SEBI Updates: SEBI reviews mechanism of dividend adjustment for stock option

SEBI on 05^th July, 2018, issued a Circularfor reviewing the mechanism of dividend adjustment for stock options and allowed alteration in strike price.

According to the SEBI, adjustment in strike price will be carried out in case dividend declared by a company is above 5 per cent of the underlying stocks. Besides, adjustment in strike price will be done in all other cases of dividend, wherein listed company has sought exemption from the timeline prescribed under listing and disclosure regulations, SEBI said in a circular.

According to the SEBI, adjustment in strike price will be carried out in case dividend declared by a company is above 5 per cent of the underlying stocks. Besides, adjustment in strike price will be done in all other cases of dividend, wherein listed company has sought exemption from the timeline prescribed under listing and disclosure regulations, SEBI said in a circular.

Strike price, in market parlance, is the price at which a derivative contract can be exercised. It is mainly used to describe stock and index options. For call options, the strike price is where the security can be purchased by the option buyer up till the expiration date. For put options, the strike price is the price at which shares can be sold by the option buyer.

Copy of Circular can be accessed below.

SEBI Updates: SEBI raises overseas investment limit of AIFs and VCFs

SEBI by issuing a Circular dated 03rd July, 2018 enhanced the overseas investment limit of Alternative Investment Fund (AIFs) and Venture Capital Fund (VCFs) to USD 750 million from the current USD 500 million

The decision has been taken in consultation with the Reserve Bank of India, the Securities and Exchange Board of India (SEBI) said in a circular. In order to monitor the utilisation of overseas investment limits, SEBI has asked AIFs and VCFs to mandatorily disclose the utilisation of the such limits within 5 working days of such usage on the regulator's intermediary portal. 

In case an alternative investment fund (AIF) or venture capital fund (VCF) has not utilised the overseas limit granted them within 6 months from SEBI's approval, the same will have to be reported within 2 working days after expiry of the validity period. 

"In case an AIF or VCF has not utilized a part of the overseas limit within the validity period, the same shall be reported within 2 working days after expiry of the validity period," the regulator noted.

Further, if an AIF or VCF wishes to surrender the overseas limit at any point of time within the validity period, the same will have to be reported within two working days from the date of decision to surrender the limit, it added. The regulator said it has decided to enhance the overseas investment limit of AIFs and VCFs to USD 750 million. 

Earlier in October 2015, the regulator had allowed overseas investment by AIFs and VCFs to the extent of USD 500 million.

AIFs are funds established or incorporated in India for the purpose of pooling in capital from Indian and foreign investors for investing as per a pre-decided policy, while VCFs are investment funds that manage the money of investors who seek private equity stakes in startups.

Copy of Circular can be accessed below:

Source: Economic Times

SEBI Updates: Filing of Term Sheet by Angel Funds

Angel funds will have to disclose details related to investment as well as venture capital undertakings and "material changes", within 10 days of launching a scheme, markets regulator SEBI said.

Releasing the format of the term sheet, the regulator said that angel fund can launch new schemes, subject to the filing of the term sheet, it needs to contain material information and have to be filed with SEBI within 10 days of launching the scheme. The term sheet has three categories — information related to investment and investee company; compliance with SEBI’s AIF regulation; and “material change”, the regulator said in a circular.

Angel Funds, a sub-category Alternative Investment Funds (AIFs), encourage entrepreneurship by financing small startups at a stage when they find it difficult to obtain capital from traditional sources of finance such as banks and financial institutions. The markets regulator, last month, had replaced the requirement of filing of scheme memorandum to SEBI by angel funds with the requirement of filing term sheet containing material information.

Now, the Securities and Exchange Board of India (SEBI) has released the format of the term sheet. With regard to investment and investee firm, information pertaining to name of the angel fund as well as scheme, name of the investee company, services offered by it, its business details, present investment size, investment highlight, total capital commitment by investors, capital drawn by the fund, price per share, details of lock in for share and exit strategy for angel fund among others need to be divulged.

Further, the term sheet will also have information pertaining to list of investors in the scheme and compliance with the AIF rules, whether the fund has corpus of Rs 5 crore and whether the funds have been raised through private placement among others. Besides, angel fund will have to submit details of material changes, rationale for such change and date of approval from SEBI in this regard.

Besides, the regulator has raised the maximum period of accepting funds from an angel investor to five years, from three years. The move will provide angel funds more time to identify opportunities and invest in venture capital firms. Earlier, SEBI had formed a working group comprising various angel networks, consultants and start-ups in a bid to provide ease of doing business for angel funds.

Copy of Circular can be accessed below:

Source: Financial Express

SEBI Updates: Outcome of SEBI's Board meeting

SEBI had its board meeting on 21st June, 2018 to discuss many important issues.

Following are few of important decisions taken by SEBI in its meeting dated 21st June, 2018

1. Review of SEBI (SAST) Regulations, 2011

It has been decided to grant additional time for upward revision of open offer price till one working day before the commencement of the tendering period

2. Replacing SEBI (Buy-back of Securities) Regulations, 1998 with new SEBI (Buy-back of Securities) Regulations, 2018

The Board has approved reframing a new set of SEBI (Buy-back of Securities) Regulations, 2018 (“new Buyback Regulations”) in lieu of the extant Buyback Regulations, 1998 to be in consistent with Section 68 and Section 70 of Companies Act, 2013

3. New SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018

The Board approved the proposed SEBI (Issue of Capital and Disclosure Requirements) Regulations, (“ICDR Regulations”) 2018 after considering the recommendation of the Primary Market Advisory Committee (PMAC) and the public comments on the Consultation Paper.

Some of important changes which are proposed in new ICDR, 2018

• Threshold for submission of draft letter of offer to SEBI in case of rights issues to be increased to Rs. 10 Crores from Rs. 50 Lakhs.
• Shortfall of up to 10% in minimum promoters’ contribution may be met by institutional investors
• For a company to be eligible to make a fast track rights issue, it should not have any audit qualifications or adverse opinion.
• Minimum Anchor investor size to be reduced to Rs. 2 Crore from the existing Rs. 10 Crore.
• The shareholding threshold for identifying promoter group has been revised from 10 percent to 20 percent.

4. Role of Sub-broker vis-a-vis Authorized Person

The Board considered and approved the proposal to discontinue the category of Sub-Brokers as Market Intermediaries. No fresh registration shall be granted as Sub-Brokers. Registered Sub-Brokers shall migrate to Authorised Persons or Trading Members as the case may be and Sub-Brokers, who do not choose to migrate, shall be deemed to have surrendered their registration as Sub-Broker.

5. Establishment of National Centre for Financial Education (NCFE)

The Board approved the establishment of National Centre for Financial Education (NCFE) to undertake financial education activities in terms of the National Strategy for Financial Education (NSFE) as approved by the Sub-Committee of Financial Stability and Development Council (FSDC-SC)

You can find below the complete outcome of SEBI's board meeting dated 21st June, 2018

SEBI: Strict actions for non-compliance of Minimum Public Shareholding

SEBI specified strict action against companies which are not complying with Minimum Public Shareholding norms

Security Exchange Board of India (SEBI) issued a Circular dated 10th October, 2017 with respect to non-compliance with Minimum Public Shareholding (MPS) requirements.

Listing Regulations mandates a listed entity to comply with Minimum Public Shareholding (MPS) requirements specified in Rule 19(2) and 19A of SCRR, 1957. It is duty of recognised stock exchanges (RSX) to monitor the compliance by listed company in this regard. Additionally, Listing Regulations has already specified the liability of listed entity for contravention and action which can be taken by respective RSX.

SEBI, by this circular, has specified following procedure to maintain consistency and uniformity of approach in the enforcement of MPS norms against non-compliant listed entities, their promoters and directors.

1. RSX shall review compliance with MPS requirements based on submitted shareholding pattern.
2. On observing non-compliance, RSX can impose fine of Rs 5,000 per day. RSX shall also intimate Depositories to freeze shareholding of promoters and promoter group. Promoters and Promoters Group shall not hold any new position as director in other listed entities till the date of compliance.
3. In case of non-compliance for more than one year, RSX shall impose fine of Rs 10,000 per day of non-compliance. RSX shall intimate depositories to freeze all the shares in demat account held by promoter and promoter group.
4. RSX may also have an option to delist this non-compliant listed entity.

SEBI further stated that if listed entity has adopted new method for complying with MPS norms other than specified in law, then SEBI has asked RSX to refer matter to them.

SEBI has also asked RSX to display on its website list of non-compliant entities, amount of fine imposed, freezing of shares etc. and status of compliance including details of fine paid by such entities.

For more details, you can have a look at the Circular.

SEBI Updates: SEBI brought uniformity in MF Schemes

Uniformity and Categorization of Mutual Fund Schemes

Security Exchange Board of India, SEBI, has issued a Circular dated 06th October, 2017, on categorisation and rationalisation of Mutual Fund Schemes.

In order to bring the desired uniformity in practice across Mutual funds, to standardise the scheme categories which will help Investors to evaluate schemes at the time of investing, SEBI decided to categorise MF schemes as follows:

1. The schemes will broadly be classified into following categories

• Equity Schemes
• Debt Schemes
• Hybrid Schemes
• Solution Oriented Schemes
• Other Schemes

The detailed annexure has been given for more details.

2. Additionally, SEBI has also defined the terms Large Cap, Mid Cap and Small Cap. It has further clarified the process of how to determine the market capitalization.

You can have a look at this Circular for more details.