SEBI has reversed its recent advisory that required special rights of shareholders to be extinguished before filing the updated draft red herring prospectus (UDRHP). Following feedback from investment bankers, SEBI modified paragraph 13 of the advisory to state that special rights will now lapse on the date of listing instead.
Previously, such rights were cancelled post-listing to ensure equal rights among all non-promoter shareholders. SEBI’s initial directive aimed to prevent private equity players from influencing IPO pricing but faced criticism for potentially leaving shareholders without special rights if the IPO did not proceed.
SEBI plans to increase inspections of investment bankers’ past deals and require backup documents for IPOs and qualified institutional placements to be uploaded to a cloud-based repository 10-15 days after the draft prospectus is filed.
This change aims to facilitate more frequent inspections, potentially after every one or two deals, rather than annually. The new system demands higher accountability from bankers and lawyers, emphasizing due diligence standards.
SEBI can refuse to approve offer documents if backup documents are inadequate. Inspections, which have become more stringent recently, can result in penalties, warnings, or even cancellation of the investment bank’s registration for serious violations.
SEBI will discuss tightening rules for including stocks in the derivatives segment at its June 27 board meeting. The regulator aims to ensure stocks in the futures and options (F&O) market are highly liquid and widely traded to mitigate risks.
SEBI’s June 8 consultation paper proposed revising eligibility criteria, raising entry thresholds, and introducing exit criteria for stocks in F&O. This follows significant market growth since the last criteria update in 2018, with concerns over increased speculation by retail traders. Currently, 181 stocks are in the F&O segment, down from 207 in May 2018.
The RBI’s directive to replace ‘penal interest’ with ‘penal charges’ is causing tax concerns for banks, as GST may apply to these charges, unlike interest. Banks have sought clarification from tax authorities, worried that GST on penal charges could complicate recovery, especially if penalties are negotiated down or loans become non-performing.
Although legal experts argue that GST shouldn’t apply to such charges, banks remain cautious. Additionally, the banking industry is urging the Telecom Regulatory Authority of India (TRAI) for more time to adjust to new rules requiring customer consent for marketing communications, fearing many customers may opt out, affecting their marketing strategies.
The finance ministry will meet heads of public sector banks and financial institutions on Tuesday to review the progress of financial inclusion schemes like Jan Dhan Yojana, Jan Suraksha Yojana, and Mudra Yojana.
The meeting will discuss issues such as identifying unbanked adults, reducing inoperative accounts, and expanding the digital payments network. The government is also developing a financial inclusion strategy to empower female entrepreneurs and increase women’s participation in schemes like PM SVANidhi. Additionally, the ‘Lakhpati Didi’ scheme target was raised to train more women in earning sustainable incomes.
What are you reading today? Drop your suggestions here 