SEBI brings back incentive for MF distributors; simplifies IPO forms

Market announces new measures to attract retail investors, revive mutual funds

Mumbai:  The Securities and Exchange Board of India (SEBI) today announced a host of steps like simplification of IPO forms and greater disclosure by companies, with an aim to attract retail investors back to the stock market. The market regulator also modified the takeover norms.

In a statement after a board meeting held today, SEBI said it has also decided to impose a transaction fee of Rs100-Rs150 on investments of Rs10,000 in mutual funds to incentivise brokers to sell schemes to investors, PTI reports.

The regulator announced guidelines for the Infrastructure Debt Fund (IDF) and simplified the Know Your Customer (KYC) registration process for investors in different segments of the financial market.

Talking to reporters, the SEBI chairman UK Sinha said that the investor form for initial public offers (IPO) will henceforward be short and simple and the number of pages would now come down by as much as half. “The IPO form is not investor friendly. It takes a lot of time to understand it. Taking all this into account, the whole form has been changed and this will lead to reduction in the size of the form,” Mr Sinha said.

The form would carry information regarding peer companies’ price-earnings (PE) ratio and track record of lead managers of the IPO. Currently, the IPO forms run into 15-20 pages, although there are only 2-3 pages where particulars are needed to be filled in by investors and the rest contain instructions, information about the company and the issue and details about bankers, registrars and bidding centres.

The SEBI board also decided on uniform KYC norms for different market players and accepted the 'Aadhar' or Unique Identity system as one of the documents as identity proof for bidding in IPOs and FPOs.

Currently, there are separate KYC norms for different segments like FIIs, mutual funds and brokerage customers. The idea behind uniform KYC norms is to ensure seamless identification of customers in the securities market.

As regards the Takeover Code, an entity buying 25% stake in a listed firm, will have to mandatorily make an open offer to buy an additional 26% from public shareholders. The new norms mark an increase in the open offer size for public shareholders from the existing 20%, while the trigger for such offer has also been raised from 15% in the existing regulations.

Partly accepting the recommendations of a SEBI-appointed panel on the matter, the market regulator decided to abolish the non-compete fees that acquirers generally pay to the sellers in merger and acquisition deals.

In its reaction to the changes in the Takeover Code, the Confederation of Indian Industry said, “This would enable more private equity investors to provide capital to the industry. However, abolition of non-compete fee may be a cause of concern.”

As regards mutual funds, the new investors will now have to cough up an additional Rs150 for investment of Rs10,000 and above in mutual funds, while the charge will be Rs100 for existing investors. Investors already pay a commission in some cases, besides up to 2.5% of their investment towards expenses of fund management.

The decision, SEBI said, will help mutual funds penetrate the retail segment in smaller towns, as the distributor would be allowed to charge Rs100 as transaction charge per subscription. No charge can be made for investments below Rs10,000. 

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