Securities and Exchange Board of India (Sebi) wants to frame regulations for both public offers and listing of non-convertible redeemable preference shares, including private placement of such shares, a proposal that is likely to impinge on the jurisdiction of the ministry of corporate affairs.

A finance ministry official said that the proposal, to be taken up by the Sebi board on March 8, aims at ensuring more disclosure for both public issues and private placement. However, it may give rise to a turf war as private placement of shares by unlisted companies are dealt by MCA, a position further strengthened by the Supreme Court ruling in the Sahara case.

According to the agenda, Sebi is in the process of drafting regulations for issuance and listing of non-convertible redeemable preference (NCRP) shares, a view that has been endorsed by the Corporate Bonds and Securitisation Advisory Committee of the board. However, the committee has said that given the high-risk of the instrument, there should be stricter eligibility criteria for making public offers of such shares along with comprehensive disclosure.

?Sebi has also argued that there should be relatively liberal framework for private placement of NCRP shares which are proposed to be listed,? the official said.

However, if approved the proposal threatens to take away the power from the MCA of regulating private placement by unlisted companies. When contacted, corporate affairs secretary Naved Masood refused to comment on the issue saying that the meeting is yet to take place. The draft regulations ensure that the minimum tenure of instrument is not less than three years and the issue has been assigned a rating not less than AA- by a credit rating agency while for listing the privately placed NCRP shares, the minimum application size should not be less than Rs 10 lakh while the issue should have a credit rating, the official added.

The SC in its Sahara order had clarified that Sebi has jurisdiction over unlisted companies which intend to get their securities listed on any stock exchange. As such, the Companies Act, 2012 has made private placement norms more stringent to ensure avoid Sahara-like cases.