AMENDMENT TO SECURITIES CONTRACTS (REGULATION) RULES PROPOSED
Based on a review, Government has proposed to amend the Securities Contracts (Regulation) Rules, 1957 (SCRR) for both initial and continuous listing requirements of companies in stock exchanges. The amendments proposed by the Ministry of Finance are:
(a) The standards for initial listing and continued listing may be prescribed in the SCR Rules.
(b) The standards for initial and continuous listing may be uniform, as the objective is same.
(c) The public offer envisaged at initial listing is of no consequence unless the public are actually allotted shares. The SCRR may speak in terms of allotment to public, not just public offer.
(d) As of now, the word ‘public’ is not defined. If ‘public’ means ‘non-promoters’ and includes FIs, FIIs, MFs, employees, NRIs/OCBs, private corporate bodies, etc., the floating stock would be insignificant. A view needs to be taken on this.
(e) For a company to be listed and continue to be listed, it must have a public stake of 25%.
(f) If for any reason, the public holding reduces below 25%, the promoters, management and company may be jointly and severally be liable to bring the public holding to 25% within 3 months, in the manner prescribed by SEBI, failing which appropriate enforcement action, including delisting, may be taken.
(g) There should not be any discrimination between a Government company and non-Government company. The powers of the stock exchange to relax any of the conditions of listing with the prior approval of SEBI in respect of a Government company needs to be withdrawn. Similarly, the powers of SEBI to relax listing requirements may be withdrawn.
A large number of shares distributed among a large number of shareholders is essential for the sustenance of a continuous market for listed securities to provide liquidity to the investors and to discover fair prices. The larger the number of shares and the number of shareholders, i.e., the larger the public float, the less is the scope for price manipulation. In order to ensure this, the securities laws prescribe initial and continuous listing requirements.
A discussion paper titled, “Requirement of Public Holding for Listing” containing above proposals has been hosted on the website of Finance Ministry. The comments on these proposals are invited by 28th February, 2008 at email@example.com.