Sebi fine tunes stock option norms

The Securities and Exchange Board of India (Sebi) has provided for mandatory disclosures, appointment of merchant bankers for all employee stock options (ESOP) or purchases schemes (ESPS), henceforth, launched by corporates.

In a notification issued yesterday, Sebi amended the norms for such schemes and said the market price would mean the latest available closing price, prior to the date of the meeting of the board of the company board in which options are granted or shares are issued, on the stock exchanges.

According to the amended guidelines if the shares are listed on more than one exchange, then the exchange, where there is the highest trading volume on the specified date, should be considered.

Corporates will also have to appoint merchant bankers for the implementation of such schemes till the stage of framing ESOPs and ESPS and obtaining the relevant in-principal approval from the exchanges, the circular says.

Where the schemes are administered through a trust, the accounts of the company should be prepared as if the company itself is administering the schemes, Sebi said.

The markets regulator said the accounting value of shares, issued under ESPS, should be equal to the aggregate of price discount over all shares issued under the scheme during any accounting period. The price discount would mean difference between the issue and market price of the shares.

The shares arising after the initial public offer (IPO), from options granted under any ESOS framed prior to its IPO, should be listed immediately upon exercise on stock exchanges where the shares of the company are listed.

"No listed company should make fresh grant of options under ESOS framed prior to IPO and prior to the listing of its equity shares, unless such pre-IPO scheme is in conformity with guidelines and ratified by shareholders," it said.

Sebi in its circular said that after the changes made to the ESOP guidelines in June 2003, the capital market regulator had received queries seeking clarification.

The board, after considering the recommendations of the J R Varma panel on ESOP and the public comments, has approved certain modifications to the guidelines.