Sebi wants to delist 4,000 companies this fiscal
The Securities and Exchange Board of India ( Sebi) wants to slash the number of listed companies by more than 4,000, clamp down on algorithmic trading abuse and possibly allow investors to buy mutual funds from Amazon and Flipkart as part of an ambitious agenda for 2016-17.
Bulk of the companies Sebi chief UK Sinha wants to delist are on regional stock exchanges, where there's no trading. Sebi is also targeting about 1,200 companies listed on the BSE and NSE that have been suspended for more than seven years.
Sinha on Wednesday said that as part of the whittling down, promoters would be asked to give investors an exit option at a fair price to be determined by a third party. "They (such companies) are a source of nuisance, a source of mischief," he said.
The stock exchanges will appoint a valuer who will determine a fair price for the shares, after which promoters and management will have to buy out investors. Those who don't comply will face harsh treatment such as being barred from raising money from the public and promoters and directors could also lose seats on other boards.
"Under the Sebi Act, everything is possible. We are a substantially empowered regulator," said Sinha, when asked whether the watchdog has enough powers to enforce such decisions on reluctant managements.
More than 5,400 companies are traded on the BSE and about 1,900 on the NSE. Apart from the 1,200 companies suspended for over seven years, Sebi is targeting about 3,000 on regional stock exchanges for compulsory delisting. Companies listed on a regional exchange and a national exchange will be exempted from the move.
Sinha also said the regulator will issue a discussion paper on algorithmic trading that will propose measures to eliminate unfair advantages that high-frequency traders may have over others. The regulator will also propose steps to provide a level playing field for information dissemination in such trades and ban manipulative practices.
Sinha said Sebi's work in restoring foreign and domestic investor confidence has resulted in a substantial increase in domestic equity inflows.
The regulator's focus on easing registration rules for foreign portfolio investors (FPIs) has led to a jump of more than 4,000 in such enrollments since 2014, he said. The regulator has also outsourced the issuing of registrations to third-party depository participants so foreign investors don't need to approach Sebi. The time taken for registration, which used to be more than six months, is now just 35 days, Sinha said.
The regulator has also substantially tightened the process of issuing participatory notes and now has a clearer idea of the ultimate beneficiary in all transactions. P-Notes as a percentage of free float fell to 9.3% in April compared with 10% in March this year and 55% in 2007, Sinha said. The regulator recently tightened rules on P-Notes to avoid their misuse.
Sebi categorises FPIs into three, with the first comprising sovereign wealth funds and central banks and the second consisting of broad-based mutual funds, pension funds, endowment funds, etc.
The third category includes hedge funds, which are barred from issuing or holding participatory notes. Only some funds falling in the second category can issue and hold them and these funds hold the largest chunk of free-float equity in Indian markets at Rs 18.74 lakh crore.
Another key item on Sinha's agenda is to allow investors to use various technology platforms to buy and sell funds. A committee headed by former Infosys CEO Nandan Nilekani is examining the issue and a report will be submitted soon. Sinha said there is nothing wrong in Amazon selling MF schemes to investors but the issue of whether it needs to be registered with Sebi to be allowed to do that is yet to be sorted out, he added. Sinha also said Sebi will take action against auditors suspected to have helped managements and promoters fudge account books.
Economic Times, New Delhi, 26th May, 2016
The Securities and Exchange Board of India ( Sebi) wants to slash the number of listed companies by more than 4,000, clamp down on algorithmic trading abuse and possibly allow investors to buy mutual funds from Amazon and Flipkart as part of an ambitious agenda for 2016-17.
Bulk of the companies Sebi chief UK Sinha wants to delist are on regional stock exchanges, where there's no trading. Sebi is also targeting about 1,200 companies listed on the BSE and NSE that have been suspended for more than seven years.
Sinha on Wednesday said that as part of the whittling down, promoters would be asked to give investors an exit option at a fair price to be determined by a third party. "They (such companies) are a source of nuisance, a source of mischief," he said.
The stock exchanges will appoint a valuer who will determine a fair price for the shares, after which promoters and management will have to buy out investors. Those who don't comply will face harsh treatment such as being barred from raising money from the public and promoters and directors could also lose seats on other boards.
"Under the Sebi Act, everything is possible. We are a substantially empowered regulator," said Sinha, when asked whether the watchdog has enough powers to enforce such decisions on reluctant managements.
More than 5,400 companies are traded on the BSE and about 1,900 on the NSE. Apart from the 1,200 companies suspended for over seven years, Sebi is targeting about 3,000 on regional stock exchanges for compulsory delisting. Companies listed on a regional exchange and a national exchange will be exempted from the move.
Sinha also said the regulator will issue a discussion paper on algorithmic trading that will propose measures to eliminate unfair advantages that high-frequency traders may have over others. The regulator will also propose steps to provide a level playing field for information dissemination in such trades and ban manipulative practices.
Sinha said Sebi's work in restoring foreign and domestic investor confidence has resulted in a substantial increase in domestic equity inflows.
The regulator's focus on easing registration rules for foreign portfolio investors (FPIs) has led to a jump of more than 4,000 in such enrollments since 2014, he said. The regulator has also outsourced the issuing of registrations to third-party depository participants so foreign investors don't need to approach Sebi. The time taken for registration, which used to be more than six months, is now just 35 days, Sinha said.
The regulator has also substantially tightened the process of issuing participatory notes and now has a clearer idea of the ultimate beneficiary in all transactions. P-Notes as a percentage of free float fell to 9.3% in April compared with 10% in March this year and 55% in 2007, Sinha said. The regulator recently tightened rules on P-Notes to avoid their misuse.
Sebi categorises FPIs into three, with the first comprising sovereign wealth funds and central banks and the second consisting of broad-based mutual funds, pension funds, endowment funds, etc.
The third category includes hedge funds, which are barred from issuing or holding participatory notes. Only some funds falling in the second category can issue and hold them and these funds hold the largest chunk of free-float equity in Indian markets at Rs 18.74 lakh crore.
Another key item on Sinha's agenda is to allow investors to use various technology platforms to buy and sell funds. A committee headed by former Infosys CEO Nandan Nilekani is examining the issue and a report will be submitted soon. Sinha said there is nothing wrong in Amazon selling MF schemes to investors but the issue of whether it needs to be registered with Sebi to be allowed to do that is yet to be sorted out, he added. Sinha also said Sebi will take action against auditors suspected to have helped managements and promoters fudge account books.
Economic Times, New Delhi, 26th May, 2016
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