REVIEW OF DELISTING REGULATIONS SCHEDULED FOR DECEMBER

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The Securities and Exchange Board of India (SEBI) is poised to undertake a comprehensive review of its delisting regulations during its forthcoming board meeting in December. Madhabi Puri-Buch, the chairperson of the market regulator, disclosed this information at a Ficci-organized event on Thursday. Addressing concerns about the persistence of the reverse book-building process, Puri-Buch acknowledged the need for a reevaluation, stating, “There was a feeling that we will never review the delisting process and that we will stay with the reverse book-building process.”

In response to the challenges posed by unscrupulous players manipulating the reverse book-building process, SEBI had earlier released a consultative paper in August. This paper explored various alternatives, including a fixed price delisting route and a counter-offer framework. It also proposed methods for determining the floor price under the delisting rules and suggested a review of the reference date for floor price determination.

The delisting rules, as they currently stand, provide an exit opportunity for all public shareholders when a company intends to remove its shares from the stock market. Puri-Buch revealed that SEBI had received substantial feedback in response to the consultative paper. This feedback has been instrumental in shaping a proposal that will be presented at the upcoming board meeting.

Beyond delisting regulations, Puri-Buch highlighted SEBI’s intention to review insider trading rules and aspects of the mandatory “trading plan” that executives with key decision-making roles are required to submit six months in advance. The trading plan outlines the number of shares and the frequency of trades that can be executed. Currently, no deviations from the trading plan are permitted, and insiders are prohibited from executing any trades 20 days prior to the last day of a financial period.

The proposed changes to insider trading rules are expected to be deliberated upon by the board, either in the December meeting or the subsequent one in January.

SEBI’s agenda also includes its ongoing efforts to resolve the long-standing Sahara refund issue. Despite the recent demise of Sahara Group founder Subrata Roy, Puri-Buch emphasized that the resolution of this matter involving Sahara India Real Estate Corporation and Sahara Housing Investment Corporation would proceed independently of Roy’s death. The issue stems from funds raised in 2007-08 through Optionally Fully Convertible Debentures (OFCDs). Sebi had, in 2011, directed the two entities to refund the collected funds, a decision later affirmed by the Supreme Court. Subsequently, Roy’s arrest in 2014 was prompted by the group’s failure to comply with the court’s order, leading to a demand for the deposit of approximately Rs 24,000 crore with Sebi for further investor refunds.

Acknowledging the limited progress, Puri-Buch noted that only a fraction of the funds (about Rs 138 crore) had been returned to investors after a committee appointed by the Supreme Court vetted and cleared their claims. The larger issue of the remaining Rs 25,000 crore in undistributed funds with Sebi continues to be a complex challenge for the regulator.

As SEBI gears up for its upcoming board meeting, these critical reviews and proposed changes underscore the regulator’s commitment to refining and fortifying the regulatory framework governing the Indian securities market.

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