3 August, 2016
Guidelines for Public Issue of Units of Infrastructure Investment Trusts
SEBI has, on May 11, 2016, issued Guidelines for Public Issue of Units of Infrastructure Investment Trusts (‘Guidelines’), which amend the provisions of the SEBI (Infrastructure Invest- ment Trusts) Regulation, 2014 (‘SEBI InvIT Regulations’).
The Guidelines set out the procedure to be followed by an infrastructure investment trust (‘InvIT’) in relation to a public issue of its units, which includes the appointment of a lead mer- chant banker and other intermediaries, procedure for filing of offer documents with SEBI and the stock exchanges, the process of bidding and allotment. Further, the allocation in a public issue is required to be in the following proportion: (i) not more than 75% to institutional inves- tors; and (ii) not less than 25% to other investors; provided that the investment manager has the option to allocate 60% of the portion available for allocation to institutional investors and anchor investors (which includes strategic investors), subject to certain conditions. Further, the investment manager, on behalf of the InvIT is required to deposit and keep deposited with the stock exchange(s), an amount equal to 0.5% of the amount of the units offered for subscription to the public or ¤5 crores (approximately US$ 7,45,000), whichever is lower. The price of units can be determined either:
(i) by the investment manager in consultation with the lead merchant banker; or (ii) through the book building process. However, differential prices are not permitted.
Amendment of Guidance Note on SEBI (Prohibition of Insider Trading) Regulations, 2015
SEBI has, on April 12, 2016, amended the guidance note on SEBI (Prohibition of Insider Trading) Regulations, 2015 (‘PIT Regulations’) which was issued on August 24, 2015 to extend the exemption from ‘contra trade’ restrictions under the PIT Regulations to exit offers in addi- tion to buy back offers, open offers, rights issues, follow – on public offers, bonus issues, etc.
Revised Formats under SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011
The formats for disclosures prescribed by SEBI under Regulation 10(5) and 10(7) of the SEBI (Substantial Acquisition of Shares and Takeover Regulations), 2011 (‘Takeover Regulations’) re- quire the acquirers to report compliance with Chapter V of the Takeover Regulations (dealing with disclosure of shareholding and control). The prescribed formats for acquisitions under Regulation 10(1)(a)(i), (ii), (iii), (iv) and (v), did not specify the time period to be considered while reporting compliance with respect to such disclosures. Pursuant to its circular dated May 2, 2016, SEBI has amended the format to require acquirers to provide such information for a pe- riod of three years prior to the date of acquisition.
SEBI Board Meetings
SEBI, in its board meeting held on May 19, 2016, approved the incorporation of the internal guidance note in the SEBI (Settlement of Administrative and Civil Proceedings) Regulations 2014 (‘Settlement Regulations’), to clarify that only serious and substantial cases are to be tak- en for enforcement under Regulation 5(2)(b) of the Settlement Regulations. For this purpose, defaults which in the opinion of SEBI have a bearing on the securities market as a whole and not just the listed security and its investors may be considered to have market wide impact.
Thereafter, in its meeting held on June 17, 2016, SEBI approved the two consultation papers in relation to the changes to be made to the SEBI (Portfolio Managers) Regulations, 1993 and the SEBI InvIT Regulations.
SEBI Circular on Restriction on Redemption in Mutual Funds
SEBI, on May 31, 2016 issued a circular providing details of certain specified circumstances in which mutual funds/ asset management companies/ trustees could impose restrictions on redemption of units of their mutual fund schemes. SEBI has provided that the restriction on redemption cannot exceed ten working days in any 90 day period and would be applicable for redemption requests above ¤200,000 (approximately US$ 2,975). Further, specific approval of the board and trustees of an asset management company is required before imposing such re- strictions and SEBI should be notified of such approval immediately.
Changes in Conditions for Issuance and Transfer of Offshore Derivative Instruments
SEBI has, by way of a circular dated June 10, 2016, introduced the following key changes in the conditions for issuance and transfer of Offshore Derivative Instruments (‘ODI’), effective from July 1, 2016:
Beneficial owners of corporate subscribers are to be verified on a look-through basis, as per the thresholds set out in the Prevention of Money-laundering (Main- tenance of Records) Rules, 2005, i.e., 25% in the case of a company and 15% in case of partnership firms/ trusts/ unincorporated bodies, and Know Your Customer documentation has to be obtained from beneficial owners exceeding these thresholds. If no entity’s holding is in excess of the thresholds, the ODI issuer must obtain the identity and address proof of the relevant natural person who holds the posi- tion of senior managing official of the material shareholder/ owner entity;
Any transfer of ODIs, issued by or on behalf of the ODI issuer, is to be made to only persons eligible to deal in ODIs, with the prior consent of the ODI issuer (unless the transferee is pre-approved by it) and reported to SEBI on a monthly basis;
ODI issuers must file suspicious transaction reports (if any) with the Indian Financial Intelligence Unit;
ODI issuers must reconfirm ODI positions on a semi-annual basis, and report any deviations from the monthly reports to SEBI; and
ODI issuers must carry out a periodical review and evaluation of its controls, sys- tems and procedures with respect to ODIs, and their chief executive officer must submit a certificate in this regard to SEBI annually.
For further information, please contact:
Zia Mody, Partner, AZB & Partners
zia.mody@azbpartners.com
