SEBI has taken steps in the last few weeks to bring about reforms in the capital markets, particularly in the primary market segment.
The first set of reforms essentially gives effect to decisions taken at SEBI’s board meeting on August 16, 2012. These include matters relating to both the equity markets, where the SEBI (Issue of Capital and Disclosure Requirements) Regulations 2009 have been amended, and to the debt markets, where the SEBI (Issue and Listing of Debt Securities) Regulations, 2008 have been amended.
The more contentious set of reforms relates to additional protection that SEBI has sought to offer investors in initial public offerings (IPOs). This is by way of two measures,
(i) a proposal for a mandatory safety net mechanism by way of a discussion paper; and
(ii) the issue of the SEBI (Framework for Rejection of Draft Offer Documents) Order, 2012 that deals with specific circumstances where SEBI is entitled to reject an offer document.
These reforms have generated a substantial discussion, principally on the ground that a safety net mechanism takes away the equity risk of an investor, and that the guidelines on rejection of offer documents effectively introduces merit-based regulation of capital markets that was done away with the abolition of the Controller of Capital Issues (CCI) following the liberalised economic policies introduced in 1991.
A detailed discussion and analysis of these proposals are available at the following sources:
- Somasekhar Sundaresan in Business Standard;
- Discussionon The Firm – Corporate Law in India.