The SEBI Board approved draft amendment to regulations that would be notified on 28th September for repealing of FCRA, necessary for merger of FMC with the market regulator
Market regulator Securities and Exchange Board of India (SEBI) has approved draft amendment to regulations that would pave way for the merger of Forward Market Commission with SEBI. "These regulations will enable functioning of the commodities derivatives market and its brokers under SEBI norms and integration of commodities derivatives and securities trading in an orderly manner," the market regulator said in a release.
The SEBI Board met in Mumbai on Monday and approved the draft amendment to regulations that would be notified on 28 September 2015 for the proposed repealing of the Forward Contracts Regulation Act, 1952 (FCRA), necessary for the merger of two regulators.
The Board also approved amendments to SEBI (Stock Broker and Sub-Broker) Regulations, 1992 to provide for registration of the members of the commodity exchanges. Existing members of these exchanges are required to make an application for registration with SEBI within three months from the notification date. In such a case, they will be allowed to continue their activity unless their application is rejected by SEBI
The draft regulations provide for compliance of Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012 (SECC Regulations) which are currently required to be complied with by stock exchanges. The major compliances include norms related to net-worth, shareholding norms, composition of board, corporatisation and demutualisation and setting up of various committees, turnover and infrastructure.
To ensure non-disruptive transition, SEBI has prescribed following timelines for aligning to the different provisions of SECC Regulations:
(i) Corporatization and demutualization of regional commodity derivatives exchanges - three years from the date of merger.
(ii) Availing services of a clearing corporation - three years from the date of merger. Till then, clearing may continue with the current arrangement. However, the Commodity Exchanges shall ensure guarantee for the settlement of trades including good delivery.
(iii) Net-worth - timeline as provided by FMC, i.e. 5 May 2017, for national commodity derivatives exchanges and within three years from the date of merger for regional ones.
(iv) Shareholding - timeline as provided by FMC, i.e., 5 May 2019, for national exchanges and within three years from the date of merger for regional exchanges.
(v) Governing board norms - within one year from the date of merger for national exchanges and within three years for regional exchanges.
The SEBI Board also decided to remove current restrictions on maximum number of anchor investors (at present 25) for anchor allocation of above Rs250 crore public issue. "While the requirement of number of anchor investors for allocation of up to Rs250 crore remains the same, in case of allocation beyond Rs250 crore there can be 10 additional investors for every additional allocation of Rs250 crore, subject to minimum allotment of Rs5 crore per anchor investor," the market regulator said in the release.
To align SEBI (Share Based Employee Benefits) Regulations, 2014 (SBEB Regulations) with the new rule 19A(4) of the Securities Contracts (Regulation) Rules, 1957, formulated by the Government of India, the market regulator decided to approve proposals to amend the provisions of SBEB Regulations.
Clarifying exercise of employee stock ownership plan (ESOP), a guidance note was placed before the Board. The Guidance Note, inter alia, clarifies that exercise of ESOPs is not considered as 'trading' for the purpose of the Regulations, except provisions relating to disclosures. "This will remove the difficulties of the designated persons with regard to exercise of ESOPs and the sale of shares so acquired," SEBI added.
The Board also decided to place a discussion paper on SEBI website seeking public comments on the proposal to provide general exemption from the open offer obligations under SEBI (SAST) Regulations, 2011 in the cases of increase in voting rights as a result of expiry of call notice period and forfeiture of shares.
In addition, the Board recommended that public comments may be sought on the recommendations of the Committee on Clearing Corporations. Earlier in July 2015, the 'Committee on Clearing Corporation' set up under the Chairmanship of KV Kamath, to inter-alia examine viability of single clearing corporation or interoperability between clearing corporations and other issues relating to clearing corporations (CC), submitted its report.
The Kamath Committee has made following recommendations...
(1) Interoperability between Clearing Corporations.
(2) Investment by Clearing Corporation.
(3) Review of Transfer of 25% profits every year by recognised Stock Exchanges to recognised Clearing Corporations.
(4) Review of Transfer of 25% profits every year by Depositories to their Investor Protection Fund (IPF).
(5) Liquid assets for the purpose of calculation of Net worth of a Clearing Corporation.