SEBI tightens disclosure norms for IPOs, brings mutual fund transactions under the gambit of insider trading rules

SEBI tightens disclosure norms for IPOs, brings mutual fund transactions under the gambit of insider trading rules
Representational image.BCCL
Sebi on Friday decided to tighten IPO disclosure norms, bring mutual fund transactions under insider trading rules ambit, introduce new option for appointment of independent directors and modify the Offer For Sale (OFS) framework.

Besides, easing the open offer price calculation for PSU divestments and facilitating online bond platform providers were among the proposals approved by the board of Sebi during its meeting held here.

The watchdog has decided to tighten disclosure norms for companies going for initial public offers, insisting that they should share more details on pricing. These include the requirement for disclosures about the price at which the institutional investors have bought shares going back to up to 18 months before the Initial Public Offering (IPO).

The new norms, which follow heavy erosion of investor wealth in recent IPOs like Paytm and Zomato that led to concerns about the offer prices, will be applicable for all issuances.

Sebi Chairperson Madhabi Puri Buch said new-age technology companies or loss making companies cannot be assessed by the same financial parameters and the regulator felt that there is a need to end the information asymmetry.


"It will give a better basis for the investors to make their investments," she said.

Against the backdrop of the Franklin Templeton episode that had rattled many mutual fund investors, Sebi has cleared a proposal to bring buying and selling of mutual fund units under the ambit of insider trading rules.

A proposal for the introduction of a new option for appointment and removal of independent directors from the boards of companies has been cleared by the regulator.

Once the amended rules are in place, the appointment and removal of independent directors could be done by way of two parameters -- threshold for ordinary resolution and threshold for majority of minority shareholders.

Meanwhile to bring in more flexibility in the OFS framework, the watchdog will modify the relevant norms, including doing away with the minimum shareholding requirement for non-promoter shareholders.

OFS has emerged as among the favoured options for share sales.

In a move aimed to do away with possible impediment on pricing in PSU disinvestments, the regulator has decided to dispense with a requirement for calculating open offer price in such cases.

As per Sebi norms, one of the parameters prescribed to determine open offer price of a frequently traded scrip is Volume-Weighted Average Market Price (VWAMP) for 60 trading days immediately preceding the date of the public announcement.

The board, during its meeting here, approved amending the takeover regulations in the context of strategic disinvestment of Public Sector Undertakings (PSUs) and consideration payable under open offer.


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