Sebi on Thursday asked listed companies to comply with new norms that bar employee welfare schemes and trusts from purchasing the shares of their own firms from the secondary market, by June 30.

The move is aimed at preventing possible manipulation in trading of shares by companies. In August 2012, Sebi had barred employee welfare schemes and trusts of listed entities from purchasing their own shares from the secondary market.

In a circular issued on Thursday, the capital market regulator has directed all listed entities to comply with the requisite norms on employee benefit schemes (stock options as well as stock purchases) by June 30. Listed companies are required to furnish details about the schemes to the stock exchanges within one month from today. Further, the details have to be put up on their websites.

Sebi's ESOS (Employee Stock Option Scheme) and ESPS (Employee Stock Purchase Scheme) guidelines allow listed companies to reward their employees through these. "... any employee benefit schemes involving dealing in the securities of the company, which are not in accordance with Sebi (ESOS and ESPS) guidelines, it has been decided that such companies shall align any existing employee benefit schemes with Sebi guidelines on or before June 30, 2013," Sebi said.

Sebi's crackdown on unregulated staff welfare schemes and trusts in 2012 came amid concerns that some companies may be funding these schemes to deal in their own securities with an aim to manipulate the share price by engaging into fraudulent and unfair trade practices.

The regulations had prohibited the companies from buying their own shares, unless it is consequent to reduction of capital and for certain regulatory requirements. "It is apprehended that some entities may frame such schemes with the purpose of dealing in its own securities with the object of inflating, depressing, maintaining or causing fluctuation in the price of the securities by engaging in fraudulent and unfair trade practices," the circular noted.

According to the circular, such dealing in the company's shares by the trusts may also raise regulatory concerns regarding compliance with Sebi norms related to prohibition of fraudulent and unfair trade practices as well as insider trading.

As per Sebi norms, ESOS/ESPS trusts can only distribute options/shares to its employees issued by the company. Even under ESPS, the shares have to be issued by the company through a public issue or related venues. (MoneyControl)