Thursday, July 11, 2013

[aaykarbhavan] Busines standard news updates 12-7-2013




Sebi may further tighten preferential issue norms


SACHIN P MAMPATTA

Mumbai, 11 July

The Securities and Exchange Board of India ( Sebi) could look at further tightening preferential issue norms to curb the misuse of the route, which allows selective allotment of securities.

The regulator has considered further disclosure on the source of funds used for subscribing to such issues, according to the agenda for the regulator's previous board meeting.

Concerns over the use of front entities by promoters to enhance their stake in preferential issues are at the root of Sebi's moves in the matter, it said.

The regulator had taken up the matter of the use of front entities with the Sebi Committee on Disclosures and Accounting Standards ( SCODA), and acted on its recommendations on the issue in an initial round of tightening, which were announced in June.

The agenda reveals Sebi's concern that the ( issue of capital and disclosure requirements) regulations ' are silent on the source of funds' for such issues. Sebi wished to curb the use of front entities and mulled a disclosure on the source of funds used in such issues.

"SCODA took note of the concerns raised by Sebi that preferential issue, as a mode of raising capital, could be misused by promoters through front entities who could be used to subscribe to these issuances, thereby helping promoters in increasing their stake in the companies," said the agenda papers for the board meeting.

However, it was felt that it would be too onerous a provision to begin with, though it did not explicitly rule out a later implementation.

"If a mere disclosure of own/ borrowed funds does not suffice and a disclosure of the names of the second or third level of funding entities is sought, it was felt that the same could be construed as a breach of privacy and may be considered too harsh to start with," it said.

The committee suggested using the allottee's own bank account for such issues as an initial step. The regulator has so far decided to tighten norms to ensure that payments for a preferential issue can only be made through the allottee's own bank account and that allotments only be made in a dematerialised format, according to a press statement on the decisions taken in the board meeting.

NREGULATOR IN ACTION N SEBI WANTS DEEPER DATA ON FUNDING FOR PREFERENTIAL ISSUES:

|ICDR Regulations silent on source of funds for subscribing to preferential issues |Regulator afraid promoters could misuse it to increase stake through front entities |Board meeting agenda reveals Sebi took it up with committee on disclosures |Committee felt asking for revelation of second, third level of funding might be too harsh to start with, could result in breach of privacy |Suggested use of subscribers own bank account as an initial step

AJAY MOHANTY

 

Sebi panel mulls changes to IPO disclosure norms


SACHIN P MAMPATTA

Mumbai, 11 July

The Securities and Exchange Board of India is in discussion to review the disclosures in public issues. A committee on this held a meeting on Tuesday.

The Committee for Reviewing the Disclosures And Application Form in Public Issues had discussion on presentation of financial data, industry and market information, as well as negative statements in offer documents, according to a person familiar with the matter. "It is part of a periodic review of the disclosures in public issues. A good part of the review has already been undertaken in earlier meetings," said the person.

Those attending included senior executives from at least two domestic investment banks, a law firm and other market intermediaries, according to the person quoted above. An earlier version of this committee had recommended anumber of changes in an interim report of June 2011. Both then and now, the effort is to look at the adequacy of the disclosures made, along with the application form, revisit the structure of the information provided to investors and identify legal and other constraints related to the disclosures. The present committee will also examine management discussion and analysis made available to investors. It will also look at the way negative statements are presented to investors.

Negative statements pertain to potential risk factors associated with investing in a company. These might differ from sector to sector. The committee also looked at results being made available in more than one currency to

investors. Turn to TSI, Page 19 > REWRITING OFFER DOCUMENTS

|Panel examining disclosure norms |Also, at presentation of financial data, disclosure of industry and market information, negative statements |To see if format can be improved and made more reader- friendly

 


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CS A  RENGARAJAN,, B.Com ,FCS, LLB, PGDBM
Company Secretary, Chennai
CONVENOR, CHENNAI WEST STUDY CIRCLE ICSI-SIRC
Member - CSBF Committee ICSI-SIRC  ( 2013)
email csarengarajan@gmail.com
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