Sebi shortens bonus issue time; trading to start T+2 days from record date

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In a bid to speed up the process of crediting and trading bonus shares, markets regulator Sebi on Monday introduced new guidelines, whereby investors will be able to trade bonus shares just two days after the record date starting October 1.

The current ICDR (Issue of Capital and Disclosure Requirements) rules prescribe overall timelines regarding the implementation of the bonus issue. However, there is no specific timeline for credit of bonus shares and trading of such shares, from the record date of the issue.

Currently, after a bonus issue, existing shares continue to trade under the same ISIN, and the new bonus shares are credited and available for trading within 2-7 working days after the record date.

Under the guidelines, trading in bonus shares will now be enabled on the second working day (T+2) after the record date, boosting market efficiency and reducing delays.

This will be applicable for all bonus issues announced on or after October 1, 2024, the Securities and Exchange Board of India (Sebi) said in a circular.

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 is 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.

Issuers are required to submit all documents to the depositories by 12 pm on T+1 day to facilitate the quick credit of bonus shares.

Also, the regulator has eliminated the earlier requirement to use a temporary ISIN for bonus shares, permitting direct credit into the existing permanent ISIN of the company's shares.