At Sebi board meet,buyback norms to take centre stage

Apart from significant changes in the buyback norms,the board of the capital market regulator is likely to announce new norms for angel investors as was envisaged by finance minister P Chidambaram in his Budget speech this year.

Apart from significant changes in the buyback norms,the board of the capital market regulator is likely to announce new norms for angel investors as was envisaged by finance minister P Chidambaram in his Budget speech this year. The Sebi board,when it meets on Tuesday,is also expected to allow mutual funds to conduct proprietary trades on the debt segments of stock exchanges.

According to the proposals being considered by the board of the Securities and Exchange Board of India (Sebi),angel investors may be allowed to register as Alternative Investment Funds (AIFs) under a separate sub-category. The current AIF norms have sub-categories for venture capital funds, private equity funds,hedge funds,social funds and SME funds,among others.

Chidambaram,in his Budget speech earlier this year,had announced that Sebi would frame guidelines for angel investor pools using which these investors can be classified as AIF ventures. Sebi,meanwhile,is likely to restrict the investment by such funds to between R50 lakh and R5 crore.

Sebi is expected to allow such entities to invest only in unlisted companies and those that are incorporated in India. Further,angel investors would be required to stay invested in a firm for at least three years. The norms,if approved,would go a long way in helping start-up entities,which find it difficult to obtain funds from traditional sources of funding such as banks and financial institutions.

The most important issue on Sebis agenda would,however,be the tightening of the buyback norms,which could see the minimum buyback commitment increasing two-fold from the current 25% to 50% of the total buyback size. The time-frame for the buyback could also see a significant reduction from the current one year to around three months. The regulator is also expected to impose restrictions on further capital raising by companies that make a buyback offer and do not make the minimum stipulated buy back of shares.

Seperately,the long pending issue of a self-regulatory organisation (SRO) for mutual fund distributors might also see the light of day at Tuesday’s board meet apart from fund houses being allowed to conduct proprietary trades on the debt segments of stock exchanges. Sebi is of the view that a single SRO for the mutual fund distributors would help remove complexity and duplication and also lower the costs. It would also help Sebi in better regulating the vast number of distributors in the country.

It is believed that some entities have already evinced interest in setting up SROs for distributors of mutual fund products and a single applicant would be selected from amongst them by Sebi after getting formal applications. The regulator will also discuss a proposal to allow distributors to apply for limited purpose membership of stock exchanges that would involve a lower financial burden and fewer compliance requirements.

(With PTI inputs)