SEBI proposes changes in ITP norms to attract more firms

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The Securities and Exchange Board of India (Sebi) on Friday proposed changes to the Institutional Trading Platform (ITP), to draw more companies to it. Comment on the discussion paper has been invited till August 14.

Introduced in 2013, the platform allows companies, particularly in information technology (IT), to list without necessarily doing an Initial Public Offer of equity. So far, only around 40 companies are listed on the ITP platforms of the BSE or the National Stock Exchange.

IT companies to qualify on this platform need Qualified Institutional Buyer (QIB) shareholding of at least 25 per cent; other companies need 50 per cent. Sebi has proposed to expanded the definition of QIBs to investors such as family trusts and individual foreign investors. Also, to do away with the 25 per cent cap on single investors listed on the platform.

Further, it proposes to reduce the minimum institutional investor participation, from 75 per cent to 50 per cent. Also, to increase the ceiling on allotment to individual institutional investors from 10 per cent to 25 per cent to a single entity. Sebi has also proposed to make market making compulsory for a minimum of three years for an issue size of less than Rs 100 crore.

More important, it has proposed to ease trading lots on the ITP platform from Rs 10 lakh to Rs 5 lakh. Interestingly, Sebi has also proposed to rename ITP as  ‘high-tech start-up & other new business platform’.

Source: http://www.business-standard.com/article/markets/sebi-proposes-changes-in-itp-norms-to-attract-more-firms-116072901316_1.html

IPOs of start-ups in India: Retail investors participation may get cleared

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Retail investors might soon be allowed to participate in the initial public offerings (IPOs) of start-ups with the Securities and Exchange Board of India (Sebi) planning to scrap the Institutional Trading Platform (ITP) for these firms. The move comes after the platform failed to witness a single listing since it was launched last year.

Sources privy to the development said instead of providing an exclusive platform for start-ups, Sebi is now planning to allow start-ups to list on the regular platform. However, some relaxations would be provided  in terms of disclosures and compliance norms. Sebi is planning to amend both the Issue of Capital and Disclosure Requirements (ICDR) and Listing Obligations and Requirements (LODR) regulations, accordingly.

As per the regulations relating to Capital Raising and Listing on Institutional Trading Platform regulations for start- ups, only institutional investors and high-net worth individuals (HNIs) are allowed to trade on ITP and the minimum ticket size was `10 lakh. Retail investors were not allowed to invest in such issues as the markets regulator felt small investors should be safeguarded against a higher level of risks associated with the platform.

Several start-ups have expressed concerns about the liquidity on ITP. Further, not even a single company has filed for an IPO on the special platform till date. Hence, Sebi wanted to review the regulations and address the concerns raised by the start-ups,” said a member of Sebi Primary Markets Advisory Committee (PMAC).

Allowing start-ups to list on the regular platform would also address the concerns regarding the minimum institutional ownership clause in the regulations. As per the current regulations, to be eligible to raise funds via an IPO, 50% of the pre-issue capital of the company must be held by qualified institutional buyers (QIBs). In the case of e-commerce and technology start-ups, 25% of the pre-issue capital should be owned by institutional investors.

In August 2015, the regulator had announced a new set of listing regulations for start-ups operating in the e-commerce space in sectors such as information technology (IT), data analytics and biotechnology.The regulations provided several relaxations to start-ups keeping in mind the unique nature of the industry including removal of caps on the money spent by start-ups on publicity and advertisements as they need to spend much more for such purposes.

Infibeam, an e-commerce company that went for an IPO in the current calendar year, chose to list on the main board instead of the ITP. Although the company filed its draft prospectus with the regulator before the ITP was announced, the company had a choice to migrate, subsequently. According to investment bankers, the company didn’t choose ITP because of concerns about the platform.

 

Source:http://www.financialexpress.com/markets/indian-markets/ipos-of-start-ups-in-india-retail-investors-participation-may-get-cleared/323787/

Alternative Investment Funds coming to India

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Markets regulator SEBI is learnt to be in process of creating a new category of Alternative Investment Funds(AIFs) to encourage long-term funds to use the AIF route to invest in the listed space.

 

Sources privy to the development said the Securities and Exchange Board of India (SEBI) will reclassify the existing category III into two groups – one comprising long-term funds like pension funds and the other consisting of hedge funds and other arbitrage funds who look to invest on a short-term basis.

 

Further, SEBI is also expected to consult the government in providing a ‘pass through’ status to the new category of AIF on par with Category I and Category II AIFs. According to legal experts, this categorisation would help the long-term overseas funds to receive a favourable tax treatment in the AIF space as currently they are taxed on par with arbitrage funds.

 

As per the current tax regulations, any investments made in listed companies which are held for more than 12 months are termed long-term investments, while others are called short-term investments. Capital gains tax is applicable only for short-term investments and investors needn’t pay any capital gains tax in case of long-term holding.

 

However, if a fund invests in the listed space through the AIF route, irrespective of the nature of holding, the investor would be taxed at uniform slab applicable for category III AIFs.

 

“Current SEBI AIF regulations are like one size fits all. Category III AIFs comprise several types of short-term and long-term funds and the purpose of each of them is different. However, the tax they are paying is the same. Long-term funds would rather take the direct route or would invest via P-notes instead of AIFs,” said a lawyer.

 

These measures are a part of efforts made by SEBI and union government to promote AIFs. During the union budget 2015, the government had provided pass-through status for Category I and Category II AIFs. Last November, the government had allowed foreign funds to invest in AIFs through the direct route.

 

In the last two years, inflows into AIFs have witnessed a significant increase. According to a SEBI data, cumulative funds raised via the AIFs as on March 31, 2016 was `22,691.18 crore — a fourfold increase compared to `5,847.5 in Q2FY15.

 

According to Jay Gandhi, Partner at Shardul Amarchand Mangaldas, the SEBI AIF regulations have found great traction in the market in a relatively short period of time. “The AIF regulations have permitted investment managers great flexibility in structuring various kind of fund structures targeted at specific segments of the investor community,” Gandhi said.

Source: http://www.financialexpress.com/markets/alternative-investment-funds-coming-india-heres-need-know/314881/

SEBI cross with UB over Mallya’s board seat

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The Securities and Exchange Board of India (Sebi) is not pleased with United Breweries (UB) allowing Vijay Mallya to continue on its board of directors, despite being tagged a wilful defaulter.

Mallya is chairman of the board of Bengaluru-based UB. Several banks have formally declared him a wilful defaulter and under new Sebi norms (late last month), any individual so tagged is barred from holding a board position in a listed company.

“Mallya should have stepped down as UB chairman and from its board, following Sebi’s new regulations. (We) are keeping a watch on the board functioning,” said a Sebi official, requesting anonymity.

IN TROUBLED WATERS

SEBI’s new curbs on wilful defaulters

  • New rule bans wilful defaulters from taking any board positions
  • Disallow defaulters from setting up market intermediaries
  • Defaulters would not be allowed to take control of other listed company
  • No wilful defaulter shall make a public announcement of an open offer for acquiring shares or enter into any transaction
  • Sebi’s rule disqualifies Mallya from various posts he holds at the moment

The regulator could soon initiate action if UB is in violation of the corporate governance norms, said the official. The regulator is believed to have also raised questions on the role of independent directors on UB’s board.

UB refused to comment on an email query sent to it.

Earlier this year, Mallya had resigned as chairman and managing director of United Spirits, as part of a deal with the company’s new owner, Diageo. Mallya, however, continued to serve on the board of other companies, including UB. Diageo now owns 55 per cent of USL and Mallya had stepped down from the board in February, for a $75 million payoff.

From the March quarter shareholding data, Mallya holds 8.08 per cent in UB in his personal capacity. Another 22 per cent in UB is owned by his group companies.

Heineken acquired a 37.5 per cent stake in United Breweries in 2008 through its takeover of Scottish & Newcastle and has since increased its holding to 42.4 per cent.

The banks say Mallya had given personal guarantees, apart from pledging his stake in UB Group companies, to raise funds for his now-grounded Kingfisher airline. This resulted in Mallya losing control over his liquor empire to global players — Diageo in spirits and Heineken in beverages.

Mallya reportedly left India on March 2, allegedly to escape enforcement action by multiple probe agencies and Indian banks, to which he owes Rs 6,963 crore in loans. In March, a consortium of lender approached the Supreme Court to stop Mallya from going abroad but he’d left; on April 18, a court in Mumbai issued a non-bailable arrest warrant against him.

Last week, the enforcement directorate had attached United Breweries Holdings and Mallya assets worth Rs 1,411 crore in Mumbai, Bengaluru, Coorg and Chennai. He was also declared a proclaimed offender early this week.

This was issued in response to a plea by the Enforcement Directorate on April 15 before the special court hearing cases under the Prevention of Money Laundering Act, 2002. There were allegations on him that he transferred Rs 4,000 crore ($590 million) to tax havens.

Source: http://www.business-standard.com/article/markets/sebi-cross-with-ub-over-mallya-s-board-seat-116061600885_1.html

SEBI begins proceedings to recover Rs 55,000 crore from defaulters

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The Securities and Exchange Board of India (Sebi) has initiated recovery proceedings against defaulters to collect more than Rs 55,000 crore, largely on account of its clampdown on illicit money-pooling schemes.

Ever since it was given powers in October 2013 to recover penalties and investors’ money collected fraudulently, Sebi has initiated nearly 900 recovery proceedings, of which more than 200 have been fully completed.

The amount involved in these proceedings stands at Rs 55,015 crore, including Rs 52,959 crore in the last financial year. This include a total of Rs 52,912 crore in cases related to collective investment scheme (CIS) and deemed public issues and another Rs 47 crore to recover penalties.

More than 2,500 attachment notices have been issued during the period under review, including over 600 in 2015-16.

Interestingly, an amount of Rs 250 crore has been recovered in 207 cases. Promising high returns to the investors, several firms have raked in unauthorised funds through various mechanisms. The capital was raised through realty schemes and ‘buffalo purchase’, among others. Also, funds have been garnered by issuing securities to investors without complying with public issue norms.

To recover pending dues, Sebi has attached properties, bank and demat accounts of the defaulters. Besides, the regulator has sold shares attached in recovery proceedings in various defaulters in 744 trading sessions and realised an amount of over Rs 11 crore.

Through amendments in the Securities Laws Act, the government had enhanced powers of Sebi to take action against illegal money-pooling activities. It has been empowered to recover penalties imposed by the Adjudicating Officer, amount directed to be disgorged and money ordered to be refunded to the regulator.

The recovery powers include attachment of bank as well as demat accounts, sale of assets of the defaulters and arrest and detention of the defaulter.

The Act also provides for setting up of a special court to expedite the cases filed by Sebi. The government in consultation with the high courts have set up special courts in Mumbai, Kolkata and Chennai.

Besides, constitution of a special court in Delhi is in progress. However, a designated court is already dealing with Sebi cases.

 

Source: http://www.business-standard.com/article/markets/sebi-begins-proceedings-to-recover-rs-55-000-crore-from-defaulters-116061400476_1.html

SEBI to make it easier for fund managers to move to India

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To make it easier for the foreign fund managers keen to relocate to India, markets regulator SEBI is considering allowing them to function as ‘Portfolio Managers’ under an easier regulatory regime.

The move assumes significance in the wake of the government already having announced taxation incentives for the offshore fund managers willing to relocate to India.

A new section in the Income Tax Act provides that the fund management activity carried out through an Eligible Fund Manager (EFM) located in India and acting on behalf of an Eligible Investment Fund (EIF) would not constitute business connection in India of such a fund.

Following the issuance of notification by the tax department in this regard, SEBI held meetings with various stakeholders to discuss the registration framework for EFMs, during which several impediments were pointed out in the existing regulations for Investment Advisers and Portfolio Managers.

Subsequently, SEBI has decided to initiate a consultation process for changes to its norms for Portfolio Managers while putting in place a framework for allowing EFMs to act as Portfolio Managers to their EIFs.

A proposal in this regard would be put up for approval of SEBI’s board next week, a senior official said.

Among the proposed measures, an existing SEBI-registered Portfolio Manager will also be allowed to act as EFM with prior intimation from SEBI and subject to certain conditions.

SEBI also plans to put in place a procedure for registration of an existing foreign-based fund manager desirous of relocating to India, or as a fresh applicant.

Such applicants will be granted registration as Portfolio Managers to act as an EFM, provided they meet existing eligibility norms of being a body corporate, having net worth of Rs 2 crore, appointment of a Principal Officer and minimum two employees with requisite credentials.

The EFMs would be required to segregate the funds and securities of the EIFs from that of other clients, provide information to Sebi on a half-yearly basis, ensure compliance to the Prevention of Money Laundering Act and other regulations.

However, EFMs would be exempted from several provisions of the PMS Regulations with respect to the EIF, and would have to comply with the applicable regulatory and disclosure requirements of the jurisdiction of the EIF.

Source: http://economictimes.indiatimes.com/articleshow/52640330.cms

SEBI warns investors against barred entities

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The Securities and Exchange Board of India (Sebi) on Monday warned unlisted companies and their directors who fraudulently raised money and asked investors not to be lured by their schemes.

The market regulator has listed out 235 unlisted companies that have lured retail investors by issuing securities such as non-convertible debentures/non-convertible preference shares in the garb of private placement. Orders against these firms were passed between April 2003 and May 2016.

“Companies are cautioned not to issue securities to public without complying with provisions of law. Failing which Sebi will be constraint to take stringent action against such companies and their directors,” Sebi noted.

The companies against which action has been taken include Jeevan Suraksha Real Estate, Roofers Infra Projects, Shankalp Food and Beverages, Silicon Projects, Pious Agro Industries, Ravi Kiran Realty, Angela Agrotech, Amrit Projects, MARS Agrofarm Developers, and Golden Heaven Agro Project India.

In another note, Sebi also warned investors against collective investment schemes (CIS) of entities barred by the market regulator from raising money.  The regulator passed orders against 100 entities and its directors carrying on unregistered CIS.

“As part of interim directions, Sebi directs the entities and its directors to stop collecting further money under existing / new schemes, not to launch any new scheme or float any new companies/firm to raise fresh money, not to divert or alienate any assets or money collected.”

Apart from Gift Collective Investment Management Company Limited, no other entity is registered with Sebi. Hence, investors are advised to do due diligence before investing in such schemes, said Sebi in its note.

http://www.business-standard.com/article/markets/sebi-warns-investors-against-barred-entities-116060601204_1.html