Regulator Sebi's board is likely to discuss tomorrow proposed overhaul of governance norms for market infrastructure institutions as well as amendments to buyback and takeover norms, a senior official said.
Regulator Sebi’s board is likely to discuss tomorrow proposed overhaul of governance norms for market infrastructure institutions as well as amendments to buyback and takeover norms, a senior official said. Other proposals, including reducing the cooling off period for former employees to one year and review of the watchdog’s recruitment policy, are also on the agenda. The board of Sebi is to meet tomorrow in Mumbai where the proposal for overhauling regulations for ownership and governance of market infrastructure institutions (MIIs), including capping the tenure of chief executives of stock exchanges, are expected to be discussed, the official said.
The watchdog has been working on ways to deepen the capital market as well as attract more investors. In a significant move, the watchdog plans to bring in new ownership norms for setting up of stock exchanges as it feels that entry of new players can benefit investors with better product choices and effective cost structures. A committee, headed by former RBI Deputy Governor R Gandhi, had submitted a report on review of regulations and relevant circulars pertaining to MIIs in March. Based on the panel’s recommendations, Sebi plans to change the existing norms in this regard.
“A person may serve as MD/ CEO of an MII for a maximum of two terms of up to five years each or up to 65 years of age, whichever is earlier,” the official said, adding that it would also be applicable for serving MDs and CEOs of such institutions. Currently, Sebi norms do not stipulate maximum tenures for MD/CEO of MIIs. The regulator is looking at harmonising the shareholding limit across all MIIs whereas there are restrictions now.
At present, while foreign entities can have up to 15 per cent stake in stock exchanges, the same is limited to 5 per cent in the case of clearing corporations and depositories. A consultation paper for various regulatory and procedural requirements for setting up of MIIs, including stock exchanges, is likely to be floated. As per the official, there are plans to revise the regulations for share buybacks wherein more clarity would be provided on various aspects, including on the requirement to make public announcements.
The watchdog has carried out a review of the current buyback norms in order to simplify the language, remove inconsistencies and update the references to the new Companies Act that came into force in April 2014. With respect to takeover regulations, Sebi has proposed changes related to revision of open offer price after after public consultations on a discussion paper about review of SAST (Substantial Acquisition of Shares and Takeovers) Regulations.
It is being proposed that the additional time for the upward revision of open offer price can be extended to only one working day before the commencement of the offer. This time frame has been decided upon as revision of open offer price during the period of tendering of shares might create confusion among the investors. Another proposal that is likely to be discussed by the board would be putting in place revised norms for recovering investors’ money in cases of illegal collective investment schemes. Under the proposed changes, a registered insolvency professional would be appointed as administrator to undertake sale of assets in the case of such entities.
Also, the regulator plans to revise the procedures to be followed after passing of orders in cases related to unregistered collective investment schemes. Among others, the regulator is looking to fix the cooling off period to one year for its former employees before they take up jobs elsewhere. At present, the period is two years.
Besides, introduction of special casual leaves for staff with physical disabilities and a comprehensive review of its recruitment policy are expected to be deliberated upon during the meeting. The reduction in cooling off period will bring the condition applicable for Sebi employees in line with the RBI and the central government.