Sebi to tighten investor protection norms

The Securities and Exchange Board of India (Sebi)’s board at its meeting to be held in Chennai on Tuesday is expected to clear the deta...

The Securities and Exchange Board of India (Sebi)’s board at its meeting to be held in Chennai on Tuesday is expected to clear the detailed guidelines on investors’ protection which will further tighten the Sebi norms in line with the provisions of Investor Protection Act. This will ensure that capital market regulator can carry out its function of regulating markets in an efficacious manner. The Sebi board is also expected to deliberate on a proposal of empowering its board to order action against market manipulators in some cases without obtaining consent of Sebi chairman. The market regulator had been severely criticised by the JPC for failing to protect the small investors’ money. Dubious promoters raised massive funds from the primary markets and manipulated secondary market to loot over Rs 11,000 crore from the investors.

Sandvik shareholders cry foul

MUMBAI: While Sebi is planning steps to protect investors, some corporates are taking small investors for ride by misusing Sebi’s own regulations. Take for example the case of de-listed Sandvik Asia shareholder. The multinational has just come out with a proposal that forces minority investors to exit, without a choice. The company came out with two open offers to buy 95.56 per cent of the company’s equity, thus leaving a few minority shareholders to sell shares. This time the company is offering them Rs 850 to quit, and there is no choice to refuse. Cheques for the shares will reach shareholders. Those who went for the open offers were also paid Rs 850 a piece. The scheme has raised fears other companies would do the same to force minority shareholders to fall in line. An EGM of shareholders has been called on June 13 to reduce its share capital.

At its meeting held on May 3, Sebi board had cleared the entry norms for corporates accessing capital markets. The Sebi appointed committee, while tightening eligibility norms for IPOs, had recommended that as on the date of filing of the draft offer document with Sebi, the company should have net tangible assets (NTAs) of at least Rs 3 crore in each of the preceding two full years(12 months each), of which not more than 50 per cent is to be held in monetary assets (provided that if more than 50 per cent are held in monetary assets, the company should have firm commitments to deploy such excess monetary assets in its business/project so that verifiable existence of company can be ensured).