12 November, 2015
- On August 20, 2015, the Securities and Exchange Board of India (‘SEBI’) has issued a Con- sultation Paper for amendments to the SEBI (Infrastructure Investment Trusts) Regulations, 2014 (‘Consultation Paper’). Pursuant to the Consultation Paper, SEBI has proposed the follow- ing key amendments to the SEBI (Infrastructure Investment Trusts) Regulations, 2014:
SEBI has proposed that Infrastructure Investment Trusts (‘InvITs’) be permitted to invest in a two-level Special Purpose Vehicle (‘SPV’) structure, permitting In- vITs to invest in a holding company, which in turn invests in other SPVs holding the infrastructure assets, subject to certain prescribed conditions.
SEBI has proposed reducing the minimum sponsor commitment in such InvITs from 25% to 10% of the total units of the InvIT on a post-issue basis.
- SEBI has recently issued a discussion paper on ‘Review of policy relating to forfeiture of partly paid-up shares – Amendments to SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011’. Increase in voting rights arising out of actions undertaken by the companies under the Companies Act, 2013, such as rights issues, buybacks and schemes of arrangement are already exempt from the open offer obligations, subject to fulfillment of certain conditions, under Regulation 10 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations (‘Takeover Regulations’). SEBI, by way of this discussion paper, has proposed to include in the list of exemptions under Regulation 10 of the Takeover Regulations, increase in voting rights pursuant to: (A) non-payment by a shareholder on (i) calls or sums payable for shares regis- tered under such shareholder’s name; or (ii) in regard to which the company has exercised any right of lien; OR (B) the forfeiture of shares undertaken in compliance with the Companies Act, 2013 and articles of the Company.
- On August 24, 2015, SEBI issued a Guidance Note on SEBI (Prohibition of Insider Trading) Regulations, 2015 (‘Guidance Note’). Set out below are certain key clarifications provided by SEBI under the Guidance Note:
ESOP: SEBI has clarified that exercise of options under an Employee Stock Option Plan (‘ESOP’) will not be considered to be ‘trading’ under the SEBI (Prohibition of Insider Trading) Regulations, 2015 (‘Insider Trading Regulations’) and, hence, the contra trade restriction contained under Clause 10 Schedule B of the Insider Trad- ing Regulations will not be applicable to ESOPs.
Contra Trades: SEBI also clarified that any derivative contract that is cash settled on expiry should be considered to be a contra trade. Trading in index futures or such other derivatives, where the scrip is part of such derivatives, is not required to be reported. Further, any trading conducted by a person under a trading plan is permitted only to the extent and in the manner disclosed in the plan, except for pledging of securities. The ‘contra-trade’ restriction will not be applicable to buy back offers, open offers, rights issues, follow-on public offers or bonus issues, of a listed company. SEBI has also clarified that the contra trade restriction is applica- ble to not just a listed company but also market intermediaries and other persons that are required to handle Unpublished Price Sensitive Information (‘UPSI’) in the course of business operations.
Pledge: It is SEBI’s intent to prohibit creation of pledge or invocation of pledge for enforcement of security while in possession of UPSI, and it is incumbent on the pledgor or pledgee to demonstrate that the creation of pledge or invocation of pledge was bona fide and prove their innocence under proviso to Regulation 4(1) of the Insider Trading Regulations.
Further, with respect to thresholds for disclosure under Chapter III of the Insider Trading Regulations, the market value on the date of creation or revocation of pledge is to be considered, as opposed to the value at which the transaction is carried out between the pledgor and pledgee.
iv. Miscellaneous: Additionally, SEBI has clarified the following in the Guidance Note: (a) The board of directors will be the approving authority in case of trading made by a compliance officer; (b) In case of a group, a separate code may be adopted for a listed company and each of its intermediaries; (c) In cases where both the chief investor relations officer and the compliance officer have been designated for overlapping functions, they will be jointly and severally responsible; and (d) A spouse is presumed to be an ‘immediate relative’, unless rebutted.
