Sebi eases norms on preferential allotments

Capital market regulator Securities and Exchange Board of India (Sebi) today lifted restrictions on broad based institutions such as insurance firms and mutual funds subscribing to preferential issues of companies. The decision was taken at its board meeting held in New Delhi today.

As per earlier regulations, these institutions were not allowed to participate in preferential allotments if they had sold holdings in the issuer companies in the preceding six months. Further, on allotment, they were required to lock-in their entire pre-preferential holdings in such companies for a period of six months from date of preferential allotment.

Both these restrictions have now been lifted. “It has been decided to exempt insurance companies and mutual funds, which are broad-based investment vehicles representing public at large, from regulations relating to sale and lock-in of their pre-preferential shareholding in the issuer company,” Sebi said in a release.

However, the lock-in on shares allotted in the preferential issue, will remain unchanged.

Other important decisions

Minimum investment limit under PMS
The market regulator has increased the minimum investment amount under portfolio management services from Rs 5 lakh to Rs 25 lakh. Further, portfolio managers will have to ensure segregation of holdings in individual demat accounts in respect of unlisted securities as well.

Reservation for holders of convertible debt securities
Sebi has clarified that reservations to convertible debt holders in rights and bonus issues, shall be only available to compulsorily convertible debt holders, since conversion is not at the option such holders.

Amendment to MF Advertisement Code
To provide more flexibility to mutual fund houses, Sebi has decided to amended the advertising code to make it principle based. “The definition of advertisement shall be broadened to include all forms of communication that may influence investment decisions of any investor,” the regulator said.