The SEBI board on Wednesday tightened norms for MSMEs going public and investment bankers, while expanding the definition of unpublished price sensitive information (UPSI) to include more material events.
MSMEs can make a public offer only if the issuers have earned an operating profit of ₹1 crore from operations for two out of the three previous financial years at the time of filing the draft prospectus. The offer for sale (OFS) by selling shareholders in SME IPOs will not exceed 20 percent of the total issue size, and selling shareholders cannot sell more than 50 percent of their shares.
The lock-in on promoter holdings exceeding the minimum promoter contribution will be lifted in a phased manner: the lock-in on 50 percent of promoter holdings above the MPC will be lifted after one year and the rest after two years. The allocation methodology for non-institutional investors in SME IPOs will be aligned with the methodology used for NIIs in motherboard IPOs.
SME issues where the purpose of the issue is to repay a loan from the promoter, promoter group or any related party from the proceeds of the issue, directly or indirectly, are not permitted. Related party transaction (RPT) standards, as applicable to listed mainboard entities, will also be extended to listed SME entities.
Commercial bankers
Investment bankers other than banks, financial institutions and their subsidiaries can only undertake permitted activities as specified by SEBI. Other regulated activities can be carried out as a separate business entity after obtaining the required supervisory mark. Unauthorized activities will be transferred to a separate legal entity with a separate brand name within two years.
Bankers with a net worth of at least ₹50 crore fall under category 1 and are allowed to undertake any activities that fall under the ambit of SEBI. Those with a net worth of Rs 10 crore fall under category 2 and are not allowed to deal with share motherboard issues.
UPSI
The Sebi board has approved amendments to include several more significant events in the definition of unpublished price sensitive information (UPSI). According to a SEBI investigation into material events disclosed to the stock exchanges, it was found that companies were only categorizing the items explicitly mentioned in the PIT regulations as UPSI and were not adhering to the law.
The board nodded to a proposal for specifying timelines for deployment of funds collected by mutual funds in new fund offerings as per a scheme’s specified asset allocation.
The Board approved sharing ESG rating reports simultaneously with subscribers and the rated issuer; and the procedure for handling appeals and representation by the rated issuer. This is done to facilitate ease of doing business for ERPs under a subscriber-pay business model. The Council also approved an activity-based regulatory framework for ERPs to undertake activities under the purview of other financial sector regulators and to separate unregulated activities into a separate entity.
