SEBI to Propose New Delisting Rules to Enhance Transparency and Trust in the Stock Market
Introduction
The Securities and Exchange Board of India (Sebi) is set to propose a review of its regulations for delisting stocks to ensure transparency and trust in the stock market. During a recent conference, Sebi chairperson Madhabi Puri Buch announced that a consultation paper has already been circulated, and the board will discuss the proposal in its next meeting. This move comes amid concerns of manipulation and the need to streamline the delisting process.
Exploring Alternatives to Reverse Book-Building Process
The Sebi sub-group has examined alternatives to the current reverse book-building process, including the introduction of a fixed price route for delisting shares. This approach aims to provide certainty to acquirers and shareholders regarding the delisting offer price. By offering a fixed price option, shareholders can make informed decisions upfront about their participation in the delisting process.
Under the existing regulations, the exit price is determined through a reverse book-building mechanism when the promoter’s cumulative shareholding, combined with public shareholders’ tendered shares, reaches 90% of the total issued shares. While the reverse book-building process ensures fair price discovery for the buyback, it has also been susceptible to manipulation, prompting Sebi to explore alternative methods.
Addressing Delayed Fundraising Applications
During the conference, Buch acknowledged the concerns surrounding the backlog of fundraising applications with Sebi. She emphasized that the pendency of applications is not the main issue; rather, it is the aging of these applications that poses a problem. Buch highlighted that Sebi is committed to addressing the aging applications and focusing on efficient regulatory processes. The regulator recognizes that delays have implications for the ecosystem and market participants, particularly issuers.
Building Trust and Transparency
Buch reaffirmed Sebi’s commitment to facilitating capital formation in the economy and emphasized the importance of trust and transparency in the system. Sebi’s objective is to ensure that market participants have confidence in the capital markets. While the regulator acknowledges the need for ease of doing business, it firmly believes that without trust, the ease of doing business cannot be achieved.
Increasing Consultation Papers for Stakeholder Participation
Sebi has been proactively seeking input from market participants through consultation papers. Recognizing the complexity of the markets, Sebi has prioritized the consultation process to ensure that it can make well-informed decisions. Since 2003, the percentage of consultation papers issued by Sebi has increased from 7% to 33% of the total circulars, underscoring the regulator’s commitment to engaging stakeholders.
Continuation of Legal Proceedings against Sahara Group
Buch clarified that despite the passing of founder Subrata Roy, the legal proceedings against the Sahara group will continue as planned. The regulator is determined to uphold accountability and fulfill its responsibilities, emphasizing that the actions taken are in line with the directions of the Supreme Court-appointed committee. Refunds have been disbursed to investors who have presented proof of their investments.
Conclusion
Sebi’s proposal to review the regulations for delisting stocks demonstrates its commitment to enhancing transparency, trust, and efficiency in the stock market. By exploring alternative methods and seeking stakeholder input, Sebi aims to create a robust and fair environment for all market participants. The regulator’s continued efforts to streamline regulatory processes and address the backlog of applications reflect its dedication to facilitating capital formation and maintaining the integrity of the Indian capital markets.
Disclaimer:
Estabizz Fintech compiled the material in this article using the most recent Acts, Rules, Circulars, Notifications, Provisions, Press Releases, and material applicable at the time. They ensured the completeness and correctness of the material through due diligence. When using this material, users must consult the relevant, applicable legislation. The given data may change without prior notice and does not constitute professional advice. Estabizz Fintech disclaims all liability for any results from the use of this material.
