes of acquisition the relevant date shall be the earliest date on which the obligations are triggered
Relevant Date in case of Preferential Allotment	The date of Board Resolution authorizing the preferential allotment shall be the relevant date instead of date of special resolution
Aligning disclosure requirements with SEBI (Prohibition of Insider Trading) Regulation	Disclosure requirement with regard to buy or sell two percent  by persons holding more than five percent as specified in Takeover Regulations, 2011 shall be modified in line with SEBI (Prohibition of Insider Trading) Regulations, 1992
Clarification on period of 90 days for increase in voting right due to buy back	It has been clarified that the period of 90 days will be reckoned from the date of closure of buyback offer.

Note: There are various other changes apart from those mentioned above. However the above changes are the most significant one.

Amendment to Section 15M of SEBI Act

The Cabinet has approved the proposal made by the Department of Economic Affairs to amend Section 15M of the SEBI Act 1992 to enlarge the field of selection for the post of Presiding Officers (PO) of the Securities Appellate Tribunal (SAT) by including a sitting or a retired judge of a High Court with a minimum experience of 7 years as one of the qualification.

Amendment to the SEBI Act, 1992 will be done on the lines of the approved ordinance and a Bill will be introduced in the ensuing session of the parliament to replace the Ordinance in consultation with the Legislative department.

Currently following are elligible to hold the post of PO -

• Sitting or Retired judge of Supreme Court
• a sitting or retired Chief Justice of a High Court

Report on Mandatory 25% Public Shareholding

Meaning of the term Public:

"Public" means person’s other than -

I.            The promoter and promoter group;

II.            Subsidiaries and associates of the company.

Explanation: For the purpose of this clause the words "promoter” and "promoter group” shall have the same meaning as assigned to them under the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.

Meaning of the term “Public Shareholding”:

                "Public shareholding" means equity shares of the company held by public and shall exclude shares which are held by custodian against depository receipts issued overseas

Amended Provision:

I.            At least twenty five per cent of each class or kind of equity shares or debentures convertible into equity shares issued by the company was offered and allotted to public in terms of an offer document; or

II.            At least ten per cent of each class or kind of equity shares or debentures convertible into equity shares issued by the company was offered and allotted to public in terms of an offer document if the post issue capital of the company calculated at offer price is more than four thousand Cr. rupees;

Provided that the requirement of post issue capital being more than four thousand Cr. rupees shall not apply to a company whose draft offer document is pending with the Securities and Exchange Board of India on or before the commencement of the Securities Contracts (Regulation) (Amendment) Rules, 2010, if it satisfies the conditions prescribed in clause (b) of sub-rule 2 of rule 19 of the Securities Contracts (Regulation) Rules, 1956 as existed

Provided further that the company, referred in sub-clause (ii), shall bring the public shareholding to the level of at least twenty five per cent by increasing its public shareholding to the extent of at least five per cent per annum beginning from the date of listing of the securities, in the manner specified by the Securities and Exchange Board of India .

Provided further that the company may increase its public shareholding by less than five per cent in a year if such increase brings its public shareholding to the level of twenty five per cent in that year

Continuous Listing Requirement:

(1)    Every listed company shall maintain public shareholding of at least twenty five per cent

Provided that any listed company which has public shareholding below twenty five per cent on the commencement of the Securities Contracts (Regulation) (Amendment) Rules, 2010, shall bring the public shareholding to the level of at least twenty five per cent by increasing its public shareholding to the extent of at least five per cent per annum beginning from the date of such commencement, in the manner specified by the Securities and Exchange Board of India.

Provided further that the company may increase its public shareholding by less than five per cent in a year if such increase brings its public shareholding to the level of twenty five per cent in that year.

(2)    Where the public shareholding in a listed company falls below twenty five per cent at any time, such company shall bring the public shareholding to twenty five per cent within a maximum period of twelve months from the date of such fall in the manner specified by the Securities and Exchange Board of India."

Time Limit Given to Companies:

Listed companies were given three years time to meet the requirement of minimum public holding. While the private companies have to meet the norms by June 2013, for PSUs the deadline is August 2013.

Manner of reducing the promoter holding:

Following manners are specified by SEBI –

·         Institutional Placement Programme (means a further public offer of eligible securities by an eligible seller, in which the offer, allocation and allotment of such securities is made only to qualified institutional buyers)

·         Offer for Sale

·         Auction

·         Select Bonus Issue

Select Right Issue