REFORMS IN PRIMARY MARKET - Accounts and Finance for Managers

  • Merchant banking and banking code installed
  • Due diligence certificate from the lead managers
  • Disclosure norms
  • Companies details - facts and risk factors associated with their projects
  • Stock exchanges required to ensure the formalities with the companies during the issues
  • Restriction in the usage of Stock invest - institutional investors
  • Disclosure norms for the advertisement
  • Underwriting is optional and if it is not carried out due to bring down the issue cost – 90% of the amount offered to the public - should be refunded
  • Bonus guidelines were relaxed
  • New system introduced for preferential issue - pertaining to pricing Shri Y H Malegam – disclosure requirements and issue procedures
  • SEBI to vet the prospectus within 21 days from the date of issue and approval by the registrar companies is given a time period of 14 days
  • Abridged prospectus - should be vetted by the SEBI

Reforms in the Primary Market: 1996-97

  • Norms were tightened - to enhance the quality of the paper
  • First time issuers - dividend payment record in three of the immediately preceding five years
  • If this requirement is not applicable in the case of companies - appraisal should be done through commercial banks or financial institutions -10% contribution from the issuer out of the total size of the issue - no restriction but if the issues are premium priced - two years profitability record
  • Prohibition on direct or indirect discounts during the moment of allotment
  • 90% of the subscription waived due to minimum share holding
  • Housing finance companies allowed to function as registered issue facilitating companies in along with the refinancing from the National housing bank
  • The promoters contribution should be in a phased manner if it crosses Rs.100 cr
  • Debt securities could be listed in the stock exchanges without any listing of equity shares.

Reforms in 1997-98

  • Entry for unlisted companies modified
  • Partly paid up shares should be either fully converted or forfeit
  • 3 years profitability required for the unlisted companies for the issuance of share capital
  • For rights issue - Registrar should be separately deputed
  • Details of the promoters should be given in the offer document
  • Only body corporates allowed to function as merchant bankers
  • Merchant bank classifications abolished
  • Merchant banks are not permitted to carry out the fund related activities; if any corporates are available - suitable breathing time was given to restructure the activities

Reforms in 1998-2001

  • Entry norms revised
  • Pre issue net worth should not be less than 1 cr in 3 preceding years out of 5
  • Merchant banks registered with RBI as NBFCs eligible to trade Govt securities
  • Mutual funds permitted to derivatives
  • Further updating was made in the companies act to protect the investors
  • Additional power granted to SEBI for the violation of the companies act
  • SEBI compendium 2000 issued
  • On line offerings were encouraged by SEBI
  • Regulation of rating agencies framed
  • ESOP guidelines
  • Changes introduced on mutual funds the P.K.Kaul committee
  • Issue freedom is given to companies but not less than Re 1
  • 100% book building route introduced

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