New format of disclosure of derviatives by Mutual Fund & investment/exposure norms amended

Review of norms for investment and disclosure by Mutual Funds in derivatives
Please refer to the circular DNPD/CIR-29/2005 dated September 14 2005, circular MFD/CIR/9/120/2000 dated November 24 2000, and SEBI circular MFD/CIR/18337/2002 dated September 19, 2002 on investment in derivatives by mutual funds and disclosures thereof in half yearly portfolio statement.

In order to have prudential limits for derivative investments by mutual funds and to bring in transparency and clarity in the disclosure of the same to investors, it has been decided to bring in certain modification in the aforesaid circulars.

Disclosure of derivatives in Half Yearly Portfolios
The manner of disclosure of derivatives position in half yearly portfolio disclosure reports has not been specified in the SEBI (Mutual Funds) Regulations, 1996 and the disclosures being currently made are not uniform across the industry. Therefore, the following format for the purpose of uniform disclosure of investments in derivative instruments by Mutual Funds in half yearly portfolio disclosure, annual report or in any other disclosures is prescribed.

Effective date: The provisions shall be applicable for all new schemes launched post the issue of the circular. For all existing schemes, compliance with the circular shall be effective from October 01, 2010.

Source:SEBI Cir/ IMD/ DF/ 11/ 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

2nd year Event Videos, Photos, Awards, Mafoi Pandiarajan on business, cake cutting & lot more fun with Lawlabz Learnlabz OnlyThisMuch 2010 Celebration

Ever heard of a lab that concocts and churns out, not chemical, but legal solutions! LAWLABZ (Law Labz Consultancy Pvt Ltd), a legal consulting services organisation, has positioned itself in the forefront in offering high end services in corporate compliance practices. It has a training division called Learnlabz and publication initiative called OnlyThisMuch for Company Secretary students.

 

And as you are aware Lawlabz Group 2nd Year Celebrations this July 2010 with Learnlabz & OnlyThisMuch, the video way, hope you will make it, now its the time to share with the happy moments during our event [4 parts of video & photos].  You will find following features throughout the events,

1. Funny (bit of Tamil mixture)
2. Business is like a dance!!! (Wonderful speech by Mr. K. Pandiarajan of Mafoi Randstad)
3. Lawlabz Corporate & Employee Awards, Learnlabz Faculty Awards & OnlyThisMuch Author awards
4. Blast, Cake cutting, celebrations & celebrations.

[Do see all the 4 parts of the Videos & photographs hereunder]

Lawlabz Learnlabz OnlyThisMuch 2nd Year celebrations 2010

Thanks again for making the even the most successful one in all respects.  Thanks will definitely not suffice your well wishes.

Exchange Traded Currency Options RBI Directions for investment by Person Resident in India and SEBI norms 2010

As you are aware of Exchange Traded Currency Futures (ETCF) in Recognised Stock Exchanges for Person Resident in India (PRII) and What exam for approved users & sales personnel of trading members in currency derivatives segment and trading in interest rate derivatives, register for NISM now

Guidelines on trading of Currency Options on
Recognised Stock / New Exchanges

Attention of Authorised Dealers Category – I (AD Category – I) banks is invited to the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 dated May 3, 2000 [Notification No. FEMA/25/RB-2000 dated May 3, 2000], as amended from time to time and A.P. (DIR Series) Circular No. 05 dated August 6, 2008 in terms of which persons resident in India were permitted to participate in the currency futures market in India subject to directions contained in the Currency Futures (Reserve Bank) Directions, 2008.

2. In order to expand the existing menu of exchange traded hedging tools, it was announced in the Monetary Policy Statement 2010-11 (para 62) that recognised stock exchanges would be permitted to introduce plain vanilla currency options on spot US Dollar/ Rupee exchange rate for residents. Accordingly, it has been decided to permit trading of currency options on spot USD-INR rate in the currency derivatives segment of the stock exchanges, recognized by the Securities and Exchange Board of India (SEBI). The currency options market would function subject to the directions, guidelines, instructions, rules, etc issued by the Reserve Bank and the SEBI from time to time.

3. Persons resident in India are permitted to participate in the currency options market, subject to the directions contained in the Exchange Traded Currency Options (Reserve Bank) Directions, 2010, [Notification No.FED.01 / ED (HRK)-2010 dated July 30, 2010] (Directions) issued by the Reserve Bank of India, a copy of which is annexed (Annex-I).

4. Necessary amendments to Foreign Exchange Management (Foreign Exchange Derivatives Contracts) Regulations, 2000 (Notification No. FEMA.25/RB-2000 dated May 3, 2000) (Regulations) have been notified in the Official Gazette vide G.S.R. No. 635(E) dated July 27, 2010, a copy of which is annexed (Annex-II).

Source: A.P. (DIR Series) Circular No. 05 dated 30th July 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

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

Issue or Transfer of shares under FEMA: No more CCI guidelines pricing but Discounted Cash Flow technique for valuation: certification by Merchant banker/Chartered Accountant

Issue of shares

(a) After issue of shares (including bonus and shares issued on rights basis) and shares issued under ESOP)/ convertible debentures / convertible preference shares, the Indian company has to file Form FC-GPR, enclosed in Annex - 8, through it’s AD Category I bank, not later than 30 days from the date of issue of shares. The Form can also be downloaded from the Reserve Bank's website http://www.rbi.org.in/Scripts/BS_ViewFemaForms.aspx. Non-compliance with the above provision would be reckoned as a contravention under FEMA and could attract penal provisions.

Issue Price (for all issues other than Rights Issue)

• Price of shares issued to persons resident outside India under the FDI Scheme, shall be on the basis of SEBI guidelines in case of listed companies.
• In case of unlisted companies, valuation of shares has to be done by a SEBI registered Category I Merchant Banker or a Chartered Accountant as per the Discounted Free Cash Flow Method (DCF) .
• In case of issue of shares on preferential allotment the price shall not be less that the price as applicable to transfer of shares from resident to non-resident.

Issue Price (for Rights Issue)

• Listed = @ the price determined by the Company.
• Unlisted = Minimum price is the Rights Issue price to resident shareholders.

Transfer of Shares

Reporting of transfer of shares between residents and non-residents and vice- versa is to be made in Form FC-TRS (enclosed in Annex - 9). The Form FC-TRS should be submitted to the AD Category – I bank, within 60 days from the date of receipt of the amount of consideration. The onus of submission of the Form FC-TRS within the given timeframe would be on the transferor / transferee, resident in India. The AD Category – I bank, should forward the same to its link office. The link office should consolidate the Form FC-TRS and submit a monthly report to the Reserve Bank.

Transfer Price

1. Transfer by Resident to Non-resident (i.e. to foreign national, NRI, FII and incorporated non-resident entity other than erstwhile OCB)
   • Listed = Minimum price as per Preferential Issue under SEBI ICDR regulation with date of purchase/sale as relevant date.
   • Unlisted = Minimum price as per Fair value under Discounted Cash Flow Method and certified by Merchant Banker or Chartered Accountant.
2. Transfer by Non-resident (i.e. by incorporated non-resident entity, erstwhile OCB, foreign national, NRI and FII) to Resident
   • Should be within Minimum price as said in Transfer by Resident to Non-Resident above (for all issues).

Updated Notifications

1. Foreign Exchange Management (Transfer or Issue of Security by a PersonResident Outside India) (Amendment) Regulations, 2010

2. A. P. (DIR Series) Circular No.49 dated 4th May 2009

3. Foreign Investment Master Circular July2010

New definition of factory, dependant, Appointment of specialist, Medical Benefit council, Social Security Officers, Appeal provisions, 5 year limitation period, Other beneficiaries scheme - ESI Amendment Act, 2010

ESI Act was amended by Employees State Insurance Amendment Act, 2010 by way of Gazette notification dated 25th May 2010 and its effective date is notified as 1st June 2010 with the following updates.

Section 1(5): The appropriate Government may, in consultation with the Corporation and where the appropriate Government is a State Government, with the approval of the Central Government, after giving one month (earlier it was six months') notice of its intention of so doing by notification in the Official Gazette, extend the provision of this Act or any of them, to any other establishment or class of establishments, industrial, commercial, agriculture or otherwise :

Section 2(6A) "dependant" means any of the following relatives of a deceased insured person, namely :-

(i) a widow, a minor legitimate or adopted son who has not attained the age of 25 years, an unmarried legitimate or adopted daughter;

(ii) if wholly dependent on the earnings of the insured person at the time of his death, a legitimate or adopted son or daughter who has attained the age of 25 years (not eighteen years) and is infirm;

Section 2(6A): “Employee” definition also includes only such persons engaged as apprentice whose training period is extended to any length of time.

Section 2(11) "family" means all or any of the following relatives of an insured person, namely :

(v) dependant parent whose income from all sources does not exceed such income as may be prescribed by CG.

(vi) in case the insured person is UNMARRIED & his/her parents is not alive, a minor brother/sister WHOLLY dependant on the earnings of the insured person.

Section 2(12): "factory" means any premises including the precincts thereof -
(a) whereon ten or more persons are employed or were employed for wages on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on with the aid of power or is ordinarily so carried on, or (b) whereon twenty or more persons are employed or were employed for wages on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on without the aid of power or is ordinarily so carried on, but does not include a mine subject to the operation of the Mines Act, 1952 (35 of 1952) or a railway running shed.

Section 10. MEDICAL BENEFIT COUNCIL. - (1) The Central Government shall constitute a Medical Benefit Council consisting of - (a) the Director General, ESIC, ex officio as Chairman;

(b) the Director General, Health Services, ex officio as Chairman.

Section 12(3) A person referred to in clause (i) of section 4 [3 members of Parliament of whom two shall be members of the House of the People (Lok Sabha) and one shall be a member of the Council of States (Rajya Sabha) elected respectively by the members of the House of the people and the members of the Council of States] shall cease to be a member of the Corporation,

• on becoming a Minister or Speaker or Deputy Speaker of the House of the people or the Deputy Chairman of the Council of States.
• when he ceases to be a member of Parliament.

2nd provisio to Section 17(2)(a) dealing with Staff of ESIC allows appointment of Consultants & Specialists in various fields on contract basis.

Section 37. VALUATION OF ASSETS AND LIABILITIES. – The ESI Corporation shall, at intervals of 3 years (not five years), have a valuation of its assets and liabilities made by a valuer appointed with the approval of the Central Government.

Section 45. INSPECTORS, THEIR FUNCTIONS AND DUTIES: ESI Inspectors are now called Social Security Officers (SSO). Further, any authorised ESIC officer may carry out test inspection or re-inspection of the records & returns u/s. 44 for the purpose of verifying correctness & quality of inspection.

Second Proviso  to Section 45A: In case of determination of contribution u/s. 45, the ESI Corporation power is limited to 5 years of contribution becoming due. [limitation period]

Section 45AA: Appeal to Appellate Authority can be preferred by employee for order u/s. 45A within 60 days by depositing 25% of contribution (ordered or as per own calculation - whichever is higher), which is refundable with interest on success of appeal.

Section 51E: An accident occurring to an employee while commuting from his residence to the place of employment for duty or from the place of employment to his residence after performing duty, shall be deemed to have arisen out of and in the course of employment if nexus between the circumstances, time and place in which the accident occurred and the employment is established. [Agnes v. BEST Corpn case is now a law]

Third proviso to Section 56 amended: Medical Benefit:

Provided also that an insured person, who has attained the age of superannuation, a person who retires under Voluntary Retirement Scheme (VRS) or takes premature retirement, and his spouse shall be eligible to receive medical benefit subject to payment of contribution and such other conditions as may be prescribed by the Central Government.

Section 58(5): State Government, with prior approval of Central Government, can also establish organisation to provide for sickness, maternity & employment injury.

Section 59(3): ESIC’s Hospital through Third party participation is now permitted.  So, now even a private hospital can be recognised for medical treatments.

Section 59B: ESIC is given permission to establish medical colleges, nursing colleges & training institutes for its paramedical staff & employees.

Existing Chapter VA is completely revised

• Section 73B gives overriding power to Central Government to frame Scheme by way of Notification, for other beneficiaries (not being insured) for providing medical facility on payment of user charges.
• Scheme shall have the details as per Section 73D and shall be laid in both houses of Parliament for 30 days.

Provisios added to Section 87: Exempted factory or establishment by which,

• it is mandated that exemption will be granted only if employees receive substantially similar or superior benefits.
• Application for renewal shall be made within 3 months before expiry of Exemption period and taken up by Government within 2 months.

Section 91A powers restricted.  Thus now, exemption may be granted only prospectively and not retrospectively.

Section 91AA: Central Government is the appropriate Government if the medical benefits are provided by ESIC.

Source: Notification

Download SME Listing Agreement & understand deviations from Equity; how to set up SME Exchange with networth of 100 crores & requirements under SCRA

Sub: Conditions of listing for issuers seeking listing on SME Exchange - Model SME Equity Listing Agreement In recognition of the need for making finance available to small and medium enterprises, SEBI has decided to encourage promotion of dedicated exchanges and/or dedicated platforms of the exchanges for listing and trading of securities issued by Small and Medium Enterprises (“SME”). Consequently, SEBI amended SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (“SEBI (ICDR) Regulations”) by inserting a Chapter XA on “Issue of specified securities by small and medium enterprises”, through notification dated April 13, 2010. In continuation of the same and to facilitate listing of specified securities in the SME exchange, “Model Equity Listing Agreement” to be executed between the issuer and the Stock Exchange, to list/migrate the specified securities on SME Exchange, is specified through this circular.

SME listing agreement is same as Equity listing agreement.  However, certain relaxations are provided to the issuers whose securities are listed on SME exchange in comparison to the listing requirements in Main Board (= other than SME Exchanges), which inter-alia include the following:

a. Companies listed on the SME exchange may send to their shareholders, a statement containing the salient features of all the documents [in abridged form], as prescribed in proviso to section 219(b)(iv) of the Companies Act, 1956, instead of sending a full Annual Report;
b. Periodical financial results may be submitted on “half yearly basis”, instead of “quarterly basis” under Clause 41 and
c. Every issuer listed under SME Exchange shall have their own website.

d. SMEs need not publish their financial results in newspapers, as required in the Main Board (= other than SME Exchanges)  and can make it available on their website.

Download SME Listing Agreement

Sub: Setting up of a Stock exchange/ a trading platform by a recognized stock exchange

A. A company desirous of being recognized as a SME exchange may apply to Market Regulation Department, SEBI, in accordance with the provisions of the Securities Contracts (Regulation) Act,1956 ( SCRA) read with the provisions of the Securities Contracts (Regulation) Rules, 1957 (the SCRR), subject to the applicant fulfilling the following conditions:
(i) It is a corporatised and demutualised entity and is compliant with requirements of maintaining public shareholding and shareholding restrictions in accordance with Chapters II and III of the Securities Contracts (Regulation) (Manner of Increasing and Maintaining Public Shareholding in Recognised Stock Exchanges) Regulations, 2006;
(ii) It has a balance sheet networth of atleast Rs. 100 crores;
(iii) It shall have nation wide trading terminals and an online screen-based trading system, a suitable Business Continuity Plan including a disaster recovery site;
(iv) It shall have an online surveillance capability which monitors positions, prices and volumes in real time so as to check market manipulation;
(v) It shall have adequate arbitration and investor grievances redressal mechanism operative from all the four regions of the country.
(vi) It shall have adequate inspection capability;
(vii) It shall have the same risk management system and surveillance system as are required for cash market segment of a recognised stock exchange;
(viii) Information about trades, quantities, and quotes shall be disseminated by the recognized stock exchange in real time to at least two information vending networks which are accessible to investors in the country;
(ix) The trading system of the stock exchange may be quote driven or a hybrid of quote driven and order driven. The settlement system in the stock exchange shall be the same as that of the cash market of a recognised stock exchange;
(x) The clearing function of the stock exchange shall be performed by a clearing corporation/ clearing house;
(xi) The minimum lot size for trading on the stock exchange shall be one lakh rupees.
B. The above eligibility criteria shall mutatis mutandis apply to recognised stock exchanges having nation wide trading terminals and which
desires to set up a trading platform for listing of the specified securities issued in terms of Chapter XA of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009. Such recognised stock exchange shall file an application demonstrating its compliance with the conditions mentioned in subpara (i) to (xi) of para 6 above alongwith the proposed Rules, Regulations and Byelaws for the SME platform. Such a platform can be operationalised by the recognised stock exchange only after obtaining prior approval of SEBI.

Source:

1. Setting up of a Stock exchange/ a trading platform by a recognized
   stock exchange having nationwide trading terminals for SME vide CIR/MRD/DSA/17/2010 dated 18th May 2010.
2. Conditions of listing for issuers seeking listing on SME Exchange - Model SME Equity Listing Agreement vide CIR/CFD/DIL/6/2010 dated May 17, 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 (Merchant Bankers) Regulations, 1992,
• SEBI (Foreign Institutional Investors) Regulations, 1995,
• SEBI (Venture Capital Funds) Regulations, 1996,
• SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 and
• SEBI (Stock Brokers and Sub-brokers) Regulations, 1992.

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,

Date	Details
13-Apr- 2010	Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements)(Third Amendment) Regulations, 2010
08-Jan- 2010	Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Second Amendment)Regulations, 2010
01-Jan- 2010	Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Amendment Regulations, 2010

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.”