SEBI Calls For Changes In Norms For Rights Issue, Check What The Regulator Proposed

The capital markets regulator suggested changes in norms like filing a draft document and appointing a merchant banker, which would help make the process quicker and more efficient

The Securities and Exchange Board of India (SEBI) on Tuesday called for putting in place a variety of measures to promote rights issue as a mode of fundraising. The capital markets regulator proposed revisions in measures like filing a draft document and appointing a merchant banker, which would help make the process quicker and more efficient.

Issuing a consultation paper, SEBI called for public comments on the matter, reported The Financial Express. As part of the suggestions, the regulator called for discontinuing the several types of rights issue and launching a simple letter of offer including lesser disclosures like issue price, record date, object, and entitlement ratio.

Notably, a company invites existing shareholders to acquire an extra stake in the company via shares in a rights issue. To make the process more user-friendly and popular, the regulator suggested these measures and sought comments from the general public on the matter.

Role Of Intermediaries

In terms of intermediaries like merchant bankers and registrars, SEBI recommended allowing firms to go ahead with a rights issue without appointing such middlemen and rather shift this responsibility to the issuer or stock exchanges.

“It can be inferred that investing in a company by way of rights issue is more or less akin to a secondary market purchase. Hence, in case of rights issue, there seems to be no requirement for aggregating the information which is already available in the public domain except few issue-related information,” SEBI said via the paper.

Changes In Timeline

The regulatory body further suggested that the timeline of the process should be reduced by half to T+20 from the date of board approval to the issue’s closure. The deadline from the date of closure to the trading of the issue should be slashed down to T+3, it added.

SEBI also proposed that promoters and promoter groups of the rights issue should be allowed to give up their entitlement in it and let selective investors with upfront disclosures come to the forefront.