Sebi speeds up bonus share trading: What this means for you

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 The Securities and Exchange Board of India (Sebi) has introduced new rules to make trading bonus shares faster and more efficient. From October 1, 2024, investors will be able to trade their bonus shares just two days after the record date.

Bonus shares are additional shares given to the current shareholders without any additional cost, based upon the number of shares that a shareholder owns.

Previously:

• There was no specific timeline for trading bonus shares after a bonus issue.
• Bonus shares were typically credited and available for trading within 2-7 working days.

New Rules:

Bonus shares will now be available for trading on the second working day (T+2) after the record date.

This change aims to improve market efficiency and reduce delays for investors.

Example:

If a company announces a bonus issue with a record date of October 15, 2024, investors will be able to trade their bonus shares on October 17, 2024.

The move is expected to benefit both issuers and investors by reducing the time gap between bonus share allotment and trading.

Issuing the operational procedure, Sebi said companies proposing a bonus issue are required to apply for in-principle approval from the stock exchange within five working days of the board meeting that approved the bonus.

When the company sets the record date (T day) for the bonus issue, it needs to note the deemed date of allotment, which is the next working day (T+1 day).

After receiving the record date and necessary documents, stock exchanges will issue a confirmation notice that includes the deemed allotment date and the number of shares being issued as bonuses.

Key Changes:

• Reduced Time Gap: The new rules significantly reduce the time between bonus share allotment and trading.
• Simplified Process: Issuers are required to apply for in-principle approval from the stock exchange within five working days of the board meeting.
• Direct Credit: Bonus shares will be directly credited to the existing permanent ISIN of the company's shares, eliminating the need for a temporary ISIN.

Benefits for Issuers and Investors:

•  Investors can start trading bonus shares sooner, potentially benefiting from price movements.
• The streamlined process enhances market efficiency and reduces delays.
• Reduced Administrative Burden: Issuers can benefit from a simplified process for implementing bonus issues.
• Overall, SEBI's move is expected to improve the experience for both issuers and investors involved in bonus share transactions.