The Hindu Business Line : SEBI amends listing pact terms to benefit investors

IN order to protect the interest of investors in securities and to promote the development of, and to regulate, the securities market, the Securities and Exchange Board of India (SEBI) has amended the listing agreement terms.

Now, the listed companies, whose stocks are available for derivatives contracts or were part of index with derivatives, should give a 30-day notice for corporate actions such as merger, de-mergers, splits and bonus shares.

SEBI has amended Clause 16 of the equity listing agreement to incorporate this change, according to the information published on the SEBI Web site.

The SEBI's Advisory Committee on Derivatives and Market Risk Management has noted that the existing requirement for stock exchanges to give notice of six weeks to the market for any change in the contract specifications (and also in case of a change in a constituent of an index on which derivatives are available), is too long and it may be reduced to four weeks, said the release.

According to an earlier circular, which was issued in November 2003, a company is required to give a notice of at least 15 days to inform the record date for any corporate actions, to the stock exchanges.

"Keeping in view the difficulties experienced in case of corporate action in stocks on which derivatives are available or stocks which form a part of an index on which derivatives are available, the committee recommended that the Clause of Equity Listing Agreement be amended for extension of notice period only for the limited purpose of adjustment of corporate actions such as mergers, de-mergers, splits, bonus shares and that too only for such stocks on which derivatives are available," said the circular.

Stock exchanges have been advised to implement this with immediate effect.

More Stories on : Regulatory Bodies & Rulings | Investor Protection

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