Sebi announces slew of measures on delisting of subsidiaries, role of debenture trustees

MUMBAI: The Securities and Exchange Board of India (Sebi) announced a slew of amendments at its board meeting on Tuesday, including granting exemption for the reverse book building process for delisting of a listed subsidiary, strengthening the role of debenture trustees (DTs) and introduction of a code of conduct for fund managers of AMCs.

The market regulator granted exemption from reverse book building process for delisting of listed subsidiaries, where it becomes the wholly-owned subsidiary of the listed parent.

To be eligible for this exemption, the holding and subsidiary should be in the same line of business, and should be listed for at least three years. The subsidiary should have been a listed subsidiary of the listed holding entity for at least three preceding years.


To protect the interests of investors in the listed subsidiary, it has been stipulated that the votes cast by public shareholders of the listed subsidiary in favour of the proposal will be at least 2 times the number of votes cast against it in terms of the present delisting regulations, the markets regulator said.

Sebi also approved the proposal of strengthening the role of debenture trustees (DTs) to protect the interest of debenture holders.

It said the DTs should exercise independent due diligence of the assets on which charge is being created, and take required action by convening the meeting of debenture holders for enforcement of security, joining the inter-creditor agreement, etc.

The regulator also approved the proposal to facilitate setting up of a limited purpose repo clearing corporation.
For asset management companies (AMCs), Sebi has introduced a code of conduct for fund managers, including chief investment officers and dealers of AMCs, saying it will be the CEO's responsibility to ensure adherence by all officers.

It also approved a proposal to enable AMCs to become a self-clearing member of the recognised Clearing Corporations to clear and settle trades in the debt segment of recognised stock exchanges, on behalf of its mutual fund schemes.

For Alternative Investment Funds (AIFs), Sebi said the qualification and experience criteria of the investment team may be fulfilled individually or collectively by personnel of the key investment team of the manager.

The amendment also included the constitution of an investment committee by the manager for approving investment decisions, responsibilities of manager and members of such investment committee of an AIF.

On forensic audits, Sebi said that in case such an audit is initiated, listed companies will intimate stock exchanges along with the name of entity initiating the forensic audit and reasons for the same, and also provide the final forensic audit report, along with comments of the management.

For prohibition of insider trading, the market regulator has prescribed a period of 3 years for reporting such violations through the informant mechanism. It also said the informants will be required to provide specific information such as details of securities, trades by suspect and unpublished price sensitive information based on which insider trading is alleged.