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Tuesday, Jul 09, 2002

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SEBI sets timeframe for advanced ruling system

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Mr G.N. Bajpai, SEBI Chairman (centre), with a member of the Bengal Chamber of Commerce and Industry, before an interactive session in Kolkata on Monday.


THE Securities and Exchange Board of India (SEBI) has decided to set in place a system of advanced ruling to provide solutions for issues under dispute.

The market regulator has set for itself a timeframe of two months by which an advanced ruling mechanism will be established. SEBI will, on a case-to-case basis, charge a fee for those who raise queries and seek its opinion on various matters.

According to Mr G.N. Bajpai, Chairman of SEBI, a company or any other party will be free to refer a definite case to it, and a suitable fee, to be ascertained on the basis of pre-determined parameters, will be levied for the service rendered.

The proposed advanced ruling system is expected to emerge in course of time as a valuable service for capital market participants. On one hand it would help the cause of fairness and democracy, while on the other it would ensure the desired flow of information, SEBI has pointed out.

The regulator is also confident that the service will eventually turn out to be a revenue generator as well. "That is an important consideration for us as we are not a commercial organisation with major streams of income'', Mr Bajpai said. He is currently in Kolkata to attend a series of meetings organised by various chambers of commerce.

SEBI is also of the opinion that shareholders have the right to choose their managements and change them if they consider so. Such changes are most welcome in the context of corporate democracy and in the greater interest of stakeholders. Hostile bids and takeovers, too, are favourable for the markets if these are carried out to benefit the majority of investors. At the end of the day, such moves would help create and distribute wealth.

On the issue of de-listing of shares - a practice that is increasingly seen among MNCs and a section of Indian corporates - SEBI has maintained that all factors (including both entry and exit prices) should be considered. "When a company wants to get out of the market by de-listing its shares, we will have to ensure that no investor gets hurt'', Mr Bajpai told newspersons.

According to Mr Sumit Mazumder, Vice-President of the Bengal Chamber of Commerce, who also addressed the meeting, certain shortcomings have been noticed in the takeover regulations.

He wanted SEBI to address the critical areas that he said needed more clarity.

"One is the exemption allowed in the regulations to preferential allotment of shares under Section 81 (1A) of the Companies Act. There are allegations that this exemption has been misused'', Mr Mazumder said.

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