SEBI Current Affairs: June, 2018 (Part – I)

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Relevant for SEBI Grade A 2018 Examination

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The changes were based on therecommendations made by a panelled by capital markets expertPrithvi Haldea. He had submittedthe report to Sebi on 4 May.

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Sebi cuts timeline for IPO price band

• SEBI recently announced a new set ofIPO reforms, reducing the timelinefor announcement of IPO price band.

• As per the new rules, the time linefor announcing IPO price band hasbeen reduced to two days from fivedays earlier.

• A reduction in time period betweenadvertising the price band and issueopening would also help issuersprice deals better in a volatilemarket.

Experts feel that proposed amendments to SEBI ICDR

Regulations are steps taken by SEBI in the right directions.

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IPO Price Band

• Price Band is basically a range of priceat which the IPO is bid for.

• This information is generally containedin the Red Herring Prospectuspublished by the company filing for theIPO.

• Price band contains floor & cap price.

• For instance, if a company ALPHA-BETAfiles for an IPO, their price band canpotentially be ₹1000 to ₹1200.

• This also means minimum bidding bythe buyers for IPO must be ₹1000. Price Band - ₹355 to ₹358

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SEBI rejigs share buyback code

• Under the new regulations, buyback periodof a company’s stock has been redefined asthe time between the board’s resolutionto that effect and the date on which thepayment will be made to shareholders.

• Sebi also said that at least 15% of thesecurities a company proposed to buyback should be reserved for smallshareholders, while the maximum limitwas capped at 25% of the company’s paid-up capital.

• Sebi also allowed companies to buy backas much as 10% of shares outstandingwithout shareholders’ resolution.

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Share Buyback

• A buyback is a mechanism throughwhich a listed company buys backshares from the market.

• Buybacks are done when companyhas a significant cash reserve andfeels that the shares are not fairlyvalued at the current market price.

• Since the shares that are boughtback are extinguished, the stake ofthe remaining shareholders rise.

• Promoters also use this mechanismto tighten their grip on the firm.

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Sebi panel to look at ways to ease listings for start-ups

• The group will review the presentinstitutional trading platform (ITP)framework in the current context

• as well as identify areas, if any,which require further changes.

• Besides, any other issue relevantto the framework might also beassessed.

• SEBI has been working on ways tohelp bolster start-ups.

Sebi panel, formed to mull ways to make listing attractive for start-ups, will review the existing institutional

trading platform framework and identify areas which require changes

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Institutional Trading Platform (ITP)

• ITP framework is window on stock exchanges where e-commerce,data analytics, bio-technology and other startups can list and trade ontheir shares.

• It allows companies to list without necessarily doing an Initial PublicOffer (IPO) of equity.

• SEBI had introduced it in 2013 to facilitate listing of new agecompanies, but it had failed to gain any traction.

• It also relaxes compliance and cost effective listing and provide taxbenefits to long term Investors.

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SEBI imposes 3-year ban on Vijay Mallya

• SEBI has barred Vijay Mallya fromaccessing the securities market forthree years and holding anyposition as director or keymanagerial person of a listedcompany for five years for hisinvolvement in fraud.

• Two former senior officials at USLhave also been restrained fromholding directorships and keymanagerial positions for one yearin any listed company.

In the context of diversion of funds perpetrated in a listed company by

way of dubious and concealed financial statements/projections or

false books of accounts, SEBI has powers to take apt action.

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SEBI Eases Listing Norms For Insolvent Companies

• Role and responsibilities of Board ofDirectors now need to be carried out byresolution professionals.

• Relief For Related Party Transactions asthey will no longer require shareholderapproval.

• Listing regulations require a no-objectionletter from stock exchanges before anyscheme of arrangement can be placedbefore courts for approval.

• Companies under the insolvency processwill not be required to do so.

In a relief to companies under theinsolvency process, India’s stockmarket regulator has reduced thecompliance burden for such firmsunder its ‘Listing Obligations andDisclosure Requirements’.

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Insolvency

• Insolvency is a term for when an individualor organization can no longer meet itsfinancial obligations with its lender orlenders as debts become due.

• Insolvency can arise from poor cashmanagement, a reduction in cash inflowforecasts or from an increase in expenses.

• Bankruptcy is an actual court order thatshows just how an insolvent person orbusiness will pay off his creditors, or howhe will sell his assets in order to make thepayments.

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Exchanges to devise additional surveillance measures for firms under IRP

• (SEBI) has directed exchanges tointroduce surveillance measuresfor companies that are beingproceeded against under theInsolvency Resolution Process (IRP)of the Insolvency and BankruptcyCode, effective June 11, 2018.

• Accordingly, the list of securitiesundergoing IRP as per IBC shall beavailable on the exchange’swebsite among other measures.

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Insolvency and Bankruptcy Code

• Insolvency and Bankruptcy Code, 2016(IBC) is the bankruptcy law of Indiawhich seeks to consolidate the existingframework by creating a single law forinsolvency and bankruptcy.

• The Code creates a new institutionalframework, consisting of a regulator,insolvency professionals, informationutilities and adjudicatory mechanisms,that will facilitate a formal and timebound insolvency resolution processand liquidation.

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Sebi has ordered a forensic audit of the company: Fortis

• In a regulatory filing, Fortis said ithad received a communicationfrom the Securities and ExchangeBoard of India (Sebi) confirmingthat an investigation has beeninstituted against the company.

• The cash-strapped healthcarechain further said it had alsoreceived a communication fromthe Serious Fraud InvestigationOffice (SFIO), seeking informationand documents.

Company has admitted to systemic lapses in giving Rs494.14-crore loans to firms

controlled by erstwhile promoters -- Singh brothers.

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Forensic Audit

• A forensic audit is an examination andevaluation of a firm's or individual'sfinancial information for use asevidence in court.

• A forensic audit can be conducted inorder to prosecute a party for fraud,embezzlement or other financial claims.

• Forensic audits uncover several types offraud.

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Serious Fraud Investigation Office (SFIO)

• SFIO is a multi-disciplinary organizationunder Ministry of Corporate Affairs,

• consisting of experts in the field ofaccountancy, forensic auditing, law,information technology, investigation,company law, capital market and taxation

• for detecting and prosecuting orrecommending for prosecution white-collar crimes/frauds.

• SFIO has head office in New Delhi andregional offices in Maharashtra, AndhraPradesh, Tamil Nadu and West Bengal .

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Sebi plans to amend takeover regulations

• SEBI is likely to change certainprovisions in the takeover regulations,including those pertaining to revisionof open offer price.

• The watchdog’s move comes afterpublic consultations on a discussionpaper about review of SAST(Substantial Acquisition of Shares andTakeovers) Regulations.

• Another proposed change is to providethe option to dispatch letter of offerthrough electronic mode.

Sebi’s review exercise is aimed atsimplifying the language, removingredundant provisions andinconsistencies as well as updatereferences about Companies Act inthe takeover regulations

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Takeover

• In business, a takeover is the purchase ofone company (the target) by another(the acquirer, or bidder).

• If the takeover goes through, theacquiring company becomes responsiblefor all of the target company’s operations,holdings, and debt.

• As per Sebi norms, an entity is required tomake an open offer to the publicshareholders when its shareholding in alisted company crosses certain thresholds.

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SEBI moves to ease corporate insolvency resolution process

• Corporate insolvency resolutionprocess (CIRP) in India will get a boostwith SEBI now amending its‘Takeover Code’ to remove capitalinfusion hurdles in companies withapproved resolution plans under theInsolvency and Bankruptcy Code (IBC).

• The latest change will enableacquirers of shares under approvedresolution plan to go beyond themaximum permissible non-publicshareholding, that is, 75 per cent.

Hitherto, the ‘Takeover Code’ barred acquirers of shares in a company from

entering into any transaction that would take their aggregate shareholding above

the maximum permissible non-public shareholding limit.

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Sebi asks MFs to disclose total expense charge on daily basis

• Markets regulator Sebi askedmutual fund houses toprominently disclose on a dailybasis total expenses charged tocustomers for all schemes under aseparate head on their websites aswell as industry body Amfi website.

• TER is a percentage of a scheme'scorpus that a mutual fund housecharges towards expensesincluding administrative andmanagement.

The fund houses need to disclose about name of the scheme, base as well as total TER, additional expense and Goods and Services Tax (GST) for regular and direct mutual funds plan

in a prescribed format.

MCQ’s

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1. __________ is basically a range of price at which the IPO is bid for?

a) Price Range

b) Price Band

c) Bid Band

d) Bid Range

2. SEBI (Issue of Capital and Disclosure Requirements) Regulations were notified in?

a) 2004

b) 2006

c) 2009

d) 2012

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3. Which of the following can be one of the reasons for buyback of shares by a listed company?

a) Availability of significant cash reserves with company

b) When company feels shares are not fairly valued in the market

c) Tighten the grip of promoters on the company

d) All of the above

4. Head office of Serious Fraud Investigation Office (SFIO) is located in?

a) Kolkata

b) Mumbai

c) New Delhi

d) Bangalore

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ANSWERS1. B2. C3. D4. C

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SEBI Current Affairs - June 2018

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Thank You! Happy Learning!

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