Securities and Exchange Board of India (SEBI) may soon make changes to the “fit and proper” requirement for shareholders holding 2 percent in stock exchanges.
Securities and Exchange Board of India (SEBI) may soon make changes to the “fit and proper” requirement for shareholders holding 2 percent in stock exchanges, reports Business Standard.
Existing rules prohibits an entity to directly or indirectly own shares of a stock exchange unless declared fit and proper. Current Sebi rules define a person to be fit and proper who is financially sound, good reputation and not faced any conviction, winding up order or declared insolvent.
Sebi has given different situations for monitoring and complying with the rules on the basis of shareholding threshold of 2, 5 and 15 percent.
Currently, stock exchanges approve applications for entities wanting to purchase 2 percent stake and also have to monitor fit and proper criteria based on the declaration made by the purchaser.
Stock exchanges have sought relaxation in the norm requiring them to monitor every shareholder.
This is because once an exchange is listed -- MCX and BSE have already got listed while NSE is slated for listing -- bourses say they would in difficult to monitor individual investors whose holdings cross 2 percent through open market purchases.
Experts deem it to be a reasonable move as monitoring fit and proper condition for retail and small shareholders would become a difficult job for a listed entity.Sebi is likely to make an amendment in the stock exchanges and clearing corporation rules, which is under review for exchanges and other institutions.