BuyBack Norms to Get Tougher

Securities & Exchange Board (Sebi) has been mulling over the issue of tightening norms for buyback of shares by companies, Chairman C B Bhave disclosed here on Thursday.

The move emanated after a recent trend of the companies failing to honour their word on buyback of shares. “In the recent past, many companies have announced they would buy back shares and thereafter, they have failed to act accordingly,” Bhave told reporters here after opening Sebi new eastern region office. Asserting that the issue has not escaped Sebi’s notice he made it abundantly clear that the market watchdog would not sit idle and do everything possible to tighten the regulations further to ensure this does not happen. “Such announcements need to be followed by actions,” he noted.

Mandatory norm

In fact, the regulator has been advised to make it mandatory for companies to buy back a stipulated percentage of shares from shareholders if they make buyback announcements, Bhave pointed out.

Sebi, Bhave said, has received a few reports of peer review carried out on certain Nifty and Sens*x companies. It has plans to undertake peer review of some other companies to be selected at random at a later stage, he indicated. It may be mentioned that Sebi has mandated peer reviews as confidence-building measure for investors two days after Satyam Computer founder Ramalinga Raju confessed to having fudged books for several years. On currency options, Bhave said a joint committee of Sebi and Reserve Bank of India has been looking at various issues involved including different kind of currency derivatives that can be introduced. The committee is also finalising its reports on the introduction of interest rate futures.

On the proposed small and medium enterprise (SME) exchange, he said Sebi has put out the consultative papers and formalised conditions under which it wants the exchange to operate. “We have received some applications. We need to do some amount of work before this exchange can start operating. We’ll be cautious this time.” He, however, refused to specify any time frame for the exchange to become operational.