Capital market watchdog Securities and Exchange Board of India on Friday said foreign institutional investors (FIIs) had to end the practice of investing money collected from a single or a few investors in stocks by October 1.
Rejecting the FIIs' demand for extension of the October 1 deadline for compliance with the new rules, SEBI Chairman C. B. Bhave said FIIs would have to register afresh under a structure conforming to the new norms.
The new guidelines require that FIIs or each of their sub-accounts must have not less than 20 investors, except for a few entities like pension funds.
There have been concerns that a few high net worth individuals have been playing the stock market using the FII route.
The norms also require that no single investor accounts for 49 per cent of the fund raised for investment.
“FIIs have to comply with the October 1 deadline,” Mr. Bhave told reporters on the sidelines of a merchant banking industry function here.
On the surge in stocks, driven by huge investment inflows from FIIs, Mr. Bhave said, “As of now we are not concerned with the trail of money into the domestic market.”
He, however, said the surge had not resulted in any trade settlement related problems and that the regulator was keeping a close watch.
Besides, on the issue of bringing down the IPO listing period to seven days from the current 20 days, he said it was not mandatory, but an observation.
“Our panel is looking into the practicality of its implementation. Our panel is likely to come out with its report by November post which we will take a call.”
On rejecting the application of MCX-SX to set up a full fledged stock exchange, Mr. Bhave said, “everybody has to stick to the guidelines.”
Guidelines on IPO ads
On queries relating to the new Takeover Code, Mr. Bhave said SEBI had collected observations and suggestions from industry on the same issue. “The next SEBI board meeting will come out with the final view,” he said.
Meanwhile, incensed over the “planting of articles” and wrongful advertisements in the run up to a company's public offer, SEBI pulled up merchant bankers and said it was considering coming out with revised norms on IPO advertisements.
“A lot of information/articles are planted and it is not included in the DRHP (Draft Red Herring Prospectus)... at present, we (SEBI) have to take cuttings and send it to investment bankers,” SEBI Executive Director Usha Narayanan said while addressing the Association of Merchant Bankers of India summit here.
“We will not be tolerating this forever and will be coming out with norms ... we are preparing a paper currently, ” Ms. Narayanan said, while saying that SEBIO was not against advertising by companies as per “past practices.”