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Showing posts with label CS Executive Securities Law. Show all posts
Showing posts with label CS Executive Securities Law. Show all posts

Friday, May 11, 2012

Download OnlyThisMuch book Update Amendments 2012 for Company Secretary June exams onwards covering Corporate laws, Securities laws, Due Diligence, Voluntary Corporate Governance Codes, Schedule VI XII, Takeover Code 2011, Legal Metrology Act, Foreign Contribution, FDI Policy & ICDR with ICSI Supplements to enjoy passing

OnlyThisMuch book series has released most crucial Updates/ Amendments 2012 for June exam onwards under all laws applicable for Company Secretary exams [CS Executive Programme & Professional Program].  The same can be read from: http://www.scribd.com/doc/93236216/Only-This-Much-Amendments-Laws-2012-Updates-for-Company-Secretary-Exams-on-Corporate-Economic-Securities-Secretarial-Practice-Drafting-Alliances#fullscreen

(Better when downloaded).  It covers the following laws:

Company Law/ Company Secretarial Practice/ Corporate Restructuring

1.       Amendments in MCA-21 & Filing aspects

2.       Amendments in Clauses of Memorandum Of Association

3.       Amendments in Unlisted Public Companies PREFERENTIAL ALLOTMENT Rules u/s. 81(1A)

4.       Amendments in General Meetings & Board Meetings related

5.       Amendments in Managerial Remuneration under Schedule XIII

6.       Amendments in Related Party Transactions under Sections 295, 297 & 314 of Companies Act, 1956

7.       Amendments in Merger of Government Companies u/s. 396

8.       DEFUNCT COMPANIES & FAST TRACK EXIT SCHEME

9.       Form & Contents of Annual Accounts under Revised Schedule VI

 

CRUCIAL DOWNLOADS FOR LAST MINUTE READING BEFORE CS EXAMS:

For Direct & Indirect Tax Laws Amendments, download & print the ICSI Supplement from this link [this is applicable for CS Executive & Professional Program exams

Click here for Financial Management Theory

Glance through MCA Guidelines on Governance

Securities Law/ Due Diligence

1.       Amendments in SEBI ICDR Regulations, 2009

2.       Amendments in Equity Listing Agreement

3.       Public Issue by SME’s & SME Equity Listing Agreement (most predicted question for this exam)

4.       Debt market issues & Securitised Debt Listing Agreement

5.       Revised Insider Trading Disclosures

6.       New Takeover Code, 2011

Corporate Governance/ Securities Law

1.       New Voluntary Governance Codes in India

(including MCA’s Corporate Governance & CSR Code, Secretarial Audit, ICSI’s recommendations)

2.       New Governance Codes abroad

(including UK Corporate Governance & Stewardship Codes)

3.       Other Amendments – Internal Control, Credo & Green Tribunal

 

Other Laws for CS Exams:

1.       Amendments in FEMA & CONSOLIDATED Foreign Direct Investment (FDI) POLICY, 2012  [for Drafting & Alliances in Professional Program, Economic Laws in Executive Program]

2.       FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 & RULES 2011 [FCRA] replacing Old Act [for Economic Laws in Executive Program & has Compounding provisions as relevant for Drafting]

3.       Competition Act, 2002 & Mergers, Amalgamations, Acquisitions & Takeovers (MAAT) [for Drafting & Corporate Restructuring in Professional Program & Economics Laws in Executive Program]

4.       Legal Metrology Act, 2009 replacing Standard Weights & Measures Act [for Eocnomic Laws in Executive Program]

 www.learnlabz.com

 onlythismuch@lawlabz.com

Only This Much Amendments Laws 2012 Updates for Company Secretary Exams on Corporate, Economic, Securities,...

Enjoy passingSmile

Saturday, June 11, 2011

Company secretary June 2011 exam question paper for CS (ACS) Executive Programme

Glance through Company Secretary June 2011 exam questions papers now.

Monday, December 6, 2010

No preferential allotment to promoter for 1 year on warrant failure, Be a retail investor UPTO 2 lakhs, Advertise filing of offer documents, Uniform allotment in offer to public, Asks company to decide whether partly/fully paid shares - SEBI ICDR 4th Amendment 2010

SEBI Issue of Capital & Disclosure Requirements - ICDR (Fourth Amendment) Regulations, 2010: The amendment includes postal insurance funds as QIB, increases retail investor limit to 2 lakhs [ie, those who will fall in the 35% in net offer category], mandates company to advertise filing of offer documents, clarifies on pending convertible securities before IPO, as usual puts extra responsibility on Merchant banker to certify on advertisements issued in all types of media, unifies allotment in offer to public as 50%-35%-15% (for QIB-Retail-Others), issue to give either part payment or full payment option to investors (& not both) and finally clarifies on eligibility of Preferential Allotment to Promoters or Promoters Group (i.e) if they have sold shares within past 6 months or if they have failed to exercise warrants issued within past 1 year, then such promoters/promoters group becomes ineligible for preferential allotment.

Retail investors/reservation to employees limit extended

Reg 2(ze) “retail individual investor” means an investor who applies or bids for specified securities for a value of not more than  Rs. 2 lakhs (erstwhile limit was Rs. 1 lakh).

Reg 2(zf) “retail individual shareholder” means a shareholder of a listed issuer, who applies or bids for specified securities for a value of not more than Rs. 2 lakhs.

Reg 42(4): The reservation on competitive basis to any employee shall not exceed Rs. 2,00,000/- (erstwhile limit was Rs. 1,00,000)

Reg 2(zd) “Qualified Institutional Buyer” (QIB) has 12 items now:

“(xii) insurance funds set up and managed by the Department of Posts, India.”

In addition to SEBI, Stock Exchange & Merchant banker who publish draft offer documents in their website, the company shall publish the same in dailies

New Reg 9(3): The issuer company either on the date of filing the draft offer document with SEBI or on the next day shall make a public  announcement in one English/Hindi/Regional daily newspaper with wide  circulation about the fact of filing of draft offer document with SEBI and inviting public comments.

Reg 26(5): IPO can be made with FULLY PAID outstanding convertible securities which are required to be converted on or before the date of filing of prospectus.

Same allocation even if minimum public shareholding is 10/25%Reg 43(2): Allocation in net offer to public category shall be:

  • UPTO 50% to QIB
  • Atleast 35% to Retail Investors
  • Atleast 15% to Non-Institutional Investors

(irrespective of whether the offer is made under Rule 19(2)(b) or not [i.e, even if minimum public shareholding is 10%])

Hence, the erswhile limits of 60%, 30%, 10% will  not apply.

Make it fully paid or partly paid & not both

New Reg 54(7):  “The issuer shall give only one payment option out of the following to all the investors -  

(a) part payment on application with balance money to be paid in  calls; or 
(b) full payment on application:

Provided that where the issuer has given the part payment option to  investors, such issuer shall  obtain the necessary regulatory  approvals to facilitate the same.”

Now, Merchant banker shall also certify the Public communications, publicity materials, advertisements and research reports in all medias

New Reg 60(14): “The merchant bankers shall submit a compliance certificate in the format specified in  Part D of Schedule XIII, for the period between the date of filing the draft offer document with SEBI and the date of closure of the issue, in respect of news reports appearing in any of the following media:
(a) newspapers mentioned in sub-regulation (3) of regulation 9;
(b) major business magazines;
(c) print and electronic media controlled by a media group where the media group has a private treaty/shareholders’ agreement with the issuer or promoters of the issuer.”

image

Conditions for Preferential Allotment made more stringent

“Explanation: Where any person belonging to promoter(s) or the promoter group has sold his  equity shares in the issuer during the 6 months preceding the relevant date, the promoter(s) and promoter group shall be ineligible for  allotment of specified securities on preferential basis”.

New Reg 72(3): Where any person belonging to promoter(s) or the  promoter group has previously subscribed to warrants of an issuer but failed to exercise the warrants, the promoter(s) and promoter group shall be ineligible for issue of specified securities of such issuer on preferential basis for a period of one year from the date of expiry of the tenure/cancellation of  the  warrants.

Download the SEBI ICDR 4th Amendment 2010 issued vide No. LAD-NRO/GN/2010-11/19/26456 dated 12th November 2010

Wednesday, October 13, 2010

Monthly Portfolio Management Activity report to be filed within 5 days of month at SEBI portal - Revised format

Sub: Monthly reporting by Portfolio Managers
Please refer to SEBI circular SEBI/IMD/PMS/CIR-3/2009 dated June 11, 2009 regarding submission of monthly report by portfolio managers.

The format for the monthly report on portfolio management activity has been revised as per enclosed Annexure. All portfolio managers are advised to upload the report in the revised format on SEBI Portal by the 5th of the following month with effect from the report for the month of October 2010 onwards.

Procedure to upload monthly report on portal is as follows:

a. Log on to SEBI Portal at https://portal.sebi.gov.in. using the Username and Password provided at the time of Registration/ Renewal as a portfolio manager.

b. Select the portfolio manager tab

c. Select the link: PM Monthly Report

d. Fill the data in the format provided

e. Save the data and then Submit.

Download Revised PM Monthly Report

Source: Cir. /IMD/DF/14/2010 dated 8th October 2010

Thursday, August 19, 2010

SEBI Clarification: AMC Addendum:all mutual fund schemes in demat form shall be freely transferable from 1st October, 2010 (except ELSS)

Transferability of Mutual Fund units

Regulation 37(1) of SEBI (Mutual Fund) Regulations, 1996 states that:

“a unit unless otherwise restricted or prohibited under the scheme, shall be freely transferable by act of parties or by operation of law.”

The spirit and intention of this regulation is not to prohibit transferability of units as a general rule or practice. However, it is noticed that mutual fund schemes prohibit transfer on a regular basis instead of on an exceptional basis.

In order to facilitate transferability of units of mutual funds held in one demat account to another demat account, it has been decided that all Asset Management Companies (AMCs) shall clarify by way of an addendum that units of all mutual fund schemes held in demat form shall be freely transferable from the date of the issue of said addendum which shall be not later than October 1, 2010. However, restrictions on transfer of units of Equity Linked Savings Schemes (ELSS) during the lock-in period shall continue to be applicable as per the ELSS Guidelines.

Source: SEBI CIR/IMD/DF/10/2010 dated 18th August 2010

Fund of Fund MF schemes expense structure in offer document & change amounts to fundamental attribute requiring exit option to unit holders

Fund of funds mutual fund schemes shall adopt either of the total expense structures laid out in Regulation 52(6)(a) of SEBI (Mutual Funds) Regulations 1996, as amended by SEBI (Mutual Funds) (Amendment) Regulations, 2010, which Asset Management Companies shall clearly indicate in the scheme information documents (SID).  Fund of Fund schemes, existing as on July 29, 2010, shall, with the approval of trustees, adopt either of the total expense structures laid out in Regulation 52(6)(a) and change the total expense structure after giving the unitholders an option to exit in accordance with Regulation 18(15A). [In case of change in fundamental attributes in terms of Regulation 18 (15A), SID shall be revised and updated immediately after completion of duration of exit option.]

Regulation 52(6)(a): The total expenses of the scheme excluding issue or redemption expenses, whether initially borne by the mutual fund or by the asset management company, but including the investment management and advisory fee shall be subject to the following limits:—

in case of a fund of funds scheme, the total expenses of the scheme including the management fees shall be either:-
(i) not exceeding 0.75% of the daily or weekly average net assets, depending upon whether the NAV of the scheme is calculated on daily or weekly basis; or
(ii) it may consist of -
(A)management fees for the scheme not exceeding 0.75% of the daily or weekly average net assets depending upon whether the NAV of the scheme is calculated on daily or weekly basis;
(B) other expenses relating to administration of the scheme; and
(C) charges levied by the underlying schemes:
Provided that the sum total of (A), (B) and the weighted average of the total expense ratio of the underlying schemes shall not exceed 2.50% of the daily or weekly average net assets (depending upon whether the NAV of the scheme is calculated on daily or weekly basis) of the scheme.

Source: SEBI Cir / IMD / DF / 8 / 2010 dated 6th August 2010

Saturday, August 14, 2010

You can buyback FCCBs now as time limit extended from June 2010 to June 30, 2011

On a review of the policy and in view of the representations received from the issuers of FCCBs, it has been decided to consider applications, under the approval route, for buyback of FCCBs until June 30, 2011, subject to the issuers complying with all the terms and conditions of buyback/ prepayment of FCCBs, as mentioned in Again an option to Buyback / Prepayment of FCCB under RBI Approval Route till June 2010

Source: A.P. (DIR Series) Circular No.07 dated 9th August 2010

Friday, August 13, 2010

ECB beyond USD 100 million under RBI Approval Route for service sector available for permissible end uses, not being acquisition of land

At present, entities in the services sectors viz., Hotels, Hospitals and Software  are allowed to avail of ECB up to USD 100 million per financial year under the  Automatic Route, for foreign currency and/or Rupee capital expenditure for permissible end-uses. On a review, it has now been decided to consider applications  from the corporates in the Hotel, Hospital and Software sectors to avail of ECB beyond USD 100 million under the Approval Route, for foreign currency and / or Rupee capital expenditure for permissible end-uses. The proceeds of the ECB should not be used for acquisition of land.

Source: A.P. (DIR Series) Circular No.08 dated 12th August 2010

Friday, August 6, 2010

Understand Chapter XA of SEBI ICDR Amendment 2010 as to SME Exchange and listing upto 25 crores of capital like Fast track route for small & medium companies

Download the Updated Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 as on date. 

In order to lay down the policy for issue, listing and trading of the securities issued by the SMEs, necessary amendments have been made in the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 and consequent amendments were made int he following regulations as given below.

SEBI ICDR Third Amendment Regulations 2010, in addition to the amendments made under various clauses, the following updates were made.

After CHAPTER X, the following Chapter shall be inserted, namely:-
“CHAPTER XA
ISSUE OF SPECIFIED SECURITIES BY SMALL AND MEDIUM
ENTERPRISES (SME) – Regulation 106A to 106J

An issuer whose post-issue face value capital does not exceed ten crore rupees shall issue its specified securities in accordance with provisions of this
Chapter.  Kindly note, there is also Micro, Small & Medium Enterprises Development Act which classifies Industries but for such classification, only the investment made in plant & machinery are taken into account whereas under SEBI ICDR the whole capital of the company should be Rs. 10 crores or less

In some cases, even upto Rs. 25 crores [ie, 10 crores to 25 crores] may be considered under this chapter where shareholders agree to Migrate by passing a Special Resolution through postal ballot and can be acted upon if and only if the votes cast by shareholders other than promoters in favour of the proposal amount to at least two times the number of votes cast by shareholders other than promoter shareholders against the proposal. [R:106H].  Kindly note even such companies, if already in SME Exchange have the option to migrate to Main board on satisfaction of the above said conditions. [R:106I]

In cases where companies in SME Exchange [upto 25 crores] is likely to exceed the same due to further issue of shares, then prior to such issue the company shall pass Special Resolution (similar way as mentioned above) and to get in-principle approval for listing in the Main board by complying with all the conditions.

The sub-regulations (1), (2) and (3) of regulation 6 (filing of offer document), regulation 7 (in-principle approval), regulation 8 (documents to be submitted before opening the issue), regulation 9 (draft offer document to be made public), regulation 10 (Fast track issue), regulation 25, 26 & 27 (eligibity requirements for IPO & FPO) and sub-regulation (1) of regulation 49 (Minimum application value between Rs.5000 & 7000) of these regulations shall not apply to an issue of specified securities made under this Chapter.  That means, all other regulation will apply as such with such modifications as necessary, what we call legally as “mutatis mutandis”.

Main Board = Stock Exchanges other than SME Exchange

Nominated Investor = QIB/PE fund who undertakes the under-subscription portion or receive/deliver (which requires prior approval of SME exchanges) during Market making (for 3 years) with the market makers inventory of atleast 5%. Market Maker shall not buy from promoter or persons belonging to promoter group.  [R 106J]  Also, a promoter can offer only such shares which are not locked-in for market making with the prior approval of SME Exchange.

Similar to Fast track Issues (FTI), there is no need to file draft offer documents, instead the final offer documents shall be filed simultaneously with SME Exchanges, RoC and SEBI alongwith  due-diligence certificate as per Form A of Schedule VI including additional confirmations as provided in Form H of Schedule VI.

  1. 100% of offer through offer document shall be underwritten, out of which,
    • 15% shall be underwritten by Merchantbankers
  2. Underwriter shall undertake in case of under-subscritpion and not more than that as mentioned in the agreement.
  3. Nominee Investor shall undertake in case of under-subscription.
  4. Merchant banker is responsible for underwriting & shall give an Undertaking 1 day before opening of issue.
  5. Minimum Application size = atleast Rs. 1 lakh per application.
  6. Minimum Allottees = 50 nos.

In Schedule VI, after Form G, the following form shall be inserted, namely:-
“FORM H
[See regulation 106C(2)]

ADDITIONAL CONFIRMATIONS/ CERTIFICATION TO BE GIVEN BY MERCHANT BANKER IN DUE DILIGENCE CERTIFICATE TO BE GIVEN ALONG WITH OFFER DOCUMENT REGARDING SME EXCHANGE.

ASBA for all, Discounted price for employees, issuer can regulate bids, fti liberalised as to SCN, reservation for other employees also, lock-in preferential issue sica, IDR %: SEBI ICDR Amendments 2010

Download the Updated Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 as on date.  There are three amendments in SEBI ICDR Regulations in 2010 which are,

SEBI ICDR First Amendment January 2010

Regulation 58: Abridged prospectus, abridged letter of offer and ASBA.

(5) In all public issues and rights issues, where not more than one payment option is given, the issuer shall provide the facility of ASBA in accordance with the procedure and eligibility criteria specified by SEBI. [earlier it was available only to retail investors]

(6) An application through ASBA form may be made:
(a) in a public issue, by an applicant who:
(i) is a resident retail individual investor;
(ii) is bidding at cut-off, with single option as to the number of shares bid for;
(iii) is applying through blocking of funds in a bank account with the self certified
syndicate banks;
(iv) has agreed not to revise his bid;
(v) is not bidding under any of the reserved categories;
(b) in a rights issue, by an applicant who:
(i) holds the shares of the issuer in dematerialised form as on the record date and has
applied for entitlements and/or additional equity shares in dematerialised form;
(ii) has not renounced his entitlements in full or in part;
(iii) is not a renouncee;
(iv) who is applying through blocking of funds in a bank account with the Self Certified
Syndicate Bank.
[Omitted]

In schedule XI, in Part A, in para (12), in clause (i), the bracket and words “(except ASBA investors)” shall be omitted.

SEBI ICDR Second Amendment January 2010

 

Regulation 29: Differential Pricing

After clause (c), following clause shall be inserted , namely:-

“(d) In case the issuer opts for the alternate method of book building in terms of Part D of Schedule XI, the issuer may offer specified securities to its employees at a price lower than the floor price:
Provided that the difference between the floor price and the price at which specified securities are offered to employees shall not be more than 10% of the floor price.”

In schedule XI, in Part D, [alternate method of book building]-
“(b) The issuer shall disclose a floor price in the red herring prospectus. The issuer may mention the floor price in the red herring prospectus (RHP) or if the floor price is not mentioned in the red herring prospectus, the issuer shall announce the floor price at least one working day before opening of the bid in all the newspapers in which the pre-issue advertisement was released.”

“(c) Investors other than retail individual investors shall bid at any price above the floor price.   Qualified institutional buyers (QIB) shall bid at any price above the floor price.” [as discounted price is allowed to employees, retail investors, etc…]

“(e) Allotment shall be on price priority basis for investors other than retail individual investors.  Allotment shall be on price priority basis for qualified institutional buyers.”

“(f) Allotment to retail individual investors shall be made proportionately as illustrated in this Schedule.  Allotment to retail individual investors, non-institutional investors and
employees of the issuer shall be made proportionately as illustrated in this Schedule.”

“(h) Retail individual investors shall be allotted specified securities at the floor price. Retail individual investors, non-institutional investors and employees shall be allotted specified securities at the floor price subject to provisions of clause (d) of regulation 29.”

“(i)  The issuer may place a cap either in terms of number of specified securities or percentage of issued capital of the issuer that may be allotted to a single bidder.  The issuer may:-
(A) place a cap either in terms of number of specified securities or percentage of issued capital of the issuer that may be allotted to a single bidder;
(B) decide whether a bidder be allowed to revise the bid upwards or downwards in terms of price and/or quantity;
(C) decide whether a bidder be allowed single or multiple bids.”

SEBI ICDR Third Amendment April 2010

Regulation 2(1)

(c)“anchor investor" means a qualified institutional buyer [who makes] an application for a value of ten crore rupees or more in a public issue made through the book building process in accordance with these regulations;

(m) “employee” means a permanent and full-time employee of the issuer, working in India or abroad, [of the issuer or of the holding company or subsidiary company or of that material associate(s) of the issuer whose financial statements are consolidated with the issuer’s financial statements as per Accounting Standard 21], or a director of the issuer, whether whole time or part time and does not include promoters and an immediate relative of the promoter (i.e., any spouse of that
person, or any parent, brother, sister or child of the person or of the spouse);

(zf) “retail individual shareholder” means a shareholder of a listed issuer, who:
(i) as on the date fixed for the purpose of determining shareholders eligible for reservation in terms of [regulation 42] of these regulations, is holding equity shares which, on the basis of the closing price of the equity shares on the recognised stock exchange in which highest trading volume in respect of the equity shares of the issuer was recorded as on the previous day, are worth up to one lakh rupees; and (ii) applies or bids for specified securities for a value of not more than one lakh rupees;

Regulation 8: Documents to be submitted before opening of the issue by Lead Merchant Banker with Draft offer document

(1)(e): a certificate in the format specified in [Part C] of Schedule VII, confirming compliance of the conditions mentioned therein.

Regulation 10: Fast Track issue

(1)(g): no show-cause notices have been issued or prosecution proceedings initiated [by SEBI] or pending against the issuer or its promoters or whole time directors as on the reference date;

Regulation 13: Underwriting

(2) Where the issuer makes a public issue through the book building process, such issue shall be underwritten by book runners or syndicate members:
Provided that fifty per cent. [sixty per cent, if public issue is made with at least ten per cent. public offer under clause (b) of sub-rule (2) of rule 19 of the Securities Contracts (Regulation) Rules, 1957] of the net offer to public proposed to be compulsorily allotted to qualified institutional buyers for the purpose of compliance of the eligibility conditions specified in sub-regulation (2) of regulation 26 and [regulation 27] cannot be underwritten.

Regulation 26: Conditions for IPO

(5) No issuer shall make an initial public offer if [as on the date of registering the prospectus with the Registrar of Companies] there are any outstanding convertible securities or any other right which would entitle any person any option to receive equity shares after the initial public offer: Provided that…..

Regulation 29: Differential Pricing – [as the word “of the issuer” is removed as mentioned below, discounted price can be offered beyond the employees of issuer company also].

(a) retail individual investors or retail individual shareholders or employees[***] entitled for reservation made under regulation 42 making an application for specified securities of value not more than one lakh rupees, may be offered specified securities at a price lower than the price at which net offer is made to other categories of applicants: Provided…

Further, the same is also reiterated in Regulation 55A dealing with Reservation for [its] employees alongwith rights issue by removing the word “its”.

Regulation 42:  Reservations on competitive basis

“(1)(a) employees of the issuer including employees of the promoting companies in case of a new issuer; employees; and in case of a new issuer, persons who are in the permanent and full time employment of the promoting companies excluding the promoters and an immediate relative of the promoter of such companies;”

“(2)(a) employees of the issuer including employees of the promoting companies in case of a new issuer; employees; and in case of a new issuer, persons who are in the permanent and full time employment of the promoting companies excluding the promoters and an immediate relative of the promoter of such companies;”

Regulation 46: Period of Subscription

(1) [Except as otherwise provided in these regulations] a public issue shall be kept open for at least three working days but not more than ten working days including the days for which the issue is kept open in case of revision in price band.

Regulation 70. [Preferential issue to Company under SICA shall be subject to lock-in, though exempt from other preferential issue regulations.]

(1) The provisions of Preferential Issue shall not apply where the preferential issue of equity shares is made:
(a) pursuant to conversion of loan or option attached to convertible debt instruments in terms of sub-sections (3) and (4) of sections 81 of the Companies Act, 1956;
(b) pursuant to a scheme approved by a High Court under section 391 to 394 of the Companies Act, 1956;
(c) in terms of the rehabilitation scheme approved by the Board of Industrial and Financial Reconstruction under the Sick Industrial Companies (Special Provisions) Act, 1985:
[Provided that the lock-in provisions of this Chapter shall apply to preferential issue of equity shares mentioned in clause (c).]

Regulation 98: Conditions for issue of IDR

(e) the balance fifty per cent. may be allocated among the categories of non-institutional investors and retail individual investors including employees at the discretion of the issuer and the manner of allocation shall be disclosed in the prospectus. Allotment to investors within a category shall be on proportionate basis:
[Provided that at least thirty per cent. of the IDRs being offered in the public issue {erstwhile it was 30% of the 50%} shall be available for allocation to retail individual investors and in case of under subscription in retail individual investor category, spillover to other categories to the extent of under subscription may be permitted.
Explanation: For the purpose of this regulation, “employee” shall mean a person who,-
(a) is a resident of India, and
(b) is a permanent and full-time employee or a director, whether whole time or part time, of the issuer or of the holding company or subsidiary company or of the material associate(s) of the issuer, whose financial statements are
consolidated with the issuer’s financial statements, working in India and does not include promoters and an immediate relative of the promoter (i.e., any spouse of that person, or any parent, brother, sister or child of the person or of the spouse).]

In Schedule IV,

  • in Part A, for clause (b) with respect to Rights issue, the following shall be substituted, namely:-
    “(b) In case of a rights issue: An alteration as to fees is made.
  • in Part B, for the words “Para 3” , the words “Para 2” shall be substituted.

In Schedule VI,

  • in Form A, for reference title, the following shall be substituted, namely:-
    “[See regulations 8(1)(c), 10(3)(a) and 106C(2)]”
  • (b) in Form D, in the note, for the figure, bracket and word “2(b)”, the figure, bracket and word “1(b)” shall be substituted.

In Schedule VIII,

(a) in Part A, in Para (2), -
(A) in item (VI),-
(I) in sub-item (B), in clause (15), for sub-clause (e), the following shall be
substituted, namely:-
“(e) The underwriting agreement shall list out the role and obligations of each
syndicate member and inter-alia contain a clause stating that margin collected shall be uniform across all categories indicating the percentage to be paid as margin by the investor at the time of bidding.”
(II) in sub-item (D), in clause (2),-
(i) in sub-clause (i), in section (ii), after the words “regulation 2”, the bracket
“)”shall be inserted;
(ii) in sub-clause (j), in section (iv), after the words “regulation 32”, the words
“and regulation 33” shall be inserted;
(iii)in sub-clause (r), after section (xvii), the following shall be inserted,
namely:-
“(xviii) the details of the number of shares issued in ESPS, the price at which
such shares are issued, employee-wise details of the shares issued to
• senior managerial personnel;
• any other employee who is issued shares in any one year amounting to
5% or more shares issued during that year;
• identified employees who were issued shares during any one year equal
to or exceeding 1% of the issued capital of the company at the time of
issuance;
(xix) diluted Earning Per Share (EPS) pursuant to issuance of shares under
ESPS; and consideration received against the issuance of shares.”
(B) in item (VIII),-
(I) in sub-item (D), in clause (3), sub-clause (f) shall be omitted;
(II) in sub-item (E), in clause (8), in sub-clause (j), for the word
“discussed” appearing at the end, the word “disclosed” shall be
substituted;
(C) in item (IX),-
(I) in sub-item (B),-
(i) in clause (12), in sub-clause (a), in section (v), for the mark and
words “(c) or (d)”, the mark and words “(iii) or (iv)” shall be
substituted;
(ii) in clause (16), in sub-clause (b), after the words “loan taken
and before the words “by the promoters”, the words “from the
issuer
” shall be inserted;
(II) in sub-item(C), in clause (2), before the proviso the following
paragraph shall be inserted, namely:-

“In case there are no listed group companies, the financial information shall be given for the five largest unlisted group companies based on turnover.”
(D) in item (XI), in sub-item (I), for the words “letter of offer”, the words “offer document” shall be substituted;
(E) in item (XII), in sub-item (B), in clause (29), in sub-clause (a), for the words “thirty days” appearing after the words “from the date of the closure” the words “fifteen days” shall be substituted;
(b) in Part C, in para (2),-
(A) brackets and letter “(e)” shall be omitted;
(B) item (f) shall be renumbered as “(e)”;
(c) in Part E, in Para (5), in item (VI), in sub-item (C), in clause (6), the following proviso shall be inserted, namely:-
“Provided that such participation shall not result in breach of minimum public shareholding requirement stipulated in the equity listing agreement entered into between the issuer and the recognized stock exchanges where the specified securities of the issuer are listed.”
(d) in Part F, for para (2), the following shall be substituted, namely:-
“(2) However, if the conditions specified in clause (1) in Part E of this Schedule are satisfied, the disclosure requirements specified in the following clauses in Part D of this Schedule, shall not be applicable to such issuer:
(a) Sub-item (B) of item II ;
(b) Sub-item (D) of item III;
(c) Item V;
(d) Item VI;
(e) Item VII ;
(f) Item X;
(g) Item XI;
(h) Item XIV;
(i) Item XV;
(j) Item XVI.”

In Schedule XI,-
(a) in Part A,-
(A) in para 10, for clause (f), the following shall be substituted, namely:-

“(f) Anchor Investors shall pay on application the same margin which is payable by other categories of investors the balance, if any, shall be paid within 2 days of the date of closure of the issue.”
(B) in para 11, -
(I) for clause (a), the following shall be substituted, namely:-
“(a) The margin collected shall be uniform across all categories of investors.”
(II) clause (b) shall be omitted;
(C) in para 12, after clause (i), the following shall be inserted, namely:-
“(ia) The issuer may decide to close the bidding by qualified institutional buyers one day prior to the closure of the issue subject to the following conditions:
(i) bidding shall be kept open for a minimum of three days for all categories of
applicants;
(ii) disclosures are made in the red herring prospectus regarding the issuer’s
decision to close the bidding by qualified institutional buyers one day prior to closure of issue.”
(b) in Part C, in the heading, for the word “INSTUTIONAL”, the word “INSTITUTIONAL” shall be substituted.

FII Amendment 2010: exemption extended to market making through SME platform under Chapter XA ICDR

In the Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995 through SEBI (FII) (Amendment) Regulations, 2010 vide Notification No. LAD-NRO/GN/2010-11/02/1107 dated 13th April 2010, the following updates were included:
(i) in regulation 15, in sub-regulation (3),-
(a) in clause (a), after second proviso, the following proviso shall be inserted, namely:-
“Provided further that nothing contained in this clause shall apply to any transaction in securities by the Foreign Institutional Investor pursuant to an agreement entered into with the merchant banker in the process of market making or subscribing to unsubscribed portion of the issue in accordance with Chapter XA of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.”
(b) in clause (c), after sixth proviso, the following proviso shall be inserted, namely:-
“Provided further that nothing contained in this clause shall apply to any transaction in securities by the Foreign Institutional Investor pursuant to an
agreement entered into with merchant banker in the process of market making or subscribing to unsubscribed portion of the issue in accordance with Chapter XA of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.”

Merchant Bankers Regulation Amendment 2010 for SME segment & obligation extended thereof for Chapter XA of ICDR

In the Securities and Exchange Board of India (Merchant Bankers ) Regulations, 1992, through SEBI (Merchant Bankers) (Amendment) Regulations, 2010 vide Notification No. LAD-NRO/GN/2010-11/04/1109 dated 13th April 2010, the following updates were inserted:
(i) in regulation 13A, after the proviso and before the Explanation, the following proviso shall be inserted, namely:-,
“Provided further that a merchant banker, who has been granted certificate of registration under these regulations, may ensure market making in accordance with Chapter XA of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.”
(ii) in regulation 22, after the proviso, the following proviso shall be inserted, namely:-
“Provided further that in any issue made in accordance with Chapter XA of
the Securities and Exchange Board of India (Issue of Capital and Disclosure
Requirements) Regulations, 2009 the merchant banker shall, itself or jointly
with other merchant bankers associated with the issue, underwrite at least
fifteen per cent of the issue size.”
(iii) in regulation 27, the following proviso shall be inserted, namely:-
“Provided that complete particulars of any transaction for acquisition of securities made in pursuance of underwriting or market making obligations in accordance with Chapter XA of the Securities and Exchange Board of India
(Issue of Capital and Disclosure Requirements) Regulations, 2009 shall be
submitted to SEBI on quarterly basis.”

No separate certificate of registration for stock & sub brokers to trade in SME platform under Chapter XA of ICDR: Amendment 2010

In the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992, through SEBI (Stock Brokers and Sub- Brokers) (Amendment) Regulations, 2010 vide notification No. LAD-NRO/GN/2010-11/06/1097 dated 13th April 2010, the following updates were inserted:
(i) in regulation 6, the following proviso and Explanation shall be inserted, namely:-
“Provided that, subject to the conditions of regulation 6A, a stock broker holding a certificate of registration with respect to membership of a recognised stock exchange having nationwide trading terminals shall be eligible for trading on SME platform established by such stock exchange without obtaining a separate certificate of registration for trading on the SME platform.
Explanation: For the purpose of this regulation, SME platform means a trading platform of a recognised stock exchange having nationwide trading terminals and permitted by SEBI to list the securities issued in accordance with Chapter XA of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.”
(ii) in regulation 11, the following sub-regulation and Explanation shall be inserted, namely:-
“(3) Subject to the provisions of regulation 12A, no fresh certificate need to be obtained under sub-regulation (1) where a registered sub-broker is affiliated to stock broker who is eligible to trade on SME platform.
Explanation: For the purpose of this regulation, SME platform means a trading platform of a recognised stock exchange having nationwide trading terminals and permitted by the Board to list the securities issued in accordance with Chapter XA of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.”

Market Making arrangement by Venture Capital Fund for securities listed on SME exchange: Regulation 12A insertion: VCF Amendment 2010

In the Securities and Exchange Board of India (Venture Capital Funds) Regulations, 1996, through SEBI (Venture Capital Funds) (Amendment) Regulations, 2010 vide Notification No. LAD-NRO/GN/2010-11/07/1100 dated 13th April 2010, the following updates are inserted:


(i) after regulation 12, the following regulation shall be inserted, namely:-
“Investment in securities listed on SME exchange.
12A. The venture capital fund may enter into an agreement with merchant banker to subscribe to the unsubscribed portion of the issue or to receive or deliver securities in the process of market making under Chapter XA of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 and the provisions of regulation 12 shall not apply in case of acquisition or sale of securities pursuant to such subscription or market making.”

Understand Mutual Fund amendments 2010: offer period 15 days, refund & MF unit certificate 5 w.days & limits on fees/expenses on schemes

In the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, the following amendments were made through SEBI (Mutual Funds) (Amendment) Regulations, 2010 vide Notification No. LAD-NRO/GN/2010-11/13/13945 dated 29th July 2010 with immediate effect.

Regulation 34: Offering Period

No scheme of a mutual fund other than the [initial] offering period of any equity linked savings schemes shall be open for subscription for more than 15 days 45 days.

Regulation 35: Allotment of units & refund of moneys

(3) Any amount refundable under sub-regulation (2) shall be refunded within a period of 5 working days six weeks from the date of closure of subscription list, by Registered post with acknowledgement due and by cheque or demand draft marked “A/c payee” to the applicants.
(4) In the event of failure to refund the amounts within the period specified in subregulation (3), the asset management company shall be liable to pay interest to the applicants at a rate of fifteen per cent per annum from the expiry of 5 working days six weeks from the date of closure of the subscription list.

Regulation 36: Statement of accounts or unit certificates
(1) The asset management company shall issue to the applicant whose application has been accepted, a statement of accounts specifying the number of units allotted to the applicant as soon as possible but not later than 5 working days thirty days from the date of closure of the initial subscription list and/or from the date of receipt of the request from the unitholders in any open ended scheme:
Provided that if an applicant so desires, the asset management company shall issue the unit certificates to the applicant within 5 working days thirty days of the receipt of request for the certificate.

(2) An applicant in a close ended scheme whose application has been accepted shall have the option either to receive the statement of accounts or to hold units in dematerialised form and the asset management company shall issue to such applicant, a statement of accounts specifying the number of units allotted to the applicant or issue units in dematerialized form as soon as possible but not later than 5 working days thirty days from the date of closure of the initial subscription list.

Regulation 52: Limitation on fees and expenses on issue of schemes
(3) For schemes launched on a no load basis, the asset management company shall be entitled to collect an additional management fee not exceeding 1% of the weekly average net assets outstanding in each financial year. [Omitted]

(6) The total expenses of the scheme excluding issue or redemption expenses, whether initially borne by the mutual fund or by the asset management company, but including the investment management and advisory fee shall be subject to the following limits :—
(i) On the first Rs.100 crores of the average weekly net assets 2.5%;
(ii) On the next Rs.300 crores of the average weekly net assets 2.25%;
(iii) On the next Rs.300 crores of the average weekly net assets 2.0%;
(iv) On the balance of the assets 1.75% :
Provided that such recurring expenses shall be lesser by at least 0.25% of the weekly average net assets outstanding in each financial year in respect of a scheme investing in bonds :
Provided further that in case of a fund of funds scheme, the total expenses of the scheme including the management fees shall not exceed 0.75% of the daily or weekly average net assets, depending upon whether the NAV of the scheme is calculated on daily or weekly basis.
Provided further that in case of an index fund scheme, the total expenses of the scheme including the investment and advisory fees shall not exceed one and one half percent (1.5%) of the weekly average net assets
.

[The total expenses of the scheme excluding issue or redemption expenses, whether initially borne by the mutual fund or by the asset management company, but including the investment management and advisory fee shall be subject to the following limits:—
(a) in case of a fund of funds scheme, the total expenses of the scheme including the management fees shall be either:-
(i) not exceeding 0.75% of the daily or weekly average net assets, depending upon whether the NAV of the scheme is calculated on daily or weekly basis; or
(ii) it may consist of -
(A)management fees for the scheme not exceeding 0.75% of the daily or weekly average net assets depending upon whether the NAV of the scheme is calculated on daily or weekly basis;
(B) other expenses relating to administration of the scheme;
and
(C) charges levied by the underlying schemes:
Provided that the sum total of (A), (B) and the weighted average of the total expense ratio of the underlying schemes shall not exceed 2.50% of the daily
or weekly average net assets (depending upon whether the NAV of the scheme is calculated on daily or weekly basis) of the scheme.
(b) in case of an index fund scheme or exchange traded fund, the total expenses of the scheme including the investment and advisory fees shall not exceed one and one half percent (1.5%) of the weekly average net assets;
(c) in case of any other scheme-
(i) on the first Rs.100 crores of the daily or average weekly net assets 2.5%;
(ii) on the next Rs.300 crores of the daily or average weekly net assets 2.25%;
(iii) on the next Rs.300 crores of the daily or average weekly net assets 2.0%;
(iv) on the balance of the assets 1.75%:
Provided that in respect of a scheme investing in bonds such recurring expenses shall be lesser by at least 0.25% of the daily or weekly average net assets outstanding in each financial year.”]

 

Tenth Schedule (X): Amortisation of Initial Issue Expenses for close ended schemes

(e) For schemes floated on a ‘no-load’ basis, the asset management company may levy an additional management fee not exceeding 1% of the NAV. The asset management company may be entitled to levy a contingent deferred sales charge for redemption during the first four years after purchase, not exceeding 4% of the redemption proceeds in the first year, 3% in the second year, 2% in the third year and 1% in the fourth year. [Omitted]

Equity Research Report on listed companies available for download: BSE/NSE website links for investors

PR No.161/2010

Independent Equity Research Reports on listed companies made available on Stock Exchange websites

In a meeting of SEBI recognized Investors’ Associations held on February 11, 2010, it was decided that independent equity research coverage on 20 listed companies each, for which research reports were not available hitherto, would be made available by Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) on their websites by July 30, 2010 for the benefit of investors. Accordingly, both the exchanges have since made available on their respective websites, the first set of research reports. Further, exchanges have agreed to jointly frame the criteria for selection of further companies for such research coverage in future.

Website links:

What exam for distributors, agents or any persons employed or engaged or to be employed or engaged in the sale and/or distribution of mutual fund products by SEBI NISM?

Cir / IMD / DF / 5 / 2010 June 24 , 2010
All Mutual Funds, Asset Management Companies (AMCs)

Sub: Certification Programme for sale and/ or distribution of mutual fund products

In terms of SEBI Circulars dated September 25, 2001, November 28, 2002, April 03, 2003 and February 04, 2004 about, inter alia, the captioned subject, agents/distributors of mutual fund units were required to obtain certification from the Association of Mutual Funds in India (AMFI) by passing a certification examination, and to obtain registration with AMFI.

In terms of SEBI notification No. LAD-NRO/GN/2010-11/09/6422 dated May 31, 2010, under regulation 3 (1) of the (Certification of Associated Persons in the Securities Markets) Regulations, 2007, (Certification Regulations) it has been decided that from June 01, 2010, the certification examination for distributors, agents or any other persons employed or engaged or to be employed or engaged in the sale and/or distribution of mutual fund products, would be conducted by the National Institute of Securities Markets (NISM).  Accordingly, it was notified that with effect from June 01, 2010, the following category of associated persons, i.e., distributors, agents or any persons employed or engaged or to be employed or engaged in the sale and/or distribution of mutual fund products, shall be required to have a valid certification from the National Institute of Securities Markets (NISM) by passing the certification examination as mentioned in the NISM communiqué NISM/Certification/Series-V-A: MFD/2010/01 dated May 05, 2010.
Provided that if the said associated person possesses a valid certificate by passing before June 01, 2010, the AMFI Mutual Fund (Advisors) Module, he shall be exempted from the requirement of the aforementioned NISM certification examination.


Under the existing instructions, the agent/ distributor was exempted from the AMFI certification examination if he had completed 50 years of age and had at least 5 years of experience in distribution of mutual fund units. As per regulation 4 (3) of the Certification Regulations, persons who have attained the age of fifty years or who have at least ten years experience in the securities markets in the sale and/ or distribution of mutual fund products as on May 31, 2010, will be given the option of obtaining the certification either by passing the NISM certification examination or qualifying for Continuing Professional Education (CPE) by obtaining such classroom credits as may be specified by NISM from time to time.

The Certification Regulations require the persons referred to in para 2 above to comply with the requirements for CPE as specified by NISM within the validity period of the certificate obtained by passing the certification examination.
However, to facilitate the transition process from AMFI to NISM, it has been decided that a person holding a valid AMFI certification whose validity expires between June 01, 2010 and December 31, 2010, would be required to comply with the CPE requirements as laid down by NISM under the relevant clauses of the Certification Regulations, by December 31, 2010.

An associated person holding a valid AMFI/NISM certification whose validity
expires anytime after December 31, 2010, would be required to comply with the CPE requirements as laid down by NISM under the relevant clauses of the Certification Regulations, prior to the expiry of the validity of the certification.

Thursday, August 5, 2010

Issue of Debt Securities now has Non-Convertible Debentures (Reserve Bank) Directions, 2010 in addition to compliance under Companies Act & SEBI regulation

Reporting of Issuance of Non Convertible Debentures

The Reserve Bank of India has issued the ‘Issuance of Non-Convertible Debentures (Reserve Bank) Directions, 2010’ vide IDMD.DOD.9/11.01.01(A)/2009-10 dated June 23, 2010 (which is made effective from 2nd August 2010) regarding regulation of non-convertible debentures of maturity up to one year (NCDs). In terms of paragraph 12.7 of the said Directions read with paragraphs 12.4, 12.5 and 12.6 ibid, the Debenture Trustees are required to report the details of issuance of the NCDs, the outstanding amount of NCDs and default in repayment of NCDs to the Financial Markets Department, Reserve Bank of India, Central Office, Mumbai 400 001.

It is advised to submit the required information as per format enclosed in

  1. Annex 1 (details of issuance of NCDs),
  2. Annex 2 (outstanding amount of NCDs), and
  3. Annex 3 (particulars of default in repayment of NCDs) to the Chief General Manager, Financial Markets Department, Reserve Bank of India, Central Office, Fort Mumbai 400 001 (Fax: 022-22630981/22634824; e-mail).
  4. The required information may be submitted in hard as well as soft copies.
  5. While the report on issuance of NCDs may be submitted within 3 days from the date of completion of the issue and
  6. the report on default in repayment may be submitted immediately,
  7. the report on outstanding amount of NCDs may be submitted on quarterly basis within five working days from the completion of the calendar quarter to which the report pertains.

Issuance of Non-Convertible Debentures (Reserve Bank) Directions, 2010 – An Understanding:

The Reserve Bank of India, having considered it necessary in public interest and to regulate the financial system of the country to its advantage, in exercise of its powers conferred under sections 45K, 45L and  45W of the Reserve Bank of India Act, 1934 and of all the powers enabling it in this behalf, hereby gives to the agencies dealing in securities and money market instruments, the following directions for issuance of Non-Convertible Debentures (NCDs) of original or initial maturity up to one year.

Definition: Non-Convertible Debenture (NCD) means a debt instrument issued by a corporate (including NBFCs) with original or initial maturity up to one year and issued by way of private placement;

“Corporate” means a company as defined in the Companies Act, 1956 (including NBFCs) and a corporation established by an act of any Legislature.

Eligibility to issue NCDs
A corporate shall be eligible to issue NCDs if it fulfills the following criteria, namely,

  1. the corporate has a tangible net worth of not less than Rs.4 crore, as per the latest audited balance sheet;
  2. the corporate has been sanctioned working capital limit or term loan by bank/s or all-India financial institution/s; and
  3. the borrowal account of the corporate is classified as a Standard Asset by the financing bank/s or institution/s.

Rating Requirement
An eligible corporate intending to issue NCDs shall obtain credit rating for issuance of the NCDs from one of the rating agencies, viz., the Credit Rating Information Services of India Ltd. (CRISIL) or the Investment Information and Credit Rating Agency of India Ltd. (ICRA) or the Credit Analysis and Research Ltd. (CARE) or the FITCH Ratings India Pvt. Ltd or such other agencies registered with Securities and Exchange Board of India (SEBI) or such other credit rating agencies as may be specified by the Reserve Bank of India from time to time, for the purpose.
The minimum credit rating shall be P-2 of CRISIL or such equivalent rating by other agencies.

The Corporate shall ensure at the time of issuance of NCDs that the rating so obtained is current and has not fallen due for review.

Maturity

  • NCDs shall be issued for maturities of 90 days or more from the date of issue.
  • The exercise date of option (put/call), if any, attached to the NCDs shall fall after the period of 90 days from the date of issue.
  • The tenor of the NCDs shall not exceed the validity period of the credit rating of the instrument.

Denomination
NCDs may be issued in denominations with a minimum of Rs.5 lakh (face value) and in multiples of Rs.1 lakh.

Limits and the Amount of Issue of NCDs

  1. The aggregate amount of NCDs issued by a corporate shall be within such limit as may be approved by the Board of Directors of the corporate or the quantum indicated by the Credit Rating Agency for the rating granted, whichever is lower.
  2. The total amount of NCDs proposed to be issued shall be completed within a period of 2 weeks from the date on which the corporate opens the issue for subscription.

Procedure for Issuance

  1. The corporate shall disclose to the prospective investors, its financial position as per the standard market practice.
  2. The auditors of the corporate shall certify to the investors that all the eligibility conditions set forth in these directions for the issue of NCDs are met by the corporate.
  3. The requirements of all the provisions of the Companies Act, 1956 and the Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008, or any other law, that may be applicable, shall be complied with by the corporate and shall also comply with Debt Listing Agreement.
  4. The Debenture Certificate shall be issued within the period prescribed in the Companies Act, 1956 or any other law as in force at the time of issuance. 
  5. NCDs may be issued at face value carrying a coupon rate or at a discount to face value as zero coupon instruments as determined by the corporate.

Debenture Trustee

  • Every corporate issuing NCDs shall appoint a Debenture Trustee (DT) for each issuance of the NCDs.
  • Any entity that is registered as a DT with the SEBI under SEBI (Debenture Trustees) Regulations, 1993, shall be eligible to act as DT for issue of the NCDs only subject to compliance with the requirement of these Directions.
  • The DT shall submit to the Reserve Bank of India such information as required by it from time to time.

Investment in NCD
NCDs may be issued to and held by individuals, banks, Primary Dealers (PDs), other corporate bodies including insurance companies and mutual funds registered or incorporated in India and unincorporated bodies, Non-Resident Indians (NRIs) and Foreign Institutional Investors (FIIs).

  • Investments in NCDs by Banks/PDs shall be subject to the approval of the respective regulators.
  • Investments by the FIIs shall be within such limits as may be set forth in this regard from time to time by the SEBI.

Preference for Dematerialisation

While option is available to both issuers and subscribers to issue/hold NCDs in dematerialised or physical form, they are encouraged to issue/ hold NCDs in dematerialised form. However, banks, FIs and PDs are required to make fresh investments in NCDs only in dematerialised form.

Roles and Responsibilities

12.1 The role and responsibilities of corporates, DTs and the credit rating agencies (CRAs) are set out below:

(a) Corporates
12.2 Corporates shall ensure that the guidelines and procedures laid down for issuance of NCD are strictly adhered to.
(b) Debenture Trustees
12.3 The roles, responsibilities, duties and functions of the DTs shall be guided by these regulations, the Securities and Exchange Board of India (Debenture Trustees) Regulations,1993, the trust deed and offer document.
12.4 The DTs shall report, within three days from the date of completion of the issue, the issuance details to the Chief General Manager, Financial Markets Department, Reserve Bank of India, Central Office, Fort, Mumbai-400001.
12.5 DTs should submit to the Reserve Bank of India (on a quarterly basis) a report on the outstanding amount of NCDs of maturity up to year.
12.6 In order to monitor defaults in redemption of NCDs, the DTs are advised to report immediately, on occurrence, full particulars of defaults in repayment of NCDs to the Financial Markets Department, Reserve Bank of India, Central Office, Fort, Mumbai-400001, Fax: 022-22630981/22634824.
12.7 The DTs shall report the information called for under para 12.4, 12.5 and 12.6 of these Directions as per the format notified by the Reserve Bank of India, Financial Markets Department, Central Office, Mumbai from time to time.
(c) Credit Rating Agencies (CRAs)
12.8 Code of Conduct prescribed by the SEBI for the CRAs for undertaking rating of capital market instruments shall be applicable to them (CRAs) for rating the NCDs.
12.9 The CRA shall have the discretion to determine the validity period of the rating depending upon its perception about the strength of the issuer. Accordingly, CRA shall, at the time of rating, clearly indicate the date when the rating is due for review.

12.10 While the CRAs may decide the validity period of credit rating, they shall closely monitor the rating assigned to corporates vis-à-vis their track record at regular intervals and make their revision in the ratings public through their publications and website.

Documentary Procedure

  1. Issuers of NCDs of maturity up to one year shall follow the Disclosure Document brought out by the Fixed Income Money Market and Derivatives Association of India (FIMMDA), in consultation with the Reserve Bank of India as amended from time to time.
  2. Violation of the directions will attract penalties, which would include debarring of the entity from the NCD market.

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