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Friday, December 5, 2008

SEBI extend observation letter validity, rights entitlement in Demat & no early exit for close ended MF



PRESS RELEASE

PR No.283/2008

SEBI Board Meeting

1. SEBI to extend validity of the observation letter

SEBI Board has approved extension of validity of observation letter issued for public / rights issue from present three months to one year, subject to filing of updated document with SEBI where there are material changes.

2. SEBI to introduce electronic rights entitlements and ASBA in the Rights Issue process.

SEBI Board has approved certain policy measures pertaining to rights issue process, which inter-alia include enabling electronic rights entitlement, which can be traded electronically in Stock Exchanges, introducing alternate mode for making applications in rights issue viz Applications Supported by Blocked Amount (ASBA) mode and mandating that the issuer can get access to rights issue proceeds only after the allotment is finalized.

Currently a shareholder intending to renounce his/her Rights entitlements fills up part B of the rights issue application form. The renouncee can trade this form or apply in the Rights Issue by filling up Part C of the form. Renunciation forms are traded in physical segment in Bombay Stock Exchange. The right entitlement will now be made available in demat form for all shareholders holding the underlying shares in demat form.

The policy measures approved by the Board in this meeting, along with measures undertaken in the recent past for reduction in timelines, are expected to streamline the rights issue process and make it more efficient.

3. It was decided that no early exit will be allowed in any scheme of Mutual Fund in the nature of a close ended scheme. The schemes which have been approved earlier but not yet launched will also have to be amended accordingly. It will be obligatory for the Asset Management Company to list the close ended schemes. The Board also decided that for such close ended schemes the underlying assets will not have a maturity beyond the date on which the scheme expires.

4. The Board decided to adopt a code to avoid conflict of interest for the members of the Board. It was further decided that this code will be put up in the public domain by publishing it on the SEBI website before December 12, 2008.

  1. In order to bring transparency in the working of the Board it was decided that the agenda papers submitted to the Board on all policy issues will be made available in the public domain by putting them up on the SEBI website after the Board has taken a decision on the issue. The minutes of the meeting relating to such items will also be made available on the SEBI website after the Board has approved the minutes. Accordingly the agenda papers for today's Board meeting will be made available on the SEBI website by December 15, 2008.

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