Sebi eases Esop norms

The Securities and Exchange Board of India (Sebi) has proposed changes in the revised guidelines for employees stock option (ESOP) and stock purchase scheme to allow companies to obtain advance listing approval and seek additional disclosures. Sebi has asked merchant bankers to ensure that corporates adhere to the norms.

The market regulator had received queries on amendments to ESOP and stock purchase guidelines made on June 30, 2003, revealing the need to streamline existing requirements and elaborate certain provisions, Sebi said in a statement today.

Further, companies could obtain an "in principle" listing approval in advance from stock exchanges to minimise the time lag between the allotment of shares (on exercise of options) and consequent listing of shares.

Also, companies could file statements regarding Esops anytime after the grant of options and before vesting of options. The same statement could be filed with depositories like National Securities Depository and Central Depositories, Sebi said.

In an effort to provide stock exchanges greater control over the stock option schemes, Sebi said corporates should make disclosures in areas like the number of securities reserved for Esop, the total number of securities issued on cumulative basis and balance securities yet to be issued.

On the role of merchant banker, Sebi said they should ensure that Esop scheme was in compliance with Sebi norms and also certify the accuracy and correctness of disclosures.

The guidelines, issued in June 2003, were silent on specific role envisaged for the merchant banker.

Further, the appointment of a merchant banker would be applicable to ESOPESPS schemes where grants have been made or shares have been allotted on or after June 30, 2003, Sebi said.

Sebi's guidelines on preferential allotment would not be applicable to shares issued under Esop and stock purchase plans, it said.

The bare reading of provisions in disclosure and investor protection (DIP) guidelines on preferential allotment indicates that dip norms apply to Esop shares also, Sebi added.