SEBI approves new takeover code...Unveils several other measures

Capital markets regulator SEBI formally gave a green light to the new takeover regulations proposed by the Takeover Regulation Advisory Committee (TRAC). As per the proposed new norms, a company can acquire up to 25% in a company without requiring to make an open offer. The new takeover code also raises the open offer size from a minimum of 20% at present, to 26%. Under current regulations, if an investor buys more than 15% in another company, it has to make a mandatory open offer for a further 20% stake. In addition, removal of the non-compete fee will ensure that all shareholders of the target firm are treated fairly. While most of the recommendations by the C. Achuthan panel have been accepted, SEBI turned down the committee’s suggestion on the 100% open offer. The TRAC had recommended open offer for 100% of the target company's shares.



"The decision on the minimum offer size of 26% was unanimous as we found that the average promoter holding in Indian companies was 51%," said U.K. Sinha, Chairman, SEBI, after the board meeting in what was his first press briefing as SEBI chief. An open offer would take this higher than 75%, which fits in well with the 25% minimum public holding recommended for an Indian company, he said. "The recommendation regarding auto-delisting of shares pursuant to the open offer acquisition of shares has not been accepted," Sinha said.

First time mutual fund investors will now have to pay an additional Rs 150 as transaction charges, according to new rules approved by SEBI. Existing investors in mutual funds will have to pay an additional Rs 100 as transaction charge. Distributors will be allowed to charge Rs 100 as transaction charges for each subscriber to help mutual funds penetrate into the retail segment in smaller towns. These charges will only be applicable on fund investments exceeding Rs 10,000. No charges will be levied on transactions other than new fund purchases.

SEBI also approved a proposal to open three new local offices at Lucknow, Guwahati and Hyderabad in the first phase. SEBI's head office in Mumbai would continue to deal with policy and important operational issues.

SEBI also made it simpler for investors to apply for shares in initial public offer (IPO) by cutting down the paper work and removing unnecessary details. SEBI also decided in favour of investors getting more useful information, such as track record of bankers managing the issue and important details related to the pricing of the offer. It also revised the structure, design, format, contents and order of information of the IPO form and prospectus. The merchant bankers are required to exercise due diligence in the pre-issue and post-issue activities.

The SEBI Board also approved a framework for setting up of Infrastructure Debt Funds (IDFs) besides simplification and rationalization of trading account opening process with stock brokers. The Unique Identification Document (UID) or Aadhaar number will be included in the eligible documents that can be presented as an identification of the customer, as part of the KYC process.

The SEBI Board passed a proposal of setting up a mechanism wherein one or more regulated KYC Registration Agency (hereinafter referred to as "KRA") will undertake KYC at the stage of account opening for all clients in the securities market through SEBI Regulated Points of Service (PoS). As a first step towards regulating distributors of Mutual Funds, select distributors will be regulated through Asset Management Companies (AMCs) by putting in place the due diligence process.

SEBI, on the direction of the SC, has revived an order that was in the past dismissed as "null and void" by the market regulator, but under a different chairman. It said that an order by a two-member committee, which found serious lapses and irregularities on the part of National Securities Depository (NSDL) in the IPO scam of 2003-06, will now be implemented.