Sebi case law

SEBI vide its order dated August 19, 2015 imposed a penalty of Rs. 10 lakhs on the Director of Manappuram Finance Limited for breach of SEBI (Prohibition of Insider Trading) Regulations. The brief facts of the case are as follows :

1. The wife of the Directors sold shares of the Company without seeking pre-clearance from the Compliance Officer.

2. The Director submitted that 

(i) his wife was financially independent 

(ii) trading without pre-clearance was only a technically slip that would not warrant any penalty - an opinion from reputed law firm was also submitted to support these views.

 (iii) he had discussed at the board meeting of the Company about the intention of his wife to sell the shares of the Company.

3. SEBI observed and ruled that 

(i) financial independence is immaterial in case of spouse 

(ii) trading without pre-clearance is a violation of regulation and hence penalty would follow 

(iii) the discussion of the wife proposed trade at the board meeting is not substantiated with agenda or minutes of the meeting and 

(iv) penalized the Director for violation of Regulations and Internal code of conduct.

Key Take away : Personal Transaction Policy and SEBI Insider Trading norms need to be followed in letter and spirit. SEBI does not take into account any technicalities or intention of the parties. You may note that the Director in this case was about 90 years old retired civil servant without any blemish but still had been penalized for the unintentional error.

SEBI BOARD MEETING DATED 23rd June 2015

Highlights of SEBI Board meeting held on 23.06.2015:-

1. ASBA (Application Supported Blocked by Amount) now mandatory.

EFFECT:-
i. Post-issue timeline will reduce to  T+6 from T+12.
ii. No hassle of refunding excess money back to applicant.

2. Application forms can also be accepted by RTA & DPs now.

EFFECT:- Increased application centers.

3. Simplified framework for capital raising by technological start-ups and other companies through ITP (Institutional Trading Platform).

EFFECT:- Easier capital market access to technological startups.

4. Market capitalization of public shareholding of the issuer for Fast Track Issues (FTI) reduced to Rs. 1000 crore (in case of FPO) and Rs. 250 crore (in case of Right Issue).

5.  Changes proposed to encourage greater retail participation in OFS (Offer for Sale).

6. Re-classification of promoter shall be permitted subject to approval of shareholders in the general meeting.

7. Outgoing promoter can hold KMP position subject to specific approval of Shareholders and cannot
i. hold more than 10% shares.
ii. continue as KMP for more than 3 years in any case.

8. Existing promoters may be re-classified as public in case the company becomes professionally managed and does not have any identifiable promoter.

9. Net Issue proceeds pending utilization (for the stated objects) shall be deposited only in the Scheduled Commercial Banks now.

Source: SEBI. Website
http://www.sebi.gov.in/sebiweb/home/detail/31307/yes/PR-SEBI-Board-Meeting

Difference between the Sweat equity shares and ESOP or ESOS ?

1> Sweat Equity is grant of shares at discount or without monetary considerations whereas Employee Stock  Option Plan (ESOP) / Employee Stock Option Scheme Scheme (ESOS) is grant of option to purchase share at predetermined price given to employees.


2> Sweat Equity can be issued to the promoters of the Company whereas ESOS/ESOP cannot be issued to the promoters or promoter group.


3> Minimum lock in period of 3 years for Sweat Equity whereas no such lock in period for ESOP and lock in period of 1 year for Employee stock purchase scheme (ESPS).

what is participatory note ?

It is an instrument which the overseas investors can purchase from FII's.The underlying assets are indian listed shares.
The SEBI disclosure requirements can be avoided by purchasing participatory note.
This is also called as Pnote.