| SOURCE BUSINESS STANDARD Dividend distribution via depositories soon |
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Mumbai, 13 April The capital markets regulator, Securities and Exchange Board of India ( Sebi), is working on creating asingle- point distribution system for all securities market benefits. This means all the cash that you receive from your security market activities —dividends, interest income from securities, redemption proceeds — will all be distributed by the same agency. A consultation paper on allowing depositories to act as the single- point of contact for these benefits is likely to be issued soon, according to the minutes of the regulators March 22 board meeting. "World over, in most developed markets and several emerging markets, depositories usually distribute cash benefits to their account holders... It is proposed to have a detailed consultation process with market participants on the issue of considering amechanism wherein all securitiesrelated benefits can be distributed at asingle point," it said. At present, depositories only distribute non- cash benefits, including bonus and rights issues, by which shares are credited to an investor's account. Cash benefits are currently distributed through Registrar and Share Transfer Agents ( RTAs such as Karvy or CAMS). Issuers also distribute cash benefits themselves by making arrangements after getting information from the depositories. Global depositories often hold a restricted banking licence, to process cash benefits directly. "Globally, distribution of dividends is by depositories, unlike in India. The result here is that the investor has to approach individual companies if he has aquery or grievance about a payment he has not received," said G V Nageswara Rao, managing director and chief executive officer of National Securities Depository Ltd. " Globally, distributors use all models, including operating it through their own institutions if they have banking arms or through the use of third- party banks." NSDL has applied to Reserve Bank of India for a payments bank licence. Such a bank can accept deposits up to ₹ 1 lakh and offer current and savings accounts. They can be used for transfer of money, can issue debit cards and offer internet banking. They are, however, barred from lending capital or issuing credit cards. PS Reddy, managing director & chief executive of Central Depositories Services Ltd ( CDSL) said depositories were well equipped to deal with the additional responsibility. There were 387 instances of complaints regarding non- receipt of dividends during the financial year ending in March 2015, according to data on the BSE website. However, some note that dividend issues also have to do with lack of uptodate information about investors' bank accounts. " The problem of complaints regarding dividends is also on account of incomplete information regarding investors' financial details. A significant number of investors are yet to fully update their bank account details. This will have to be addressed for the problems associated with dividend distribution to be solved with finality," said Ganapathy Subramanian, advisor to RTA Karvy Computershare. "So far as the systems are simplified, it is a good measure. Investors don't have to write to multiple entities if there is a problem," said Prakash Shah, secretary of Investor Education and Welfare Association. CASH BENEFITS FROM DEPOSITORIES |Sebi wants to create a single distribution point for all securities market benefits |Wants depositories to give away dividends, interest payments and redemption proceeds |Currently, companies themselves or RTAs distribute such benefits |Some say the move will mean investors will only need one point of contact for all queries |But others say dividend problems will not go away and a lack of updated bank details remains a key issue |Consultation paper soon Sebi might issue a consultation paper for single- point distribution of securities market benefits, in keeping with the common global practice |
Source Business Line
SEBI allows stock exchange route for merger & acquisition deals
OUR BUREAU
Also, buyback, competing offers can be effected via separate window
Mumbai, April 13:
Come July 1, buybacks and share acquisitions through M&A deals can be conducted through a separate window on the stock exchanges, said a SEBI notification. Currently, exchanges offer a separate window for promoters or large investors to dilute their stakes through the offer-for-sale mechanism. Of late, the Centre has been using this route for divesting its stakes in PSU majors.
The use of the stock exchange mechanism for buyback or M&A would be in addition to the already existing tender offer method, SEBI said.
Acquirers can choose more than one stock exchange with nation-wide presence for the purpose but should choose only one as a designated exchange.
Regional SE listed too
Companies listed on regional stock exchanges are also eligible for buy-backs/M&A deals through stock exchanges.
Companies which face bids and counter bids from hostile companies can also use this mechanism.
For competing offers, each acquirer will have a separate window during the period when shares are tendered, besides the flexibility to choose the window of any exchange. Acquirers/ companies have to appoint a stock broker to transact on their behalf. Sellers of shares have to place their orders through their brokers during normal secondary market trading hours during the tendering period. These shares would then be transferred to a special account of the clearing corporation specifically created for this purpose.
Online info dissemination
Brokers will also provide details of shares tendered to the clearing corporation. Based on the number of shares transferred to the special account, information about the cumulative quantity tendered would be disseminated online during the trading session at periodic intervals. For a buy-back offer, the company has to provide a record date to determine the shareholders eligible to participate. Only such shareholders would be allowed to sell through the stock exchange mechanism. The clearing corporation would settle the trades by transferring shares from the special account to the escrow account of the company/acquirer.
Tendering of locked-in shares can be done by selling shareholders using the existing route, that is, off-market.
(This article was published in the Business Line print edition dated April 14, 2015)
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