Sebi may seek more details from investors in pref issues

In a bid to crackdown on round tripping of funds by companies and check covert hiking of stakes using front entities, the Securities and Exchange Board of India is set to seek more details from investors participating in preferential share issues, reports CNBC-TV18, quoting unnamed investors. The proposal will come up for discussion when the regulator's board meets next Tuesday.

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Sebi will seek disclosure on the source of funds of the investors who have been allotted shares in preferential issues. Also, the allottees will have to subscribe to the issue using their own funds. The company issuing the shares will have to provide ownership details of the allottees, sources said. No extra disclosures will be required if the allottee is a listed company or a mutual fund.
Sebi is also expected to review share buyback norms at the board meet. The regulator may make it compulsory for companies to use 50 percent of the funds earmarked for buyback. Sources say around 25 percent of the buyback fund will have to be kept in an escrow account. Companies will have to complete the buyback offer in six months, and could be penalized 2.5 percent of the amount in the escrow account if it does not spend the mandated 50 percent of buyback funds.
Companies going in for buyback may not be allowed to raise capital for a year after the buyback. Promoters may not be allowed to buy or sell shares of their company during the buyback and for buybacks exceeding 15 percent of the company's networth will have to be done compulsorily through the tender offer route.