The Telegraph
Tuesday , June 17 , 2014
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Bonus share rule tweak on way

Pep pill

New Delhi, June 16 (PTI): Market regulator Sebi may relax restrictions on the sale of bonus shares held by promoters or other investors during an initial public offer (IPO) of a company, even if these shares have been held for less than a year.

According to the existing regulations, shares that have been held for less than a year are not eligible to be offered for sale in an IPO. This restriction applies to all classes of shares, including bonus shares or equity granted to existing shareholders on the basis of their prevailing stake.

According to senior officials, the Sebi board will consider this reform measure in the primary markets this week which has been finalised after taking into account suggestions made by the regulator’s primary market advisory committee and representations from market participants.

At present, many companies undertake a bonus issue before filing the draft offer documents on account of expanding the capital base and thereby providing better liquidity in the scrip post-listing. These companies plan an IPO after a year from such bonus issues.

Under the new norms, bonus shares issued in the last one year prior to filing of the draft documents will also be allowed to be offered for sale, provided that these bonus shares were issued out of the reserves existing one year before filing draft papers.

The new norm will help issuers to access the market immediately rather than wait for one year after a bonus issue.

Foreign investors

Sebi today asked designated depository participants to share information about foreign portfolio investors with banks, as part of its efforts to harmonise KYC (know your client) norms.

KYC documents of foreign portfolio investors (FPIs) can be shared only after getting authorisation from them.

The latest move is part of market regulator’s efforts to harmonise KYC norms with that of the Reserve Bank of India.

Sebi-approved depository participants are responsible for granting registration to FPIs under the new framework.

“DDPs (designated depository participants) are advised to share the relevant KYC documents with the banks concerned based on written authorisation from the FPIs,” Sebi said in a circular.

Accordingly, a set of hard copies of the KYC documents furnished by the foreign portfolio investors to DDPs may be transferred to the concerned bank through their authorised representative.

While transferring such documents, DDPs will have to certify that the documents have been duly verified with the original.