Sebi to prune regulations

Rules for markets likely to be unified.

The Securities and Exchange Board of India (Sebi) is set to pare the plethora of regulations that governs the equity market to a manageable few.

As a result, regulations on shareholding pattern, minimum shareholding and the like will come either under the takeover code or the depositor and investor protection (DIP) guidelines.

Sources familiar with the development said the process of identifying the overlapping regulations was on. A Sebi official told Business Standard, "There should be one single regulation "" a master regulation "" which should deal with everything under various heads."

The takeover code has been found to be mandatory since it deals with acquisitions and mergers, both domestic and foreign. But it also deals with minimum listing requirements, shareholding pattern, promoters' holdings, definitions and the like. However, these overlap with the depositor and investor protection guidelines to a certain extent.

In fact, companies, investment bankers and legal experts have been asking for clarity in the various regulations for quite some time. Sources said the next exercise would be to bring the Sebi guidelines in conformity with those of the department of company affairs. The two sets of norms vary, especially in provisions related to mergers and acquisitions.

Incidentally, while the takover code has pegged the minimum public shareholding in a listed company at 25 per cent, the change is yet to be incorporated in the continuous listing agreement (which is under the ambit of the stock exchanges) as well as the depositor and investor protection guidelines, which also deal with the issue in a certain fashion.

In fact, the guidelines for initial public offers still allow for a minimum 10 per cent float. This is in conflict with 25 per cent under the takeover code, which has been notified in the government gazette.

There is also a move to merge the regulations for the share buy-backs under the takeover code. At present, a separate set of regulations deal with buy-backs. There are also the delisting guidelines. Sources said anything to do with the corporate sector should be brought under one umbrella regulation.

With regard to malpractice and irregularities in the secondary market, Sebi deals with it through two separate regulations "" the Fraudulent and Unfair Trade Practices Regulations and the Prohibition of Insider Trading Regulations. Sebi sources said both these regulations may be merged into one single regulation, but this matter will be taken up separately.