Sebi committee for listing of large registrars on the stock exchanges

The deadline for public feedback on the proposals is May 19

A regulatory committee has recommended that every large registrar to an issue and share transfer agent should move towards listing on the stock exchanges.
 

The move is one of the recommendations of a committee on key market infrastructure institutions (MIIs), headed by former Reserve Bank deputy governor R Gandhi. The deadline for public feedback on the recommendations is May 19, according to a note on the Sebi’s website. The registrar and transfer agent (RTA) is an entity maintaining investor records. The report notes Karvy Computershare and Computer Age Management Services (CAMS) account for 90 per cent of mutual fund (MF) investor accounts. Karvy has a 40 per cent share in corporate investor accounts. Those handling more than 20 million accounts are called qualified RTAs or QRTAs. The panel said these should have a diversified ownership structure.

“The committee is of the view that in the long run, it is desirable QRTAs be widely held and get listed,” said the report.

The report said there are current no restrictions on concentration of ownership. Promoters are also not required to lock-in their shares. The only requirement is to take prior permission before change of ownership. The new owner must be approved as ‘fit and proper’ to be promoter of such a company.
 

HDFC had earlier entered into an agreement for sale of stake in CAMS to private equity (PE) firm, Warburg Pincus.  Another PE firm General Atlantic had in 2017 sought to buy a significant stake in Karvy.

The committee has recommended that regulated entities be allowed to hold up to 100 per cent equity in RTAs. These entities come under recognised global financial regulators and include those which are part of the International Organization of Securities Commissions (IOSCO) or those with which Sebi has a bilateral agreement. This would exclude those from jurisdictions under the scanner of international money laundering watchdog Financial Action Task Force (FATF).

Such non-regulated entities cannot hold more than 15 per cent individually, and 49 per cent collectively.

"In view of the Doctrine of Reasonable Expectation, on becoming a QRTA, it may be given sufficient time, preferably five years, to achieve such an ownership structure," said the report.

The committee also recommended that the board should have one-third public interest directors if the chairperson is a non-executive director. Such directors should compose at least half the board if the QRTA does not have a regular non-executive chairperson, it said.

The report also covered other institutions such as credit rating agencies and debenture trustees. It has recommended a ‘review committee’ to appeal against a rating should include independent members. It said debenture trustees face a number of challenges, requiring a separate 'and comprehensive review'.