SEBI approves new buy back norms, eases registration rules for foreign investors - Angel Broking

India's Capital market regulator SEBI has approved new buy back norms for the Indian markets. Under the new norms 50% of the amount earmarked for the buyback must be utilized by the company for the buyback purpose and 25% of that amount should be kept in an escrow account. The time frame of buy back is reduced to six months from the earlier twelve months period. SEBI would forfeit 2.5% of the amount in case 50% is not bought back.

The board also approved the Chandrasekhar committee's recommendations to club various classes of foreign investors into a new category. According to this proposal Foreign Institutional Investors (FIIs) and qualified foreign investors (QFIs) must be merged into one category named Foreign Portfolio Investor (FPI) and neither FIIs nor their subaccounts would require prior registration with the regulator and instead would register with the designated depository participants. The regulator has also adopted a risk-based approach to KYC for the foreign investors, dividing it into three categories on the basis of perceived risk. The first will cover organizations backed by the government, such as sovereign wealth fund. The second will cover regulated entities such as foreign mutual funds, while all other entities would fall in the third category. It has also clearly defined foreign direct investment as any investment exceeds 10% stake in the company.

Also the Non-Resident Indians would continue to have individual investment limit of 5% and aggregate investment limit of 10% and High risk category investors shall not be allowed to issue offshore derivative instruments or participatory notes. The SEBI board will now need finance ministry's approval to implement these changes.

Source : Equity Bulls

Keywords