The Telegraph
Since 1st March, 1999
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Sebi fiat to check phantom operators

Mumbai, Aug. 14 (PTI): In a move to keep off fly-by-night operators, the Securities and Exchange Board of India (Sebi) today tightened its disclosure and investor protection (DIP) norms, making it necessary for firms to have minimum net tangible assets of Rs 3 crore to raise funds through public issues.

The existing eligibility norms for issuers have been amended to help small and medium companies to tap the primary market without exposing the public to undue risk, Sebi said in a release here today.

“The amended norms are expected to improve quality of issuer companies and also to keep fly-by-night issuers at bay,” the release said.

On price disclosure through book building, Sebi said companies could indicate a movable price band or a fixed floor price to make it realistic and immune from artificial demand.

Similarly, Sebi has made a provision for green-shoe option, an arrangement for allocating shares in excess of the shares included in the public issue.

It would act as price stabilisation tool helping to curb the speculative forces, which work immediately after listing, resulting in short-term volatility in post listing price.

The disclosures have been strengthened and the period between closure of issue and listing/trading of shares has been shortened from 22 to six days for book built issues.

The definition of qualified institutional buyers (QIBs) has been widened to include insurance companies, provident and pension funds with a minimum corpus of Rs 25 crore.

Sebi said wilful defaulters would be barred from raising funds by issuing debt instruments. Financial instruments by companies would need investment grade credit rating for making a debt issue, it said.

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