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On Monday, the Securities and Exchange Board of India (SEBI) announced a new framework to oversee the shareholding limits and public ownership requirements for Market Infrastructure Institutions (MIIs). These include stock exchanges, clearing corporations, and depositories. The rules apply to both listed and unlisted MIIs, which must now share their shareholding patterns on their websites every quarter, following SEBI’s Listing Obligations (LODR).
Each MII is required to appoint a non-associated Designated Depository (DD) to ensure compliance with the shareholding rules. For depositories, another depository will act as their DD. The DD will track any breaches of shareholding limits of 5% or 15% as set by the SECC Regulations and take necessary actions.
The DD will also monitor when foreign investors breach the 49% combined ownership limit in an MII and inform the MII and the relevant stock exchange of any violations.
SEBI instructed stock exchanges to make sure that Trading Members (TMs), their associates, and agents do not hold more than 49% equity collectively. If holdings exceed 45%, prior approval is required for further purchases.
Moreover, clearing corporations must ensure that stock exchanges own at least 51% of them, with no single exchange holding more than 15% in multiple clearing corporations. Shareholders with 2% or more equity must meet the fit and proper criteria. MIIs are also required to notify shareholders and report any non-compliance to SEBI every quarter.
If there are breaches, the DD can freeze excess shares, disable voting rights, and redirect dividends from those shares to the Investor Protection Fund (IPF) or Settlement Guarantee Funds (SGF). Any excess shareholding in a listed MII will need to be divested through a special process set by the stock exchange, while unlisted MIIs will follow SEBI’s specific directions on a case-by-case basis.
This new framework will take effect on January 12, 2025, which is 90 days after the circular was issued.
Disclaimer: The views and investment tips expressed by investment experts on Sharepriceindia.com are their own and not those of the website or its management. Sharepriceindia.com advises users to check with certified experts before taking any investment decisions.
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