Sebi tightens norms on default disclosure, rights issue, portfolio services
Thursday, December 5, 2019 IST
• The Sebi board today set a limit of 31 days for listed firms to disclose to the stock exchanges any event of a default
• It also enhanced the networth requirement for PMS to ₹5 crore from ₹2 crore earlier, giving the existing PMS three years to comply with the new norms
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NEW DELHI : The Securities and Exchange Board of India (Sebi) board on Wednesday set a limit of 31 days for listed companies to disclose to the stock exchanges any event of a default. The capital markets regulator set January 1 as the effective date for the new rule.
“In order to address the gaps in availability of information with respect to defaults, the board has, inter alia, decided that in case of any default in repayment of principal or interest on loans from banks or financial institutions which continues beyond 30 days from the pre-agreed payment date, listed entities, shall promptly, but not later than 24 hours from the 30th day, disclose the fact of such default," a Sebi press release said.
The capital markets regulator took more measures to enhance corporate governance at companies. As per Sebi board, too 100 listed companies, based on market capitalization, will now have to include business responsibility reporting as part of their annual reports. This requirement earlier applied only to the top 500 companies.
The Sebi board also doubled the minimum investment norm for clients of portfolio management services (PMS) to ₹50 lakh. Existing investments of clients can continue till end date of the PMS agreement. The board also enhanced the networth requirement for PMS to ₹5 crore from ₹2 crore earlier, giving the existing PMS three years to comply with the new norms.
The latest norms for portfolio managers are aimed to curb mis-selling and weeding out dubious operators from the business. PMS managers in the last half year or so have attracted a lot criticism and scrutiny over misguiding their clients, who are mostly high networth individuals.
The Sebi board also tightened the norms for rights issues of listed companies. The capital market regulator also decided to reduce the time taken to process a rights issue to T+31 days from T+55 days earlier. It also made the ASBA facility mandatory for any investor applying to a rights issue.
In ASBA, an applicant's bank account doesn't get debited until shares are allotted to them. ASBA means “Applications Supported by Blocked Amount".
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