In order to reduce the additional regulatory and cost burden to the issuer of Indian Depository Receipts (IDR), the market regulator Securities and Exchange Board of India (Sebi) has drafted a simplified listing agreement for the IDR. However, the newly drafted simplified listing agreement would be limited to only those issuers from the countries which are signatories of multilateral memorandum of understanding (MMOU) of International Organisation of Securities Commission (IOSCO) which has over 180 members spread over 100 jurisdictions. Additionally, Sebi and Reserve Bank of India will be working closely to address regulatory gaps.
The new model listing agreement had been drafted by Sebi after receiving suggestions from market participants to modify the existing guidelines to align it with the listing requirements of the issuer?s home country so that there is no additional regulatory or cost burden to the issuer.
The Sebi circular said, ?With respect to most of the provisions especially corporate governance requirements and disclosure of periodical results, the issuer is allowed to follow the home country requirements provided equitable treatment is given to the IDR holder?s vis-?-vis holders of equity shares?.
However, for the listing companies from other jurisdictions, the existing model listing agreement for IDR?s notified during April 2006 shall continue to apply till further advice from the regulator.
According to the new listing agreement the issuers are required to notify the stock exchanges at the same time it intimates to any other exchanges, where its shares are listed regarding recommendation of dividend, rights issue, bonus issue or any matter related to corporate actions.
Though Sebi had notified the IDR listing agreement in 2006, so far not a single issue had come in to India. However, in April 2009, UK headquartered Standard Chartered Bank had announced its intention to raise Rs 5,000 crore through the issue of IDR.
Further the issuer has been allowed to provide 50% of the security deposit by way of bank guarantee while the remaining by way of cash that shall be limited to Rs 3 crore. The security deposit will be released by the stock exchange after the issuing company gets No objection certificate from Sebi.
Meanwhile, Sebi is said to be working closely on reducing the time line for rights issues and disclosure norms to expedite the capital raising process and also get more transparency. The regulator is expected to issue new guidelines in this matter after the board meeting on June 18 in Mumbai.
The equity markets regulator will also be working cloesly with the banking sector regulator to plug regulatory gaps that have emerged especially after the Lehman Brothers crisis, said deputy governor Shyamala Gopinath in Washington. ?It has now been decided to jointly work with the securities regulator to identify and address the macro-prudential concerns arising from the current framework,? she said.
