The board of the Securities and Exchange Board of India (Sebi), in its meeting on December 18, is likely to approve a slew of measures, including tighter norms for small and medium enterprises (SME) listing, review of custodian and merchant banker regulations and expansion of the definition of unpublished price sensitive information (UPSI).
Some of the other items on the agenda include a review of public interest director regulations, framework for angel funds in AIFs and performance validation agencies and a few ease of doing business proposals, according to sources in the know. The need to tighten rules for the initial public offering (IPO) of micro companies arises from the increased exuberance seen among investors and manipulations on the part of companies to sail through their IPOs.
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The regulator is expected to increase the application size from existing Rs 1 lakh to Rs 2-4 lakh, mandate an operating profit in two out of three years and higher promoter lock-in of five years. Sebi is also expected to set a cooling period of two years for proprietary or partnership firms after they convert to a company.
“With the ways that such small companies are trying to defraud investors and the way that retail participation is overboard, we plan to take this up in the December board meeting,” said a Sebi official. Recently, Sebi passed a first-of-a-kind order against SME company Trafiksol, cancelling its IPO after halting the listing on the BSE’s SME platform in September. The regulator has asked the company to refund the issue proceeds collected from investors, which have been stuck for the past three months as Sebi investigates the matter.
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Sources said the proposal on the demerger of clearing corporations may need more time and may not be taken up in the upcoming board meeting. Sebi also plans to broaden the scope of price sensitive information that could affect stock prices to include resignation of auditor, change in key managerial personnel – other than superannuation or end of term, fraud by a listed company, or arrests of its key members, among others.
Further, the review of norms for custodians and merchant bankers is expected to sail through easily as most feedback received from the industry is positive,
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