Capital Markets Archives - Page 2 of 5

SEBI Revitalizes the Indian Rights Issue Framework

Insights | December 17, 2024 | Practice Area: Capital Markets, Regulatory

A new rights issue framework proposed to be introduced by SEBI will allow timely access to capital and allow public shareholders to participate without significant dilution of their shareholding. Allowing promoters to renounce their rights entitlements in favor of select investors makes rights issues an attractive alternative to other methods of fund raising that may require shareholders’ approval. The SEBI proposal streamlines the rights issue process, significantly shortens timelines and rationalizes compliance requirements while introducing flexibility for companies to raise funds from select investors. This note provides an overview of the SEBI proposal for the new rights issue framework.

Restriction on Stock Brokers from Engaging in Other Businesses

Insights | December 12, 2024 | Practice Area: Anti-corruption; Fraud and Investigations, Capital Markets, Regulatory

Regulators in India are increasing looking at the businesses of entities and seeking to restrict the business activities to specified categories that they believe should be carried out by such regulated entities. One such interesting case relates to the permissible business activities of a stock broker. This note discusses the proposed amendment by the Government to Rule 8(1)(f) and Rule 8(3)(f) of Securities Contracts (Regulation) Rules,1957 in light of the enforcement actions taken against stock brokers and highlights the need to strike a balance between the commercial requirements of the stock broker and protecting the interests of its clients.

Regulatory Spotlight on Mutual Funds

Insights | September 18, 2024 | Practice Area: Anti-corruption; Fraud and Investigations, Capital Markets, Regulatory

The Indian mutual fund industry has experienced significant growth in recent years, with data released by Association of Mutual Funds in India indicating that assets under management increased from INR 25.48 trillion (USD 303 billion approximately) as on August 31, 2019 to INR 66.70 trillion (USD 795 billion approximately) as on August 31, 2024. The Indian securities market regulator, the Securities and Exchange Board of India (“SEBI”), has increased its scrutiny over the mutual funds industry and brought in certain amendments to regulations related to mutual funds. This note discusses SEBI enforcement actions against mutual funds and highlights the recent regulatory changes brought in to deter potential market abuse and increase investor confidence.

Related Party Transactions: Recent SEBI Scrutiny

Insights | August 13, 2024 | Practice Area: Anti-corruption; Fraud and Investigations, Capital Markets, Regulatory

The Securities and Exchange Board of India (“SEBI”) has been continuously calibrating the disclosure requirements applicable to Indian listed companies to increase transparency and accessibility of information to investors. Provisions regulating related party transactions (“RPTs”), and appropriate disclosure of such transactions, are a step in that direction. This note discusses two recent SEBI actions against listed companies related to RPTs and highlights the need for listed companies to have a comprehensive policy on RPTs that suitably addresses any perceived gaps or ambiguities.

Regulatory Spotlight on Disclosure of Key Performance Indicators

Insights | August 7, 2024 | Practice Area: Capital Markets, Regulatory

The Securities and Exchange Board of India (“SEBI”) has increased its scrutiny of key performance indicators (“KPIs”) included in offer documents. Its focus is aimed at enhancing the transparency of pricing and the disclosure of performance, allowing IPO investors to obtain a clearer understanding of an issuer and its business. Given the focus on KPI disclosures, IPO-bound companies (regardless of the industry) must devote sufficient attention to identifying KPIs relevant to their business and understanding regulatory expectations in this regard.
This note provides an overview of the SEBI framework for disclosure of KPIs in offer documents.

Decoding Front Running Trades

Insights | July 10, 2024 | Practice Area: Anti-corruption; Fraud and Investigations, Capital Markets, Regulatory

Front running trades are trades where an investor has placed an order in a stock while in possession of “non-public information” of “a substantial impending transaction” in that stock. Such trades not only distort the level playing field in the securities market by taking advantage of unequal information acquired through unfair means but also affect market integrity. This note tracks the evolution of jurisprudence related to front running in India and highlights the interpretational challenges and evidentiary issues relating to front running trades.

Voluntary Delisting in India

Insights | July 1, 2024 | Practice Area: Capital Markets, Mergers and Acquisitions

On June 27, 2024, the Board of the Securities and Exchange Board of India (the “SEBI”) approved certain proposals to amend India’s existing legal framework governing delisting of equity shares from public markets (“Proposed Amendments”). These are expected to address concerns that have discouraged an attempt at delisting from the Indian public markets. The Proposed Amendments are expected to become law shortly and will amend the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2021 (the “Delisting Regulations”) that govern the delisting process in India.
One of the key changes under the Proposed Amendments is the introduction of a fixed price as an alternative to the reverse book-building process to determine the exit price of the delisting offer. The fixed price offered by an acquirer must be at a minimum 15% premium over the floor price determined under the Delisting Regulations. The floor price calculation will now include, among other parameters, the calculation of an adjusted book value certified by an independent registered valuer. This reform provides more certainty to the delisting process, given that the acquirer is not subject to a reverse mechanism of pricing where the minority/public shareholders have a role in the determination of the exit offer price.
This note discusses the legal framework and the process involved for voluntary delisting under the Delisting Regulations and the implications of the Proposed Amendments.

Regulatory Spotlight on Identification of Promoters

Insights | April 3, 2024 | Practice Area: Capital Markets, Corporate Governance and ESG, Regulatory

Identification of “promoters” ahead of an initial public offering in India is a critical step given the resultant disclosure requirements, obligations and other implications. In the recent past, the Indian securities regulators have increased their scrutiny over the persons and entities being identified as promoters in offer documents.
This note provides an overview of certain recent developments in connection with the identification of promoters.

Short Selling in India

Insights | April 1, 2024 | Practice Area: Capital Markets, General Corporate, Regulatory

Short selling in India has been in the spotlight as highlighted by the events triggered by the publication of a report by Hindenburg Research in 2023 (the “Hindenburg Report”). The Indian Supreme Court considered short selling pursuant to petitions filed following the publication of the Hindenburg Report. This was followed by SEBI reissuing its framework for short selling.

REITs and InvITs: Evolution of the Regulatory Landscape in India

Insights | March 15, 2024 | Practice Area: Capital Markets, Corporate Governance and ESG, InvITs; REITs and Business Trusts, Real Estate, Regulatory

Business trusts play a significant role in Asian and global capital markets. India introduced real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) in 2014. As the regulatory regime approaches the completion of a decade, this note reflects on the evolution of the regulatory landscape for REITs and InvITs in India.