On March 8, 2023, the Securities and Exchange Board of India (SEBI) imposed restrictions on bids, prices and volumes of companies conducting share buybacks through the stock exchange route.
- Currently, companies have two options for share buyback: a stock exchange and a tender offer.
This Circular by SEBI is issued in exercise of the powers conferred under Section 11(1) of the SEBI Act, 1992 to protect the interests of investors and to promote the development of, and to regulate the securities market.
Background:
i.On February 7, 2023, SEBI notified the Securities and Exchange Board of India (Buy-Back of Securities) (Amendment) Regulations,2023.
ii.The amendment regulations came into force on the 30th day of the date of notification (i.e., 9th March 2023).
iii.The regulations has been made effective for all buy-back offers where the Board of Directors of the company approve the resolution with respect to Buy-back on or after 9th March 2023.
What are the new rules?
i.Under this, a company could not buy more than 25% of its shares’ average daily trading volume (value) in the 10 trading days preceding the purchase.
ii.The company will not bid before the market opens, the first 30 minutes and the last 30 minutes of the regular trading session
iii.The company’s buy order price should be within 1% of the final traded price.
iv.Regarding the margin requirement for deposits in an escrow account, the account should consist of cash and/or non-cash. Appropriate deductions will be made for the portion of the escrow account that is not in cash.
Key Points:
i.SEBI requires companies and appointed brokers to ensure compliance with these regulations.
ii.The stock exchange will monitor their compliance and, in the event of non-compliance, impose appropriate fines or other enforcement actions as they deem fit.
SEBI asks investors to link PAN with Aadhaar by March 31
SEBI also asked investors to link their Permanent Account Number (PAN) with Aadhaar number by March 31, 2023 for continual and smooth transactions in the securities market. The non-compliance with this will be considered non-KYC compliant, and there could be restrictions on securities and other transactions until PAN and Aadhaar are linked
- The provisions of the Income-tax Act make it mandatory for every person who has been allotted a PAN to intimate his/her Aadhaar number to the prescribed authority so that the Aadhaar and PAN can be linked.
- This is required to be done on or before the notified date, failing which the PAN would become inoperative.
Recent Related News:
i.On January 12, 2023, the Securities and Exchange Board of India (SEBI) has amended the SEBI (Alternative Investment Funds-AIF) Regulations, 2012 to allow Alternative Investment Funds (AIFs) to participate in the Credit Default Swaps (CDS) market as protection buyers and sellers. Regulations 16(1)(aa),17(da), 18(ab)and 20(11) of AIF Regulations enable AIFs to participate in CDS.
ii.SEBI has allowed the stock exchanges to launch multiple contracts of a commodity to attract more participation of investors in commodity derivatives market. For its implementation exchanges are required to make necessary amendments to the relevant bye-laws, rules and regulations, and inform the same to their members.
About Securities and Exchange Board of India (SEBI):
Chairperson– Madhabi Puri Buch
Headquarters– Mumbai, Maharashtra
Establishment– 1992
