Sebi makes it mandatory for companies to disclose source of funds via preferential shares
PrintListen to this Article
Market regulator Sebi has made it mandatory for companies to disclose the source of funds coming through preferential allotment of shares, a move aimed at discouraging the use of front entities by promoters to increase their stake.
The directive seeks to plug the loophole in Sebi's rules on issue of capital and disclosure requirements, which are silent on the source of funds remitted for the purposeZ of subscription in preferential issue.
Sebi had last month also made it compulsory to allot preference shares in dematerialised form to ensure adequate audit trail and apply lock-in provisions.
"Shares allotted in the preferential issue shall not be transferred till trading approval is granted for such shares by the stock exchanges. Further, the lock-in period shall commence on the date of such trading approval," Sebi said in a press statement on June 25 after its board meeting.
Sebi had discussed this proposal with one of its committee on disclosures and accounting standards, which had pointed out the need for clarity on the level up to which such source of funds would be sought.
"If a mere disclosure of own/borrowed funds does not suffice and a disclosure of the names of the second or third level of funding entities is sought, it was felt that the same could be construed as a breach of privacy and may be considered too harsh to start with. After deliberations, the committee suggested that, to start with, a requirement, that preferential issues shall be subscribed only out of funds in the allottee's own bank account which would also help establish an audit trail," said an internal note to the Sebi board.
However, Sebi felt this would have limited efficacy despite ensuring greater transparency because the money trail is quickly lost due to fungibility. "It will be useful if this requirement is supplemented by disclosure of the natural persons who ultimately own or control the investing entity," the regulator said.
Investors subscribing to preferential issues will now have to do so from their own bank accounts. Besides, the issuing company will have to disclose the natural persons who ultimately own or control the allottee. (Economic Times)
Category : SEBI | Comments : 0 | Hits : 360
A financial influencer, also known as finfluencer, who was also involved in imparting training related to stock market trading has been asked to part with a little over ?12 crore, which it made unlawfully. The funds are to be credited or deposited by Ravindra Balu Bharti into an interest-bearing escrow account that has been set up in a nationalised bank especially for that purpose. The regulator stated in an order that the escrow account(s) would establish a lien in favour of SEBI and that th...
The Securities and Exchange Board of India (Sebi), the country's market regulator, has announced the launch of an optional same-day (T+0) settlement cycle for a select group of 25 stocks starting March 28, as per a circular published on its website last Thursday. This new initiative, referred to as the beta version, is set to coexist with the traditional next-day (T+1) settlement cycle, where trades are settled within 24 hours of execution. The T+0 settlement option will be available for ...
Capital markets regulator Sebi on Thursday slapped a fine of Rs 48 lakh on eight entities, including promoters of United Polyfab Gujarat Ltd (UPGL), for manipulating the share prices of the company. These entities have to pay the penalty jointly and severally within 45 days, as per an order. The order came after Sebi conducted an investigation of UPGL and trading by certain entities in the scrip of the company, to ascertain whether there was any violation of the provisions of the PFUTP (Pr...
Sebi alerts investors about the growing trend of unregistered entities falsely claiming Sebi registration and offering unrealistic returns. Investors are advised to verify the registration status and consider the inherent risks associated with high-return investments. The Securities and Exchange Board of India (Sebi) has issued a warning to investors, cautioning them against investing money with unregistered entities that promise assured or exceptionally high returns on investments. This advi...
Capital markets regulator Sebi on Thursday issued orders of action against 15 guest experts of the Zee Business channel for unlawful trading. The entities made unlawful gains to the tune of Rs. 7.41 crore from such trades and the profit was shared with guest experts as per prior understanding, Sebi noted. The market regulator also asked the guest experts to pay Rs.7.41 crore. The guest experts appeared on the Zee Business channel from 1 February 2022 and 31 December 2022. "The facts of t...
Comments