POLICY DEVELOPMENTS / COMMITTEES / WORKING GROUPS

DURING FEBRUARY1999

Clarification Regarding Investment By Foreign Institutional Investors
 
 

According to SEBI (Foreign Institutional Investors) Regulations, 1995 Amendment dated May 18, 1998, the Foreign Institutional Investors (FIIs) are permitted to invest in Treasury Bills. This avenue of investment is available to the FIIs investing through 100 per cent debt route as well as the equity route where upto 30 per cent investments can be made in debt instruments.
 
 

In terms of the SEBI ( Buy Back of Securities ) Regulations, 1998, which were notified on November 14, 1998, corporates were permitted to buy back upto 25 per cent of their paid up share capital. Following the queries from various FIIs regarding the action to be taken if the FIIs do not/ partially participate in the buy-back and thereby exceed the investment limits as a percentage of the reduced capital /post buy-back capital of the company, it is clarified that in such situations, the limit would be frozen and further FII investment would not be permitted. The pre buy-back FII investments would not be forced to be disinvested. Fresh FII investments would be permitted only when the FII investment levels falls below the limits applicable with respect to the reduced capital.
 
 

It has been clarified that clause 3 (a) of Regulation 15 of SEBI (Foreign Institutional Investors) Regulations, 1995, which stipulates conditions of compulsory delivery and no short selling in respect of FII transactions, is also applicable during the no-delivery period of a security.
 
 

Primary Market Advisory Committee Meeting
 
 

The meeting of the Primary Market Advisory Committee under the Chairmanship of Shri M.S. Verma discussed the following issues:
 
 

  1. Marketing of the Primary issues by using the infrastructure of the Secondary Market


    2. The committee deliberated on this subject and recommended to SEBI for implementation With a view to work out the modalities of such offerings, a small working group has been constituted.
     
     

  2. Benchmark pricing formula in respect of Premium Issues


    3. In respect of premium issues, in addition to the present disclosure regarding justification for premium, the Committee felt that disclosure of fair price in accordance with the established valuation methodology would go a long way in assisting the investors in making more informed decisions. The committee has recommended disclosure of the fair price to SEBI.
     
     

  3. Entry Norms


    4. Some of the members expressed that the present entry norm of track record of dividend payment of 3 out of immediately preceding 5 years is coming in the way of some of the well capitalised companies which have ploughed back their profits but not declared dividend from entering the market. The Committee appreciating the concern decided to recommend to SEBI to change the criterion from actual payment of dividend to the ability to pay the dividend worked out according to the conventional procedures prescribed in the provisions of the Companies Act, 1956.
     
     

  4. Members of the Committee expressed concern regarding some of the listed companies who changed their names during the recent past. The Committee recommended that such change of names should be brought to immediate attention of the regional stock exchanges. Further, it has also recommended that the SEBI should insist for complete disclosure of change in the name during the preceding three years. It should be considered material disclosure in the offer document.

    5.  

     

  5. The concerns were expressed regarding non-compliance of the listing requirements by the companies. The Committee decided to request the Institute of Company Secretaries of India (ICSI) to evolve a procedure whereunder it would be obligatory for the Company Secretary to submit the information required under the listing agreement is submitted to the stock exchanges periodically. The representative of the Institute has assured to initiate necessary action in this regard.
  6. The committee also recommended to SEBI to ensure disclosure of dividend per share rather than as percentage to the par value.