Sebi to frame uniform guidelines for all classes of foreign investors

Relaxing rules: Loss-making companies will be allowed to launch follow-on public offers

Written by ENS Economic Bureau | Mumbai | Published:October 7, 2012 12:54 am

In a move aimed at simplifying the investment process for overseas entities and strengthen market surveillance,the Securities and Exchange Board of India (Sebi) has proposed uniform guidelines for all classes of foreign investors.

The regulator also announced that the profitability criteria would not be applicable to the follow-on public offers (FPOs) of loss-making companies.

Sebi has decided to prepare draft guidelines in this regard with an aim to make uniform rules for different classes of foreign investors such as foreign institutional investors (FIIs),non-resident Indians (NRIs),foreign venture capital investors (FVCIs) and qualified foreign investors (QFIs).

“With a view to rationalise/harmonise different routes for foreign portfolio investments,Sebi will prepare draft guidelines based on the guidance of the Working Group on Foreign Investment in India (WGFII),for consideration of the government so that uniform guidelines are made for various categories of investors such as FII,FVCI,NRI,QFI etc,” Sebi said in a statement after the board meeting.

Companies were earlier required to have a three-year profit record for IPOs,but there was a lack of clarity with regard to FPOs. “It is clarified that listed companies coming out with FPOs need not meet the profitability criteria,” Sebi said.

Sebi also relaxed its rules regarding the debt limit allocation mechanism for FIIs,which have emerged as a significant force to the Indian capital market over the years. It said that “with effect from January 1,2014,FIIs should be allowed to re-invest during the calendar year to the extent of 50 per cent of their debt holdings at the end of the previous calendar year”.

“The utilisation period for government debt and corporate debt limits will be reduced to 30 days and 60 days,respectively,” Sebi said.

Within the FII debt limit,Sebi said,the unutilised limit in respect of corporate debt infrastructure long-term bonds category may be availed by the FIIs/Sub Accounts without obtaining prior Sebi approval till the overall FII investments reaches 90 per cent of the limit. Thereafter,the auction mechanism shall be initiated for allocation of remaining limits,Sebi said.

Bourses to inform in advance on penal action on shareholding norms

Sebi has asked stock exchanges to inform investors well in advance about any potential penal action against companies not complying with minimum public shareholding,the deadline for which expires next year. The regulator asked the bourses to carefully monitor the adherence of the companies to the norms,which require a minimum public holding of 25 per cent for private sector companies by June 2013 and 10 per cent for PSUs by August 2013.

“Stock exchanges shall carefully monitor adherence and take steps to issue advisories to shareholders of non-compliant companies about potential penal actions,so that investors have adequate time to safeguard their interests,” Sebi said in a statement. ENS

FDs,insurance,postal savings in demat format

Sebi has proposed to bring more classes of financial instruments,including insurance policies and fixed deposits,under the ambit of asset categories that can be held in demat or electronic form. The proposed move is expected to make it simpler to maintain and safe-keep various kinds of financial instruments,as the risks like loss and theft get minimised in demat form.

To expand the list of asset classes which can be held in demat form,Sebi said,it has decided to initiate steps that would enable an investor to view the details of his holdings and transactions across all asset classes through a single consolidated statement. ENS

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