Sebi likely to tighten norms for SME listing, widen UPSI definition

Decision likely at board meeting scheduled on December 18

The Securities and Exchange Board of India (Sebi) is likely to tighten rules around small and medium enterprises (SMEs) initial public offerings (IPOs) and widen the definition of unpublished price-sensitive information (UPSI).

 

The decisions are likely at the board meeting on December 18, informed sources.

 

The market regulator may announce a raft of other changes to ease doing business in the market ecosystem.

 

The move to tighten SME listing rules comes amid concerns of manipulation and misconduct. Sebi is likely to raise the investment threshold for SME IPOs by increasing the minimum application to Rs 2 lakh or Rs 4 lakh and restricting the offer-for-sale limit to 20 per cent of the issue size.

 

The regulator may also mandate the appointment of monitoring agencies to oversee the utilisation of the issue proceeds, along with the introduction of lock-in requirements for promoters and stricter corporate governance rules.

 

The overhaul of regulations around SMEs eyeing the public market comes at a time when the market watchdog has issued orders in cases where it found fictitious transactions, fund diversion, and circular transactions with related parties to inflate prices.

 

The board may also include certain promoter agreements, delisting, fundraising, frauds or defaults by promoters or key officials, loan restructuring, legal actions, and other updates as price-sensitive information. The amendments will widen the applicability of UPSI under the Prohibition of Insider Trading regulations.

 

Sebi first proposed changes last year, but following consultation, it had to first provide flexibility in the trading plan. The regulator observed that many listed companies were not complying with the law in spirit and only categorised items explicitly mentioned under the definition.

 

At the board meeting, Sebi may also review the norms on the appointment of public interest directors on the boards of market infrastructure institutions, such as stock exchanges, clearing corporations, and depositories.

 

Further, the easing of norms on real estate investment trusts (Reits), infrastructure investment trusts, and small and medium Reits may also be on the agenda.

 

The December board meeting assumes more significance as it comes at a time when there is uncertainty over Sebi Chairperson Madhabi Puri Buch’s tenure extension. Puri Buch has been in the eye of the storm following allegations by the Congress party and US-based short-seller Hindenburg Research questioning objectivity and alleging a conflict of interest. The Sebi Chair has refuted all allegations.

 

Sebi may not hold a press briefing after the board meeting — which has been the usual practice — for the second time.

 

On Agenda 

- Overhaul of regulations around SMEs after concerns of manipulation, misconduct

- Tighter norms to monitor utilisastion of funds raised through IPO, more disclosures

- Sebi may also include more updates under UPSI or price-sensitive information

- Regulator had first consulted on the proposals for UPSI definition last year and issued fresh proposals in November

- Norms on appointments of public interest directors (PIDs) at stock exchanges, clearing bodies also on agenda