Fitness norm soon for investors of bourses

Markets regulator SEBI is likely to unveil its policy on how to implement the ‘fit and proper’ criterion for investors in stock exchanges in a few days, said its Chairman UK Sinha. Speaking at the sidelines of Bandhan Bank branch opening function, Sinha said SEBI had found a way out for this issue.

SEBI’s regulations stipulate that “No person shall, directly or indirectly, acquire or hold equity shares of a recognised stock exchange or recognised clearing corporation unless he is a fit and proper person.”

The SEBI board on November 30, decided that applicants to the IPO/OFS of a stock exchange had to make a self-declaration that they were fit and proper with the regulator issuing necessary procedures to ensure compliance of the provisions post-listing. However, once the equity shares of the SE become tradable upon listing, then the exchanges are required to monitor that every shareholder buying those shares should be fit and proper, SEBI said in its agenda paper.

The challenge, experts say, is to implement this. Tejesh Chitlangi, Partner IC Legal, said “The stock exchanges from a systemic and operational risk perspective are highly sensitive and hence there is a need to ensure fit and proper status for its shareholders. However, some materiality threshold should be prescribed, such as 1-2 per cent above which a shareholder will have to meet the criteria.” 

Arun Kejriwal of KRIS Research, said: “The concept of a fit and proper investor in SEs who in turn are frontline regulators is great. What is important is to make the procedure simple, efficient and easy to implement.”

COMMENT NOW