Pricing rules for preferential issues were temporarily relaxed

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(Commercial Representative) Mumbai, Ta. Thursday, June 25, 2020

The Securities and Exchange Board of India (SEBI), the capital market regulatory body, has decided in a board meeting to relax the pricing rules for preferential issues from July 31 to December 2020 and to change the insider trading prohibition norms.

SEBI has temporarily relaxed the pricing rules for preferential issues for issues between July and December 31 or in the event of approval by the regulator in view of the Covid-15 crisis. The current pricing methodology for the preferential issue is intended to provide an additional option.

In case of frequently trading stocks under this option, the price of the shares to be allotted in the preferential issue should be less than the weekly high and low volume average of the volume weightage average price (VWAP) of the respective stocks during the last twelve weeks or last two weeks. In addition, certain securities which are allotted on preferential basis using the above pricing formula will be locked-in for a period of three years.

SEBI said the Insider Trading Prohibition Rules have been amended, including maintaining a structured digital database containing the types of unpublished price sensitive information and the names of the informants. These include automation of the process of filing disclosures to stock exchanges, restrictions on non-availability of trading windows for transactions as determined by SEBI, and filing by non-compliance entities of the Code of Conduct with stock exchanges.

It may be mentioned that SEBI has allowed acquisitions through stock exchange settlement process through bulk or block deals during the open offer. In case the open offer has been publicly announced and acquisitions are made indirectly, the details of full payment made under the open offer will have to be deposited in the form of cash or bank guarantee in two working days before the date of public statement or in the escrow account.

SEBI has also approved some changes in the settlement norms. Promoters will also be involved with the Principal Officer for the purpose of calculating the base amount. Instead of issuing a settlement notice to save time, SEBI will include in the show cause notice a paragraph informing the notice about the option to file a settlement application.


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