Coming out with strict steps to protect investor interest, the Securities and Exchange Board of India (Sebi) on Saturday decided to bar wilful defaulters from raising public money, as well as holding board positions, besides making it must for listed firms to disclose impact of audit qualifications in a separate document.
To curb malpractices in the securities and commodities markets, the watchdog will boost its surveillance mechanism and enhance the supervision of brokers and other intermediaries.
The issues pertaining to control at the time of acquisition of listed entities and mutual funds’ exposure to distressed debt securities were also discussed at Sebi’s board meeting. The Sebi move, to be notified in four-six weeks, would automatically disqualify scores of people, including beleaguered United Breweries’ chairman Vijay Mallya, who have been announced as a wilful loan defaulters by banks, from their board positions in many firms.
The Sebi board also announced that rules would be amended to stop wilful defaulters from taking control of other listed firms and bar them from setting up market intermediaries such as mutual funds and brokerage firms. Among other decisions, Sebi also gave in-principle approval to BSE for its listing.
“The main thing is that if somebody is proven by the RBI or its orders or its findings that he’s a wilful defaulter, then it is very risky to allow that person or that individual or that company to raise money from the retail persons in the market,” Sebi chairman UK Sinha said. For more clarity on change of control in mergers and acquisitions, Sebi will launch a public consultation for defining ‘control’ and proposed fixing 25% voting rights as a threshold. Addressing the board, FM Arun Jaitley asked Sebi to be alert on market supervision and take measures to expand investor base and deepen the commodity derivatives segment. On debarring defaulters, Sinha said: “A defaulter will be allowed to make a counter offer so that the regulation should not lead to distress sale of that particular company, which will also harm other investors.” He said all changes in regulations would kick in from the date of notification.
* To step up surveillance
* To define control
* Nod to listing of BSE