ECONOMIC REGULATIONS

CAPITAL MARKET PERSPECTIVE

BY CA ARUN GOENKA

CHARTERED ACCOUNTANT

Presented on 17 February 2019

J.B.NAGAR CPE STUDY CIRCLE OF WIRC

THE INSTITUTE OF CHARTED ACCOUNTANTS OF INDIA

MUMBAI

Disclaimer: The views and opinions in this presentation are those of the author of this presentation and do not necessarily represent views of the any organisation(s) to which he belongs or belonged in past

CAPITAL MARKET REGULATIONS:

After the Controller of Capital Issues was abolished, the structure of Capital Market Regulations that we see today, took shape under SEBI.

SEBI was established on April 12, 1992 in accordance with the provisions of the Securities and Exchange Board of India Act, 1992.

The key focus of SEBI, as given in its preamble is:

A. to protect the interests of investors in securities,

B. to promote the development of securities market,

C. to regulate the securities market and ,

D. for matters connected with securities market or incidental thereto."

With this objective in mind SEBI has made a host of Rules, Regulations etc.—

The Companies Act is the GRAND FATHER Act for all the companies, and SEBI Act, 1992 is the FATHER Act for all the companies who populate the capital market. Majority of the Regulations to regulate the issuance of securities and the market are formed under them.

List of some relevant Acts, Rules, Regulations, Guidelines and Circulars is given in ANNEXURE—A

INVESTORS’ PROTECTION:

From investors point of view, the 3 most interesting and important Regulations are Takeover, Buy back and Delisting.

TAKEOVER REGULATIONS:

One of the most widely impactful Regulations of SEBI is the Takeover Regulation.

SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 [last amended on 31.12. 2018] is the Third version of such Regulation.

The first Takeover Regulations was in 1994, which was replaced by 1997 Regulations.

They have overseen transactions involving Lakhs of Crores of Rupees (for the millennial generation--Trillions of Rupees).

Takeover Regulations are the most litigated of all SEBI Regulations.

Some of such litigations are going on for decades.

Shri Rama Multi Tech, Golden Tobacco Ltd. were completed after delays of about 8-10 years and protracted litigation.

The 2008 Offer in Goldstone Teleservices, name changed to Goldstone Infratech and now to Olectra Greentech is still pending at Supreme Court ((CA 7666/2009) dated November 17, 2009)

Polo Hotels:

Polo Hotels Open Offer was triggered in 1999 and is still pending. SAT has stated in its order on 29 August 2017 that it is gross abuse of the process of law, merely for delaying. It put a cost of Rs.50,000/-, . Yet they have not complied with the order and had the audacity to come back to SAT again. SAT has again put a cost of another Rs.50,000/- and dismissed their appeal on 15^th Feb. 2019, but they have already gained almost 2 years time.

Many will find it unbelievable that in the last 2 decades the case with the same facts has travelled in Higher Courts 8 times.

i. Punjab and Haryana High Court- 2 times.

ii. Hon’ble SAT- 3 times,

iii. Hon’ble Supreme Court- 3 times,

Although the Courts know and say so in the order

“ In our opinion the present appeal is filed in gross abuse of the process of law merely with a view to delay implementation of the Order of SEBI dated 1.8.2003” Yet the culprits get away with a paltry fine/cost of Rs.50,000/- and Save crores of Rupees for themselves. This no doubt encourages defiance rather than compliance of Law but that’s how Law is implemented in this country. It’s a sad commentary.

If time permits I would like to take you through to this unique case and how the investors who trust the Justice delivery system of the country are at a great loss. This company and the promoters have committed more frauds and irregularities than anyone can think of. The case filed in NCLT in Feb 2018, is yet to reach hearing stage although NCLTs being a fast track courts are expected to dispose off a case in a span of three months.

Section 422 of the Companies Act. 2013 is reproduced below:

422. Expeditious disposal by Tribunal and Appellate Tribunal

(1) Every application or petition presented before the Tribunal and every appeal filed before the Appellate Tribunal shall be dealt with and disposed of by it as expeditiously as possible and every endeavour shall be made by the Tribunal or the Appellate Tribunal, as the case may be, for the disposal of such application or petition or appeal within three months from the date of its presentation before the Tribunal or the filing of the appeal before the Appellate Tribunal.

ANNEXURE-B- POLO CASE SYNOPSIS

BUY BACK:

Hordes of cash sitting on the Balance sheets of IT companies, PSUs, and others, coupled with the tax efficiency in distributing company’s earning, to its members has ensued a plethora of BUYBACK Offers including from almost all NAVRATNA PSUs. Some key benefits of Buy back over Dividend distribution. In case of Dividend :

· Companies have to pay dividend distribution tax (DDT)

· Dividends above INR10 lakhs are taxable in the hands of the shareholders,

· Listed companies are exempt from buy-back tax (BBT) and

· Till AY 2019-20 No Long Term capital gains tax and thereafter concessional tax @10% in the hands of investors since the buy-back is routed through a stock exchange and suffers STT

· In case of unlisted companies,

· BBT is chargeable in the hands of the company on the “net amount distributed”(i.e., after reducing the amount received by the company for the issue of such shares),

· The amount received is exempt in hands of the shareholders.

Other benefits are:

· Ease of execution- No approval from NCLT required,

· Can be executed very fast-- in about 2-4 months’ time.(In case of Indian Oil, the Board decided for Buy Back on 13.12.2018 and the process was completed by 12.02.18)

· Improves operating ratio etc.

· Provides an exit route to shareholders where liquidity is low

Applicable Laws:

· Sections 68, 69 and 70 of the Companies Act, 2013,

· Rules 17 of the Companies (Share capital and Debenture) Rules 2014

· SEBI (Buy Back Of Securities) Regulations, 1998 [Last amended on March 6, 2017]

Buyback is done either by open market purchase or Tender method. For being eligible to offer the shares in the tender offer, one must be a member of the company as on the record date.

DELISTING:

VOLUNTARY:

Voluntary Delisting is mainly resorted to by Multinational Companies (MNC) although there are some Indian promoters also who got their shares delisted--Manjushree Technopack Ltd , Essar Oil etc. The objective of such delisting is generally given as follows:

· To obtain full ownership of Equity Shares of the Company,

· To get operational flexibility to support the Company’s business

· To take care of future financing needs of the company.

· To reduce the expense for the maintenance of listing and investor relations

· To save management bandwidth which can be redirected to the Company’s business.

COMPULSORY:

India's biggest stock exchange in terms of total listed companies BSE (Bombay Stock Exchange) has delisted as many as 222 companies from its platform with effect from, 4 July 2018.

· The promoters of these delisted companies will be required to purchase the shares from the public shareholders as per the fair value determined by the independent valuer appointed by the exchange

· The delisted company, its whole-time directors, promoters and group companies shall be debarred from accessing the securities market for a period of 10 years from the date of compulsory delisting,

· Till the time promoters of these companies provide an exit option to the public shareholders in terms of the value determined by the valuer, there shall be no transfer of equity shares by the company, by way of sale, pledge, etc,

· the equity shares and corporate benefits thereof held by the promoters/promoter group will remain frozen.

· The promoters and whole-time directors of the Company shall not be eligible to become directors of any listed company,

Comparative chart showing unique features of Takeover, Buy Back and Delisting

Particulars	Takeover	Buy back	Delisting
Trigger	Mandatory Legal compliance for Takeover of any listed company by way of acquisition of shares or management control	Voluntary decision by the Board	Generally Promoters’ voluntary decision but in some cases compulsory by SE as a punitive measure.
Price	Detailed formula is given in Reg.8. In short, taking the date of PA. as reference point, it is the highest of (a) negotiated price (b) Weighted average price paid in past 52 weeks (c) highest price paid in past 26 weeks (d) Weighted average market price for 60 trading days But if the shares are infrequently traded, then as per valuation parameters – book Value, comparable trading multiples etc.	The Offer price is generally slightly higher than the CMP at the time of Offer. In some recent cases The price was substantially higher- Just Dial Offer price 800, CMP 450-500, Dhanuka OP 550,CMP 450, Techno Electric OP 410,CMP 260	Although a floor price is worked out as per a similar formula as in the case of Takeover ( but now the reference date has been changed to the date of intimation to the SE, instead of PA date) In all practical terms, Price is determined through a Reverse Book Building (RBB) Process. The highest price at which the minimum required number ( Such no. of share that will take the promoters’ holding to minimum 90%) of shares for making the offer successful, are offered, is the discovered price.
Participation	Anyone can participate till the offer is Open, technically one can participate even in street name. Only Acquirers, Promoters and parties to the contract cannot participate	In case of Open market purchase, anyone can participate, till the offer is on. However Promoters cannot participate In case of Tender Method only those investors who were shareholders as on the Record date, can only participate.	Anyone can participate till the offer is Open, technically one can participate even in street name.
Attraction for Investors	Beneficial to investors as Takeover improves the market capitalisation of the target company. The Acquirer has to share a part of the ‘Control Premium’ with small shareholders as well.	Benefit to investors can be calculated by a complex matrix of premium pricing of the offer, level of participation, Post offer price of the shares. Post Buy Back , technically it should improve the fundamental price of the shares since the bought back shares are extinguished and improve the Operating ratios.	This is most risky of the 3 types of offers. It may Bust or Boom. If the offer is accepted at discovered price one may gain substantial premium, but if this is rejected everyone loses. The risk here is twofold - (a) Minimum required no. of shares will be received or not (b) the discovered price will be acceptable or not
Litigation and delays	Maximum	Not much regulatory hurdle	Not much regulatory hurdle
Recommendation for Investors	Must try	Small investors Must try. In the recent past such offers have given about 8-10 return in about 2-4 months time. Of course in some cases like Mphasis, DB Corp, Jagran etc. there have been losses. (Small investors have been defined as one holding shares whose market value is less than 2 lakhs as on the record date)	Avoid. This is now a game of nerves. One may get Bumper profit or may just make a bumper loss. The recent case of LINDE is an example. Floor Price 428.50 Discovered Price 2025- Rejected. CMP(14.02.19) 430. One Month Hi Lo 787.45 (15.01.19) to a Lo of 418 on 05.02.19
Recent Changes	Last Amended 31.12.18 Since enactment there have been 14 amendments in the SAST 2011. 11 of such changes are direct and 3 have not been direct but through changes in ancillary regulations e.g. a. October 8, 2013 by the SEBI (Listing of Specified Securities on Institutional Trading Platform) Regulations, 2013 vide No. LAD-NRO/GN/2013-14/28/6720. b. May 23, 2014 by the SEBI (Payment of Fees) (Amendment) Regulations, 2014 vide Notification No. LAD-NRO/GN/2014-15/03/1089. c. March 6, 2017 by SEBI (Payment of Fees and Mode of Payment) (Amendment) Regulations, 2017 vide No. SEBI/LAD/NRO/GN/2016-17/037 read with notification dated March 29, 2017 vide No. SEBI/LAD/NRO/GN/2016-17/38.	Last Amended 06.03.17. There are 2 key changes: a. buyback period is -- the period between the date of board of directors’ resolution or declaration of results of the postal ballot for special resolution, and the date of payment to shareholders b. make a public announcement within 2 days of results of the postal ballot for Special Resolution/ Resolution of board of directors	Last Amended 14.11.18 To Curb the volatilities in share price and unfair price manipulation 2 key amendments were made, (a) Floor price will be determined w.r.t. the date prior to the date when the SE is intimated and (b) counter offer- few shareholders’ quoting an unrealistic price was resulting in the failure of the offer and heavy losses to the investors. SEBI has now given an option to the Acquirer to make a counter offer-within 2 days of the discovery of the price, at not less than the book value
Size of offer	26% of the Capital as of tenth working day from the closure of the tendering period	Size -not to exceed 25% of the paid-up capital and free reserves. (Section 68(2)(c) of the Companies Act, 2013) The Debt: Equity Ratio should be less than 2:1. If the size of the Offer is more than 10%, of the Capital & Free Reserves, Special Resolution is required to be passed. Buy-back should be funded from Paid up Capital and Free reserves. We recall that recently SEBI rejected the Buy Back proposal from one of the most respected co. L & T, because of the concerns that the offer is not entirely funded by own resources/ high Debt.	The entire Public Holding. Conditions for Success: Minimum such No. of shares must be acquired, that will take the Promoters’ holding to 90% or beyond.

ISSUE OF SECURITIES

Any entity who wants to raise funds from the Public, even if it is a Municipality, will have to meet the SEBI rules & Regulations, for example -- SEBI (Issue and Listing of Debt Securities by Municipalities) Regulations, 2015. It has to follow SEBI guidelines for disclosure etc. aimed at enabling the investor to take an informed decision. Entities collecting funds from the public must adhere to the Rules and Regulations of SEBI. The Regulatory frame work has travelled a long way under SEBI, who has become a very respected regulator.

Stringent rules have been made by SEBI for issue of securities by companies already listed and coming out with IPOs. To prevent misuse of Preferential allotment of shares the following provisions were made:

SEBI (Issue of Capital and Disclosure Requirements) Regulations 2009

S.No.	REGULATION	REMARKS
1	72 (2)	The preferential allotment cannot be made to any person who has sold any equity shares of Company during 6 months preceding the "Relevant date".
2	74(1)	Allotment must be done within 15 days of passing of special resolution, otherwise fresh special resolution has to be passed in another AGM/EGM.
3	74(4)	Allotment can be made only in Demat form
4	74(3)	If allotment triggers obligation to make an open offer , allotment can be made after and within 15 days from the date of receipt of all statutory approvals required for completion of open offer under SEBI(SAST),2011.
5	73(4)	Special Resolution must specify the “Relevant Date” on the basis of which conversion price has been determined.
6	76/76A	Issue price cannot be lower than 26 weeks volume weighted average and 2 weeks volume weighted average from the “Relevant Date”.
6	76/76A
7	77(1)	Full consideration of specified securities must have been received before the date of allotment.
8	77(5)	Company must ensure that full consideration is received from “ respective allottee’s bank account.
9	77(6)	Certificate of Statutory Auditor must be furnished to SE that full consideration has been received from respective allottee’s bank account.
10	78(1)	Lock-in of 3 years from date of trading approval from SE.
11	78(6)	Pre-Preferential holding also remain locked-in from “relevant date” till 6 months from trading approval.

MARKET MONITORING

SEBI has tried and made it almost impossible to do any kind of price rigging without it being flagged by SEBI’s monitoring system. No matter how ingenious the manipulator is, SEBI is sure to catch up him sooner or later. We have cases of LTCG which took place almost a decade ago, but those who indulged in them are being hounded by SEBI and the Tax Department now. We have also seen how the past cases of price rigging in thinly traded Options contracts are being pursued by SEBI.

Additionally, BSE under the guidance from SEBI has introduced various pre-emptive, proactive surveillance measures from time to time which inter-alia include policy measures (like categorization of companies under X/XT sub-segment, periodic price bands), surveillance actions (like suspension of trading of companies due to surveillance concerns) and steps towards enhanced corporate governance (like the facility for companies for on-line filing of listing disclosures).

The main objective of these measures is to -

· Alert and advise investors to be extra cautious while dealing in these securities and

· Advise market participants to carry out necessary due diligence while dealing in these securities.

In order to enhance market integrity and safeguard interest of investors, various enhanced surveillance measures have been introduced :

· reduction in price band,

· periodic call auction and

· transfer of securities to Trade to Trade category.

W.e.f. 14 March 2017 Graded Surveillance Measures (GSM) has been introduced on securities which witness an abnormal price rise not commensurate with financial health and fundamentals like Earnings, Book value, Fixed assets, Net worth, P/E multiple, etc.

Stage wise Surveillance actions are listed below –

· Stage I--Transfer to trade for trade with price band of 5% or lower as applicable

· Stage II--Trade for trade with price band of 5% or lower as applicable and Additional Surveillance Deposit (ASD) of 100% of trade value to be collected from Buyer

· Stage III--Trading permitted once a week trading and ASD 100% of trade value to be deposited by the buyers (Every Monday)

· Stage IV--Trading permitted once a week trading with ASD 200% of trade value to be deposited by the buyers (Every Monday)

· Stage V--Trading permitted once a month trading with ASD 200% of trade value to be deposited by the buyers (First Monday of the month)

· Stage VI--Trading permitted once a month with no upward movement in price of the security with ASD 200% of trade value to be deposited by the buyers (First Monday of the month)

These are very stringent measure. Imagine , if you want to buy one lakh worth of shares in Stage IV, you will have to first pay 3 lakhs, 1 lakh trade value plus 200% ASD. This ASD will be retained by the exchange for three and half months. Without any interest.

Effective from March 26, 2018, the Additional Surveillance Measures (ASM) of SEBI has come into force. On daily basis exchange is publishing the list of securities being added /removed and consolidated list of all securities under ASM. ASM has been implemented based on an objective criteria covering the following parameters:

a) High Low Variation

b) Client Concentration

c) No. of Price Band Hits

d) Close to Close Price Variation

e) PE Ratio

f) Market Capitalisation

While GSM has 6 stages, ASM has only 2 stages

At Stage I

a) Securities shall be placed under Price Band of 5% or lower as applicable.

b) VAR Margins shall be levied at the rate of 100%

Stage II

a) The shortlisted securities shall be further monitored on a pre-determined objective criteria and would be moved into Trade for Trade settlement once the criteria gets satisfied.

ANNEXURE-A

ACTS, RULES, REGULATIONS, GUIDELINES AND CIRCULARS

ACTS

1. 1992 The Securities Contracts (Regulation) Act, 1956 [As amended by Finance Act, 2017] Securities Laws (Amendment) Act.

2. 1996 The Depositories Act [As amended by Finance Act, 2017]

3. 1992 Securities and Exchange Board of India Act [As amended by Finance Act, 2017]

RULES

1. 2014 Companies (Issue of Global Depositories Receipts) Rules, 2014

2. 2014 Companies (Prospectus and Allotment of Securities) Rules, 2014

3. 2014 Companies (Share Capital and debentures) Rules, 2014

4. 2005 Depositories (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 2005

5. 2005 Securities Contracts (Regulations) (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 2005

6. 2004 Securities Transaction Tax Rules, 2004

7. 2003 Securities Appellate Tribunal (Salaries, Allowances and other Terms and Conditions of Presiding Officer and other Members) Rules, 2003

8. 2000 Securities Appellate Tribunal (Procedure) Rules, 2000

9. 2000 Securities Contracts (Regulations) (Appeal to Securities Appellate Tribunal) Rules, 2000

10. 1998 Depositories (Appeal to Central Government) Rules, 1998

11. 1997 Securities Appellate Tribunal (Salaries and Allowances and other Conditions of Service of the Officers and Employees) Rules, 1997

12. 1995 SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995

13. 1994 SEBI (Annual Report) Rules, 1994

14. 1994 SEBI (Form of Annual Statement of Accounts and Records) Rules, 1994

15. 1993 SEBI (Appeal to Central Government) Rules, 1993

16. 1992 SEBI (Terms and Conditions of Service of Chairman and Members) Rules, 1992

17. 1986 Securities Contracts (Reference to the Company Law Board) Rules, 1986

18. 1957 Securities Contracts (Regulations) Rules, 1957

REGULATIONS

1. 2018 SEBI (Settlement Proceedings) Regulations, 2018

2. 2018 Securities and Exchange Board of India (Appointment of Administrator and Procedure for Refunding to the Investors) Regulations, 2018

3. 2018 Securities and Exchange Board of India (Buy-back of Securities) Regulations, 2018

4. 2018 Securities and Exchange Board of India (Depositories and Participants) Regulations, 2018

5. 2018 Securities and Exchange Board of India (Issue Of Capital And Disclosure Requirements) Regulations, 2018 [Last amended on December 31, 2018]

6. 2018 Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018

7. 2015 SEBI (Issue and Listing of Debt Securities by Municipalities) Regulations, 2015 [Last amended on February 15, 2017]

8. 2015 SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Last amended on November 30, 2018)

9. 2015 SEBI (Procedure for Search and Seizure) Repeal Regulations, 2015

10. 2015 SEBI (Prohibition of Insider Trading) Regulations, 2015 (Last amended on January 21, 2019)

11. 2014 SEBI (Foreign Portfolio Investors) Regulations, 2014 [Last amended on December 31, 2018]

12. 2014 SEBI (Infrastructure Investment Trusts) Regulations, 2014 [Last amended on December 15, 2017]

13. 2014 SEBI (Real Estate Investment Trusts) Regulations, 2014 (last amended on December 15, 2017)

14. 2014 SEBI (Research Analysts) Regulations, 2014 [Last amended on December 08, 2016]

15. 2014 SEBI (Share Based Employee Benefits) Regulations, 2014 [Last amended on March 6, 2017]

16. 2013 SEBI (Investment Advisers) Regulations 2013 [Last amended on December 08, 2016]

17. 2013 SEBI (Issue and Listing of Non-Convertible Redeemable Preference Shares) Regulations, 2013 [last amended on October 09, 2018]

18. 2012 SEBI (Alternative Investment Funds) Regulations, 2012 [Last amended on June 01 2018]

19. 2011 SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 [last amended on September 11, 2018]

20. 2011 SEBI {KYC (Know Your Client) Registration Agency} Regulations, 2011 [last amended on March 6, 2017]

21. 2009 SEBI (Delisting of Equity Shares) (Amendment) Regulations, 2016

22. 2009 SEBI (Delisting of Equity Shares) Regulations, 2009 [Last amended on November 14, 2018]

23. 2009 SEBI (Investor Protection and Education Fund) Regulations, 2009 [Last amended on March 6, 2017]

24. 2009 SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (Last amended on February 12, 2018)

25. 2008 SEBI (Intermediaries) Regulations, 2008 [Last amended on November 21, 2017]

26. 2008 SEBI (Issue and Listing of Debt Securities)Regulations, 2008 [Last amended on October 09, 2018]

27. 2008 Securities and Exchange Board of India (Issue and Listing of Securitised Debt Instruments and Security Receipts) Regulations, 2008 [Last amended on October 09, 2018]

28. 2007 SEBI (Certification of Associated Persons in the Securities Markets) Regulations, 2007 [Last amended on February 07, 2014]

29. 2006 SEBI (Regulatory Fee on Stock Exchanges) Regulations, 2006 [Last amended on October 23, 2018]

30. 2004 SEBI (Self Regulatory Organisations) Regulations, 2004 [last amended on March 6, 2017]

31. 2003 SEBI (Central Database Of Market Participants) Regulations, 2003 [Last amended on January 07, 2014]

32. 2003 SEBI (Ombudsman) Regulations, 2003 [Last Amended on Nov 09, 2006]

33. 2003 SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 [Last amended on December 31, 2018]

34. 2002 SEBI (Issue of Sweat Equity) Regulations, 2002

35. 2001 SEBI (Employees' Service) Regulations, 2001 [Last amended on June 01, 2018]

36. 2001 SEBI (Employees’ Service) Regulations, 2001 [as amended on August 13, 2018]

37. 2001 SEBI (Procedure for Board Meetings) Regulations, 2001

38. 2000 SEBI (Foreign Venture Capital Investors) Regulations 2000 [last amended on March 6, 2017]

39. 1999 SEBI (Collective Investment Schemes) Regulations, 1999 [Last amended on March 06, 2017]

40. 1999 SEBI (Credit Rating Agencies) Regulations, 1999 [last amended on September 11, 2018]

41. 1998 SEBI (Buy Back Of Securities) Regulations, 1998 [Last amended on on March 6, 2017]

42. 1996 SEBI (Custodian Of Securities) Regulations, 1996 [Last amended on January 1, 2019]

43. 1996 SEBI (Mutual Funds) Regulations, 1996 [Last amended on December 13 2018]

44. 1994 SEBI (Bankers to an Issue) Regulations, 1994 [Last amended on May 30, 2018]

45. 1993 SEBI (Debenture Trustee) Regulations, 1993[Last amended on July 13, 2017]

46. 1993 SEBI (Portfolio Managers) Regulations, 1993 [Last amended on March 6, 2017]

47. 1993 SEBI (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 [Last amended on May 30, 2018]

48. 1993 SEBI (Underwriters) Regulations, 1993 [Last amended on March 6, 2017]

49. 1992 SEBI (Merchant Bankers) Regulations, 1992 [Last amended on March 6, 2017]

50. 1992 SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992 [Last amended on March 13, 2018]

GUIDELINES

1. Mar 27, 2015 SEBI (International Financial Services Centres) Guidelines, 2015

2. Sep 03, 2009 SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 (As updated upto 3rd September 2009)

3. Aug 20, 2009 SEBI (DIP) Guidelines updated upto August 20, 2009

4. Aug 11, 2009 SEBI (Aid for Legal Proceedings) Guidelines, 2009

5. Jul 31, 2009 SEBI (DIP) Guidelines updated upto July 31, 2009

6. Jul 09, 2009 SEBI (DIP) Guidelines updated upto July 9, 2009

7. Apr 20, 2009 SEBI (DIP) Guidelines updated upto April 20, 2009

8. Feb 24, 2009 (Disclosure and Investor Protection) Guidelines 2000 [updated upto Feb 24, 2009]

9. Dec 08, 2008 SEBI (DIP) Guidelines, 2000 updated upto December 8, 2008

10. Nov 05, 2008 Framework for recognition and supervision of stock exchanges / platforms of stock exchanges for small and medium enterprises

11. Aug 28, 2008 SEBI (Disclosure and Investor Protection Guidelines) 2000 (Amended upto August 28, 2008)

12. Aug 04, 2008 SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 -(Amended up to August 04, 2008)

13. Jan 18, 2006 Guidelines for Anti-money laundering measures

14. Jan 21, 2004 Amendment to the SEBI (Informal Guidance ) Scheme 2003

15. Jun 24, 2003 SEBI (Informal Guidance) Scheme 2003

16. Feb 17, 2003 SEBI (Delisting of Securities) Guidelines, 2003 - as amended upto January 31, 2006

17. Jul 10, 1999 Guidelines for opening of Trading Terminals Abroad

CIRCULARS

Securities and Exchange Board of India (SEBI) has been issuing various circulars/directions from time to time. In order to enable the users to have an access to all the applicable circulars/directions at one place, Master Circular for Depositories has been prepared. This Master Circular is a compilation of the circulars/communications issued by SEBI up to December 31, 2010 and shall come into force from the date of its issue.

1. Jul 10, 2018 Master Circular for Mutual Funds

2. Jul 04, 2018 Guidelines on Anti-Money Laundering (AML) Standards and Combating the Financing of Terrorism (CFT) /Obligations of Securities Market Intermediaries under the Prevention of Money Laundering Act, 2002 and Rules framed there under

3. Jun 01, 2018 Master Circular for Stock Brokers

4. May 11, 2018 Master Circular for Underwriters

5. May 02, 2018 Master Circular for Credit Rating Agencies

6. Apr 09, 2018 Master Circular for Debenture Trustees (DTs)

7. Dec 16, 2016 Master Circular for Stock Exchange and Clearing Corporation

8. Dec 15, 2016 Master Circular for Depositories

9. Sep 14, 2016 Master Circular for Mutual Funds

10. May 26, 2015 Master Circular for Stock Exchange and Clearing Corporation

11. May 07, 2015 Master Circular for Depositories

12. Oct 01, 2014 Master Circular for Mutual Funds

13. May 20, 2014 Master Circular for Stock Exchanges - 2014

14. Apr 07, 2014 Master Circular for Depositories

15. Sep 11, 2013 Master Circular for Mutual Funds

16. Apr 17, 2013 Master Circular for Stock Exchange - Cash Market

17. Apr 15, 2013 Master Circular for Depositories

18. Apr 01, 2013 Master Circular on Matters relating to Exchange Traded Derivatives

19. May 11, 2012 Master Circular for Mutual Funds

20. Apr 13, 2012 Master Circular for Depositories

21. Apr 13, 2012 Master Circular for Stock Exchanges / Cash Market

22. Jan 02, 2012 Master Circular on Matters relating to Exchange Traded Derivatives

23. Jan 07, 2011 Master Circular for Mutual Funds

24. Dec 31, 2010 AML/CFT- Master Circular

25. Dec 31, 2010 Master Circular for Depositories

26. Dec 31, 2010 Master circular for Exchange Traded Derivatives

27. Dec 31, 2010 Master Circular for Stock Exchange - Cash Market

28. Dec 31, 2010 Master Circular for Stock Exchanges and Depositories

29. Dec 31, 2010 Master Circular on Administration of Stock Exchanges, Arbitration in recognised Stock Exchanges and Stock Exchanges / trading platform for Small & Medium Enterprises including guidelines for Market Makers

30. Apr 06, 2010 Master Circular for Depositories

31. Apr 06, 2010 Master Circular for Stock Exchange - Cash Market

32. Apr 06, 2010 Master Circular on Allotment of codes to Stock Exchanges, Subsidiary management by Stock Exchanges, Governance of recognised Stock Exchanges and Arbitration in recognised Stock Exchanges

33. Mar 17, 2010 Master Circular on Oversight of Members (Stock Brokers/Trading Members/Clearing Members of any Segment of Stock Exchanges and Clearing Corporations)

34. Feb 12, 2010 Master Circular on Anti-Money Laundering (AML) and Combating Financing of Terrorism (CFT) Standards

35. Jan 01, 2010 Master Circular-Mutual Funds

36. Dec 19, 2008 Master Circular on Anti Money Laundering and Combating Financing of Terrorism (AML and CFT) Standards-PDF

ANNEXURE –B

POLO HIGHLIGHTS

SYNOPSIS- from NCLT Petition

The matter in brief is about mismanagement and oppression of the minority shareholders of the company. The 3 main causes of this Petition are:

A. Allotment of huge number of shares to the promoters in a very irregular manner and in contravention of various Laws, Rules & Regulations.

B. Mismanagement and siphoning of funds

C. Irregularities in the conduct of Annual General Meetings (AGM) and not implementing the decisions taken by the General Body of Members.

1. Minority shareholders have lost all faith and confidence on the Promoters. 99.99% of e-votes cast in the last AGM were for the removal of the present Promoters – the Dahiya family. Postal Ballots were manipulated .

2. The Respondents no. 2 to 9 are mismanaging the affairs of the Company. The shareholders/members are most ill treated. Funds have been siphoned away by the promoters- Respondent no. 2&3. The voice of shareholders/members is not heard. The democratic process of Annual General Meeting is scuttled. The Shareholders are oppressed. The affairs of the Company have been and are being conducted in a manner, oppressive to the Petitioner and other members of the Respondent No. 1 Company and are prejudicial to public interest and to the interests of the Company.

3. Material changes have been brought about in the control of the Company, by an alteration in the ownership of the Company’s shareholding, and that by reason of such change, the affairs of the Company are being conducted in a manner prejudicial to company’s interests or interest of its members.

4. The capital of the company increased by 658% since the Public Issue. The entire further capital was issued to the promoters. Minority shareholders were denied opportunity to get allotted any shares.

5. The Hon’ble High Court for the States of Punjab and Haryana at Chandigarh passed an order approving the scheme of amalgamation of M/s Polo Hotels Ltd. and M/s A.R.D. Realty (P) Ltd. on 18.11.11 but allotment of Equity shares pursuant to the scheme was made even before the High Court Order i.e. on 1.4.11. No shares can be allotted pursuant to merger, till the scheme itself has not been approved by the Hon’ble High Court.

6. Almost 300% of the capital of the company was issued under this Amalgamation scheme. First on 1.4.11 directly as Equity and subsequently on 7.10.14, claiming conversion of CCPs into equity. Promoters holding jumped by 891% i.e. from 12,75,650 No. of shares to 1,13,63,414. Compulsory Convertible Preference Shares (CCPS) of Rs.10/- each, issued under the scheme, were not converted into Equity, yet falsely classified as Equity. The Promoters fraudulently got these CCPs Listed as equity and subsequently sold them to innocent investors. This is a fraud against the innocent investors. Investors rely on the basic due diligence done by Stock Exchange- BSE and the Regulators, MCA and SEBI.

7. On 9th December 2016, illegal issue of 88,88,889/- Equity shares to the promoters on preferential basis amounting to about 65.92% of the Pre-issue capital of the Company increasing promoter’s holding by 207% was made.

8. Open Offers triggered by the Respondents No. 2 & 3 under SEBI Takeover Regulations, are not complied with and pending for years. First such offer is pending for 18 years. Other 5 Open offers are pending for different no. of years ranging from about 1 to 3 year.

9. On 29 August 2017, The Hon’ble Securities Appellate Tribunal (SAT) reprimanded the Respondent no.2 when he was trying to abuse the process of law and further delay the Offer. A cost of Rs.50,000/- was also imposed on the Respondent No.2. Copy of the order at Annexure A-10

10. Notice of meetings are not served properly to the members. Hindrances are placed in the democratic process of Members meetings, Affairs of the company are grossly mismanaged:

i. The voting results are manipulated.

ii. The Members Register is falsified

iii. The decisions and Resolutions passed by the members are not implemented .

iv. False Secretarial Report certifying that all the legal compliances are in order is filed.

v. Incorrect Scrutinisers’ Report is filed

vi. Every year majority of the Directors skip the AGM

vii. Books of accounts are falsified.

viii. Corporate Governance is very bad.

ix. In the last more than a decade, or ever since it came under the control of the present management, the Company has never paid dividend.

x. On the asset valued at about 233 Crores. The annual revenue is a meagerly Rs 1.7 crs. and Profit after tax (PAT) 1.67 Lacs.

xi. Because of the mismanagement, the aggregate market value of the Company is about 10-13 crs., about 4-5% of its true worth.

xii. No proper accounting is being done for the biggest item on its Balance sheet—Capital Work in Progress. This represents amount spent on building a 5 star hotel- Rs. 74.90 crores. - ( It is only a structure of a building on which Respondent no 1 claims to have spent Rs 74.90 crores without giving any details of the expenditure incurred. A substantial sum out of Rs 74.90 crores has been siphoned out by the Promoters. A special audit by an independent firm would prove this beyond doubt.

xiii. The reported profit of the Company is much less now than what the Company was earning when the promoters were not operating the hotel and it was given on lease rent.

xiv. For personal benefit of the promoters, guarantee is given by the company for M/s ASD Tobacco (P) Ltd. which has been invoked by Bank of India.

xv. Promoters were defeated in the 33rd AGM held on 25.9.17 but to save them , votes cast on the basis of these 88,88,889 shares were illegally counted in the favour of the Promoters, to the peril of the minority shareholders.

xvi. The Resolutions passed by the majority of the shareholders in the 33^rd AGM held on 25.9.17, for removing the Promoter directors and appointing new auditors are not being implemented by manipulating the results as stated above.

xvii. Siphoning of funds—

o Funds borrowed for 5 star hotel project have been misused for personal benefits as a result the project is lying incomplete. This was to become operational by June 2015.

o Under reporting of Operational income-- in the year ended 31.3.14 ( the last full year of lease) the lease rent was 82 Lakhs and PBT was 29 Lakhs. For the year ended 31.3.17, The operational income (total sales) is 175 Lakhs and a PBT of 2 lakhs. The company was earning much higher when it was not operating its Hotel but had leased it out.

xviii. The mismanaged company is defaulting in payment of its statutory dues and dues to its bankers and creditors. The Allahabad Banks has published a POSSESSION Notice.

xix. In the year 2011-12 the Company acquired about 4.5 acres of land at a substantial cost of 10,00,00,000/- (Rupees ten Crores) for amusement park, 5 Star Hotel and Hospital. There is no whisper about the amusement park and hospital project. The hotel project that was to be operational from 2015 is completely stalled. It seems that the whole idea of Amalgamation was just to provide an opportunity to the promoters to get substantial number of equity shares allotted.

ANNEXURE C

SAST AMENDMENT LIST

1. March 26, 2013 by the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2013 vide No. LAD-NRO/GN/2012 13/36/7368.

in regulation 10, in sub-regulation (1), after clause (i) the following clause shall be inserted, namely:- "(j) increase in voting rights arising out of the operation of sub-section (1) of section 106 of the Companies Act, 2013 or pursuant to a forfeiture of shares by the target company, undertaken in compliance with the provisions of the Companies Act, 2013 and its articles of association."

2. October 8, 2013 by the SEBI (Listing of Specified Securities on Institutional Trading Platform) Regulations, 2013 vide No. LAD-NRO/GN/2013-14/28/6720.3

in regulation 1,- (i) in sub-regulation (3), for the full stop, the symbol ":" shall be substituted; (ii) after sub-regulation (3), the following proviso shall be inserted, namely,- "Provided that these regulations shall not apply to direct and indirect acquisition of shares or voting rights in, or control over a company listed on the institutional trading platform of a recognised stock exchange."

3. May 23, 2014 by the SEBI (Payment of Fees) (Amendment) Regulations, 2014 vide Notification No. LAD-NRO/GN/2014-15/03/1089.

in regulation 10, in sub-regulation (7), for the words "twenty five thousand”, the words “one lakh fifty thousand" shall be substituted; (ii) in regulation 11, in sub-regulation (4), for the words "fifty thousand”, the words “three lakh" shall be substituted; (iii)in regulation 16, in sub-regulation (1), the table shall be substituted with the following, namely,- " Sl. No. Consideration payable under the Open Offer Fee

a. Upto ten crore rupees. Five lakh rupees ( 5,00,000)

b. More than ten crore rupees, but less than or equal to one thousand crore rupees. 0. 5 per cent of the offer size

c. More than one thousand crore rupees. Five crore rupees ( 5,00,00,000) plus 0.125 per cent of the portion of the offer size in excess of one thousand crore rupees (1000,00,00,000).

4. March 24, 2015 by the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2015 vide No. LAD-NRO/GN/2014-15/28/542.

In the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 ─ (I) After regulation 5, the following regulation shall be inserted, namely:-

Delisting offer. "5A. (1) Notwithstanding anything contained in these regulations, in the event the acquirer makes a public announcement of an open offer for acquiring shares of a target company in terms of regulations 3, 4 or 5, he may delist the company in accordance with provisions of the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009:

Provided that the acquirer shall have declared upfront his intention to so delist at the time of making the detailed public statement .

(2) Where an offer made under sub-regulation (1) is not successful,-

(i) on account of non–receipt of prior approval of shareholders in terms of clause (b) of sub-regulation (1) of regulation 8 of Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009; or

(ii) in terms of regulation 17 of Securities and Exchange Board of India

(Delisting of Equity Shares) Regulations, 2009; or

(iii) on account of the acquirer rejecting the discovered price determined by the book building process in terms of sub-regulation (1) of regulation 16 of Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009, the acquirer shall make an announcement within two working days in respect of such failure in all the newspapers in which the detailed public statement was made and shall comply with all applicable provisions of these regulations.

(3) In the event of the failure of the delisting offer made under sub regulation (1), the acquirer, through the manager to the open offer, shall within five working days from the date of the announcement under sub regulation (2), file with the Board, a draft of the letter of offer as specified in sub-regulation (1) of regulation 16 and shall comply with all other applicable provisions of these regulations:

Provided that the offer price shall stand enhanced by an amount equal to a sum determined at the rate of ten per cent per annum for the period between the scheduled date of payment of consideration to the shareholders and the actual date of payment of consideration to the shareholders.

Explanation: For the purpose of this sub-regulation, scheduled date shall be the date on which the payment of consideration ought to have been made to the shareholders in terms of the timelines in these regulations.

(4) Where a competing offer is made in terms of sub-regulation (1) of regulation

20,-

(a) the acquirer shall not be entitled to delist the company;

(b) the acquirer shall not be liable to pay interest to the shareholders on account of delay due to competing offer;

(c ) the acquirer shall comply with all the applicable provisions of these regulations and make an announcement in this regard, within two working days from the date of public announcement made in terms of sub-regulation (1) of regulation 20, in all the newspapers in which the detailed public statement was made.

(5) Shareholders who have tendered shares in acceptance of the offer made under sub-regulation (1), shall be entitled to withdraw such shares tendered, within 10 working days from the date of the announcement under sub regulation (2) .

(6) Shareholders who have not tendered their shares in acceptance of the offer made under sub-regulation (1) shall be entitled to tender their shares in acceptance of the offer made under these regulations. "

(II) After sub-regulation (6) of regulation 18, the following sub-regulation shall be inserted:

"(6A) The acquirer shall facilitate tendering of shares by the shareholders and settlement of the same, through the stock exchange mechanism as specified by the Board."

(III) In sub-regulation (1) of regulation 22, after the first proviso, the following proviso shall be inserted, namely:-

"Provided further that in case of a delisting offer made under regulation 5A, the acquirer shall complete the acquisition of shares attracting the obligation 4 to make an offer for acquiring shares in terms of regulations 3, 4 or 5, only after making the public announcement regarding the success of the delisting proposal made in terms of sub-regulation (1) regulation 18 of Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009."

5. May 5, 2015 by the SEBI (Substantial Acquisition of Shares and Takeovers) (Second Amendment) Regulations, 2015 vide No. SEBI/LAD-NRO/OIAE/GN/2015-16/004.

in regulation 10, after clause (h) of sub-regulation (1) the following shall be inserted namely:-

" (i) Conversion of debt into equity under Strategic Debt Restructuring Scheme - Acquisition of equity shares by the consortium of banks, financial institutions and other secured lenders pursuant to conversion of their debt as part of the Strategic Debt Restructuring Scheme in accordance with the guidelines specified by the Reserve Bank of India:

Provided that the conditions specified under sub-regulation (5) or (6) of regulation 70 of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, as may be applicable, are complied with. " U.K.

6. August 14, 2015 by the SEBI (Substantial Acquisition of Shares and Takeovers) (Third Amendment) Regulations, 2015 vide No. SEBI/LAD NRO/GN/2015-16/009.

in regulation 1, in sub-regulation (3), the proviso shall be substituted by the following, namely:- "Provided that these regulations shall not apply to direct and indirect acquisition of shares or voting rights in, or control over a company listed without making a public issue, on the institutional trading platform of a recognised stock exchange."

7. December 22, 2015 by the SEBI (Substantial Acquisition of Shares and Takeovers) (Fourth Amendment) Regulations, 2015 vide No. SEBI/LAD-NRO/GN/2015-16/026.

in regulation 10, in sub-regulation (1), after clause (i) the following clause shall be inserted, namely:-

"(j) increase in voting rights arising out of the operation of sub-section (1) of section 106 of the Companies Act, 2013 or pursuant to a forfeiture of shares by the target company, undertaken in compliance with the provisions of the Companies Act, 2013 and its articles of association."

8. February 17, 2016 by the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2016 vide No. SEBI/LAD-NRO/GN/2015-16/035.

in regulation 3, after sub- regulation (3), the following sub regulation shall be inserted, namely,-

“(4) Nothing contained in this regulation shall apply to acquisition of shares or voting rights of a company by the promoters or shareholders in control, in terms of the provisions of Chapter VI-A of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.”

9. May 25, 2016 by the SEBI (Substantial Acquisition of Shares and Takeovers) (Second Amendment) Regulations, 2016 vide No. SEBI/ LAD-NRO/GN/2016-17/002.

In regulation 2, in sub-regulation (1),-

(1) clause (ze) shall be re-numbered as clause (zf);

(2) after clause (zd) and before clause (zf) the following shall be inserted, namely,-

"(ze) "wilful defaulter" means any person who is categorized as a wilful defaulter by any bank or financial institution or consortium thereof, in accordance with the guidelines on wilful defaulters issued by the Reserve Bank of Indiaand includes any person whose director, promoterorpartneris categorized as such;”

(II) Afterregulation 6 and before regulation 7, the following shall be inserted, namely,-

"6A. Notwithstanding anything contained in these regulations, no person who is a wilful defaulter shall make a public announcement of an open offer for acquiring sharesor enter into any transaction that would attract the obligation to make a public announcement of an open offer for acquiring shares under these regulations:

Provided that this regulation shall not prohibit the wilful defaulter from making a competing offer in accordance with regulation 20 of these regulations upon any other person making an open offer for acquiring shares of the target company."

10. March 6, 2017 by SEBI (Payment of Fees and Mode of Payment) (Amendment) Regulations, 2017 vide No. SEBI/LAD/NRO/GN/2016-17/037 read with notification dated March 29, 2017 vide No. SEBI/LAD/NRO/GN/2016-17/38.

in sub-regulation 7 of regulation 10, after the words “one lakh fifty thousand” and before the word “by”, the words “by way of direct credit in the bank account through NEFT/RTGS/IMPS or any other mode allowed by RBI or” shall be inserted;

in sub-regulation 4 of regulation 11, -

a. the words “three lakh” shall be substituted with the words “five lakh”;

b. after the symbol “,” and before the word “by”, the words “by way of direct credit in the bank account through NEFT/RTGS/IMPS or any other mode allowed by RBI or” shall be inserted.

in sub-regulation 1 of regulation 16, after the word and symbol “scale,” and before the word “by”, the words “by way of direct credit in the bank account through NEFT/RTGS/IMPS or any other mode allowed by RBI or” shall be inserted.

11. August 14, 2017 by SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2017 No. SEBI/LAD-NRO/GN/2017-18/015.4

in regulation 10, in sub-regulation (1), -

i. in clause (d), -

a. in sub-clause (ii), after the word “court” and before the word “or”, the words “or a tribunal” shall be inserted;

b. in sub-clause (iii), after the word “court” and before the word “or”, the words “or a tribunal” shall be inserted.

ii. after clause (d), the following new clause shall be inserted, namely,-

“(da) acquisition pursuant to a resolution plan approved under section 31 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016).”

iii. clause (i) shall be substituted with the following new clause, namely, -

“(i) Acquisition of shares by the lenders pursuant to conversion of their debt as part of a debt restructuring scheme implemented in accordance with the guidelines specified by the Reserve Bank of India:

Provided that the conditions specified under sub-regulation (5) of regulation 70 of the Securities and

Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 are complied with.”

iv. after clause (i), the following new clause shall be inserted, namely,-

“(ia) Acquisition of shares by the person(s), by way of allotment by the target company or purchase from the lenders at the time of lenders selling their shareholding or enforcing change in ownership in favour of such person(s), pursuant to a debt restructuring scheme implemented in accordance with the guidelines specified by the Reserve Bank of India:

Provided that in respect of acquisition by persons by way of allotment by the target company, the conditions specified under sub-regulation (6) of regulation 70 of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 are complied with:

Provided further that in respect of acquisition by way of purchase of shares from the lenders, the acquisition shall be exempted subject to the compliance with the following conditions:

(a) the guidelines for determining the purchase price have been specified by the Reserve Bank of India and that the purchase price has been determined in accordance with such guidelines;

(b) the purchase price shall be certified by two independent qualified valuers, and for this purpose ‘valuer’ shall be a person who is registered under section 247 of the Companies Act, 2013 and the relevant Rules framed thereunder:

Provided that till such date on which section 247 of the Companies Act, 2013 and the relevant Rules come into force, valuer shall mean an independent merchant banker registered with the Board or an independent chartered accountant in practice having a minimum experience of ten years;

(c) the specified securities so purchased shall be locked-in for a period of at least three years from the date of purchase;

(d) the lock-in of equity shares acquired pursuant to conversion of convertible securities purchased from the lenders shall be reduced to the extent the convertible securities have already been locked-in;

(e) a special resolution has been passed by shareholders of the issuer before the purchase;

(f) the issuer shall, in addition to the disclosures required under the Companies Act, 2013 or any other applicable law, disclose the following information pertaining to the proposed acquirer(s) in the

explanatory statement to the notice for the general meeting proposed for passing special resolution as stipulated at clause (e) of this sub-regulation:

a. the identity including of the natural persons who are the ultimate beneficial owners of the

shares proposed to be purchased and/ or who ultimately control the proposed acquirer(s);

b. the business model;

c. a statement on growth of business over the period of time;

d. summary of audited financials of previous three financial years;

e. track record in turning around companies, if any;

f. the proposed roadmap for effecting turnaround of the issuer.

(g) applicable provisions of the Companies Act, 2013 are complied with.”.

12. June 01, 2018 by SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2018 No. SEBI/LAD-NRO/GN/2018/20.

in regulation 3, in sub-regulation (2), after the proviso and before the explanation to sub-regulation (2), the following proviso shall be inserted, namely,-

2"Provided further that,acquisition pursuant to a resolution plan approved under section31 of the Insolvency and Bankruptcy Code, 2016 [No. 31of 2016]shall be exempt from the obligation under the proviso to the sub-regulation (2)of regulation 3"

13. September 11, 2018 by SEBI (Substantial Acquisition of Shares and Takeovers) (Second Amendment) Regulations, 2018 No. SEBI/LAD-NRO/GN/2018/33.

(1) in regulation 2:

(a) in sub-regulation (1), in clause (j), the words “is made” shall be substituted with the following, namely:-

“is required to be made under these regulations”

(b) in sub-regulation (1), after clause (j) and before clause (k), the following clause shall be inserted, namely;-

“(ja) “fugitive economic offender” shall mean an individual who is declared a fugitive economic offender under section 12 of the Fugitive Economic Offenders Act, 2018 (17 of 2018).”

“(ma) “listing regulations” means the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.”

(d) in sub-regulation (1), clause (r) shall be substituted with the following, namely:-

“(r) “postal ballot” means a postal ballot as provided for under Rule 22 of the Companies (Management and Administration) Rules, 2014 made under the Companies Act, 2013.”

(e) in sub-regulation (2), the words and figures “Companies Act, 1956 (1 of 1956)” shall be substituted with the words and figures “Companies Act, 2013 (18 of 2013)”

(2) in regulation 5A,-

(a) in sub-regulation (1), in the proviso, after the words “detailed public statement”, the following words and figures shall be inserted, namely:-

“and a subsequent declaration of delisting for the purpose of the offer proposed to be made under sub regulation (1) will not suffice”

(b) sub-regulation (3) shall be substituted with the following, namely:-

“(3) In the event of failure of the delisting offer made under sub-regulation (1), the open offer obligations shall be fulfilled by the acquirer in the following manner:

(i) the acquirer, through the manager to the open offer, shall within five working days from the date of the announcement under sub-regulation (2), file with the Board, a draft of the letter of offer as specified in sub-regulation (1) of regulation 16; and

(ii) shall comply with all other applicable provisions of these regulations.

(3) after regulation 6A and before regulation 7, the following regulation shall be inserted, namely;-

“6B. Notwithstanding anything contained in these regulations, no person who is a fugitive economic offender shall make a public announcement of an open offer or make a competing offer for acquiring shares or enter into any transaction, either directly or indirectly, for acquiring any shares or voting rights or control of a target company.”

(4) in regulation 7, in sub-regulation (2), the words “total shares of” appearing after the words “additional ten per cent of the”, shall be substituted by the words “voting rights in”.

(5) in regulation 9,-

(a) the words “listing agreement”, wherever occurring, shall be substituted by the words “listing regulations”.

(b) in sub-regulation (5), in clause (c), in the explanation, the words and figures “subsection (1A) of 81 of the Companies Act, 1956 (1 of 1956)” shall be substituted by the words and figures “clause (c) of sub-section (1) of section 62 of the Companies Act, 2013 (18 of 2013)”.

(6) in regulation 10,-

(a) the words “listing agreement”, wherever occurring, shall be substituted by the words “listing regulations or as the case may be, the listing agreement.”

(b) in sub-regulation (1), in clause (a), after sub-clause (iii) and before sub-clause (iv), the following explanation shall be inserted, namely:-

“Explanation: For the purpose of this sub-clause, the company shall include a body corporate, whether Indian or foreign.”

(c) in sub-regulation (1), in clause (h), the words and figures “sub-section (2) of section 87 of the Companies Act, 1956 (1 of 1956)” shall be substituted by the words and figures “sub-section (2) of section 47 of the Companies Act, 2013 (18 of 2013)”.

(d) in sub-regulation (4), in clause (c), in the first proviso, in sub-clause (i), the words and figures “section 77A of the Companies Act, 1956 (1 of 1956),” shall be substituted by the words and figures “section 68 of the Companies Act, 2013 (18 of 2013)”.

(e) in sub-regulation (4), in clause (c), in the first proviso, in sub-clause (iii), the words and figures “section 77A of the Companies Act, 1956 (1 of 1956),” shall be substituted by the words and figures “section 68 of the Companies Act, 2013 (18 of 2013)”.

(7) in regulation 17, in sub-regulation (3), after the proviso the following explanation shall be inserted, namely:-

“Explanation: The cash component of the escrow account as referred to in clause (a) above may be maintained in an interest bearing account, subject to the merchant banker ensuring that the funds are available at the time of making payment to the shareholders.”

(8) in regulation 18,-

(a) in sub-regulation (2), before the first proviso, the following explanation shall be inserted, namely:-

“Explanation:

(i) Letter of offer may also be dispatched through electronic mode in accordance with the provisions of Companies Act, 2013.

(ii) On receipt of a request from any shareholder to receive a copy of the letter of offer in physical format, the same shall be provided.

(iii) The aforesaid shall be disclosed in the letter of offer.”

(b) in sub-regulation (4), the words “three working days” shall be substituted by the words “one working day”.

(9) in regulation 20, in sub-regulation (9), in the proviso, the words “three working days” shall be substituted by the words “one working day”.

(10) in regulation 22, in sub-regulation (2), the words “one hundred per cent of the” shall be substituted by the words “the entire”.

(11) in regulation 24, in sub-regulation (1), in the first proviso, the words “one hundred per cent of the” shall be substituted by the words “the entire”.

(12) in regulation 29, in sub-regulation (3), after the words “or the acquisition” and before the words “of shares or voting rights”, the words “or the disposal” shall be inserted.

(13) in regulation 32, in sub-regulation (1), after the words “issue such directions” and before the words “as it deems fit”, the words “or any other order” shall be inserted.

(14) in regulation 33,

(a) the words and symbol “shall have the power to issue directions through guidance notes or circulars:” shall be substituted by the words “may issue clarifications or guidelines from time to time”.

(b) the proviso shall be omitted

(15) in regulation 35, in sub-regulation (1), the word “stand” shall be substituted by the word “stands”.

SECURITIES AND EXCHANGE BOARD OF INDIA (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) (THIRD AMENDMENT) REGULATIONS, 2018 No. SEBI/LAD-NRO /GN/ 2018/55

14. December 31, 2018 by The SEBI (Substantial Acquisition of Shares and Takeovers) (Third Amendment) Regulations, 2018 were published in the Gazette of India on December 31, 2018 vide No. No. SEBI/LAD-NRO /GN/ 2018/55.

in regulation 29, in sub-regulation (4), -

i. in the proviso, after the word “institution” and before the words “as pledgee”, the words “or a housing finance company or a systemically important non-banking financial company” shall be inserted; and

ii. after the proviso, the following Explanation shall be inserted, namely, -

“Explanation. - For the purpose of this sub-regulation, -

A. a “housing finance company” means a housing finance company registered with the National Housing Bank for carrying on the business of housing finance and is either deposit taking or having asset size worth rupees five hundred crores or more; and

B. a “systemically important non-banking financial company” shall have the same meaning as assigned to it in the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018.”

ANNEXURE- D

FAQs – Graded Surveillance Measures (GSM) Version – 4.0

Q 1. What is the purpose behind introduction of GSM framework?

Answer – Securities and Exchange Board of India (SEBI) and Exchanges in order to enhance market integrity and safeguard interest of investors, have been introducing various enhanced surveillance measures such as reduction in price band, periodic call auction and transfer of securities to Trade to Trade category from time to time.

Additionally, BSE under the able guidance from SEBI and in order to protect interest of investors, has introduced various pre-emptive, proactive surveillance measures from time to time which inter-alia include policy measures (like categorization of companies under X/XT sub-segment, periodic price bands), surveillance actions (like suspension of trading of companies due to surveillance concerns) and steps towards enhanced corporate governance (like the facility for companies for on-line filing of listing disclosures).

The main objective of these measures is to -

 Alert and advise investors to be extra cautious while dealing in these securities and

 Advise market participants to carry out necessary due diligence while dealing in these securities.

In continuation with the various measures already implemented including the ones mentioned above, SEBI and Exchanges, pursuant to discussions in joint surveillance meetings, have decided that along with the aforesaid measures there shall be Graded Surveillance Measures (GSM) on securities which witness an abnormal price rise not commensurate with financial health and fundamentals like Earnings, Book value, Fixed assets, Net worth, P/E multiple, etc.

Q 2. When will the GSM framework come into force?

Answer – The GSM framework monitoring has come into force with effect from 14 March 2017. The Exchange, in coordination with other Exchanges, has published notices on February 23, 2017 informing the market participants about introduction of GSM framework.

The URL to the notice issued in this regard is given below for ready reference-

http://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page=20170223-44 Public

Further, the list of shortlisted securities qualifying for application of GSM has also been published on March 03, 2017. The URL to the notice issued in this regard is given below for ready reference-

http://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page=20170303-29

Q 3. What are the main aspects of GSM framework?

Answer – As mentioned earlier and in Exchange Notice No. 20170223-44 dated 23 February 2017, the framework shall be applicable for companies that witness abnormal price rise that is not commensurate with financial health and fundamentals of the company which inter-alia includes factors like earning, book value, fixed assets, net worth, P/E multiple, etc.

The securities identified under GSM framework as per above shall be monitored and at an appropriate time subject to satisfaction of certain pre-defined objective criteria, shall attract graded surveillance measures.

Q 4. What are the various surveillance actions under GSM? And what do they signify?

Answer - The underlying principle behind defining various stages under GSM framework is to alert the market participants that they need to be extra cautious and diligent while dealing in such securities as the need has been felt to place them under higher level of surveillance.

At present, there are 6 stages defined under GSM framework viz. From Stage I to Stage VI. Surveillance action has been defined for each stage. Once the security goes into a particular stage, it shall attract the corresponding surveillance action. The security shall be placed in a particular stage by the exchange based on monitoring of price movement and predefined objective criteria.

Stage wise Surveillance actions are listed below – Stage	Surveillance Actions
I	Transfer to trade for trade with price band of 5% or lower as applicable
II	Trade for trade with price band of 5% or lower as applicable and Additional Surveillance Deposit (ASD) of 100% of trade value to be collected from Buyer

ANNEXURE: E

Additional Surveillance Measure (ASM)

Frequently asked questions

Q 1. What is the purpose behind introduction of ASM Framework?

In order to enhance market integrity and safeguard interest of investors, Securities and Exchange Board of India (SEBI) and Exchanges, have been introducing various enhanced surveillance measure. In continuation to various surveillance measure already implemented, SEBI and Exchanges, pursuant to discussions in joint surveillance meetings, have decided that along with the existing pre-emptive Surveillance measure like Graded Surveillance Measure (GSM), price band, periodic call auction and transfer of securities to Trade to Trade settlement from time to time; there shall be Additional Surveillance Measure (ASM) on securities with surveillance concerns viz. Price variation, Volatility etc.

The main purpose /objective of these measure is to –

- Alert and advise investors to be extra cautious while dealing in these securities and

- Advise market participants to carry out necessary due diligence while dealing in these securities.

Q 2. When has ASM come into force?

The Exchange has published a notice on March 21, 2018 informing the market participants about introduction of ASM. The first list of securities placed under ASM was published on March 25, 2018 and was made effective from March 26, 2018.

The URL to the notice issued in this regard is given below for ready reference-

https://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page=20180321-46 Subsequently, on daily basis exchange is publishing the list of securities being added /removed and consolidated list of all securities under ASM.

Q 3. What are the main aspects of ASM?

As mentioned above and in Exchange Notice No. 20180321-46 dated 21 March 2018, the framework shall be applicable for securities with surveillance concerns viz. Price variation, Volatility etc.

Q 4. On what basis securities are shortlisted for placing in ASM?

ASM has been implemented based on an objective criteria covering the following parameters:

a) High Low Variation

b) Client Concentration

c) No. of Price Band Hits

d) Close to Close Price Variation

e) PE Ratio

f) Market Capitalisation

The URL to the notice issued in this regard is given below for ready reference-

https://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page=20180511-26

The aforementioned criteria is dynamic in nature and subject to change from time to time.

Q 5. What are the various surveillance actions under ASM?

The surveillance actions applicable for the shortlisted securities are as under:

Stage I

a) Securities shall be placed under Price Band of 5% or lower as applicable.

b) VAR Margins shall be levied at the rate of 100%

Stage II

a) The shortlisted securities shall be further monitored on a pre-determined objective criteria and would be moved into Trade for Trade settlement once the criteria gets satisfied.

Q 6. Some of the securities which have been identified under ASM are already under various surveillance actions mentioned in the ASM framework. What does this mean?

ASM framework is in conjunction with all other prevailing surveillance measure being imposed by the Exchanges from time to time.

Q 7. Does ASM framework have any stages like in GSM?

Unlike GSM which has stages ranging from 0 to 6, securities shortlisted under ASM have 2 stages:

Initially, Securities shall be placed under Price Band of 5% or lower as applicable & VAR Margins shall be levied at the rate of 100%

Subsequently the shortlisted securities monitored on a pre-determined objective criteria and would be moved into Trade for Trade settlement once the criteria gets satisfied.

Q 8. Is there any deposit payable for securities in ASM?

There is no deposit payable in ASM framework.

Q 9. Will intraday trading be allowed in securities placed under Additional Surveillance Measure?

During stage I of ASM, following action is imposed - a. 100 % Margin b. Daily price band of 5 % or lower.

During Stage II, when the security is shifted to trade to trade settlement wherein the settlement shall be on gross basis i.e. delivery based.

Q 10. Besides the actions stated in ASM, can there be any other regulatory action against the securities identified therein?

As mentioned earlier, surveillance actions under ASM are without prejudice to the right of Exchanges and SEBI to take any other regulatory measures, in any manner, on a case to case basis or holistically depending upon the situation and circumstances as may be warranted.

Q 11. How is Margin collected and released for securities shortlisted under ASM?

Under ASM Framework, VaR Margin is being charged at 100 % and therefore is being released as per the extant margin release rules.

Q 12. Who is required to pay margin on securities shortlisted under ASM?

The margin on securities shortlisted under ASM is payable by the member and charged to the buyer and seller of the transactions.

Q 13. Are the shortlisted securities under ASM framework suspended/delisted pursuant to the framework?

Q 14. Is ASM is an action against the security?

Shortlisting of securities under ASM is purely on account of market surveillance and it should not be construed as an adverse action against the concerned security.

Q 15. How is the ASM framework levied on a security that is traded on more than one stock exchange?

ASM is uniformly applicable across all the Exchanges where ever applicable securities are traded.

Q 16. How can we know the list of securities under ASM framework?

A market wide notice is issued on the Exchange website on the applicability of securities available in the Notices section every EOD under the subject line “Applicability of Additional Surveillance Measure”.

List of securities moving in to the framework, moving out of the framework and the consolidated list of securities under ASM are part of the annexure to these daily notices.

Further, the Exchange is in process of providing ASM indicator in the scrip master file provided to the market participants on daily basis for easy identification of ASM securities. Further, the Exchange is also in process of providing alert message at the time of order entry in ASM securities on trading terminals provided by the exchange namely BOLT plus and BOW.

Q 17. Will the identified securities remain under ASM permanently? If no, what is the period of review and on what basis would securities move out of ASM framework?

As mentioned earlier, the securities shall be placed under ASM based on fulfilment of predefined objective criteria. Such securities under ASM shall be reviewed on bi-monthly basis for the applicability of ASM. If the predefined objective criteria is not satisfied then it would be eligible to move out from the framework.

Eg:- If a Security has moved in to ASM Framework w.e.f. March 26, 2018, it shall be considered for moving out of ASM w.e.f. May 26, 2018 if it does not satisfy the predefined objective criteria.

****** THANK YOU ******

CA Arun Goenka is an investor protection champion and has been very actively interacting with SEBI and RED FLAGGING issues of unfair treatment of investors by the listed companies for more than 2 decades now.

He has been challenging the corporate might of TATAs, Jindals, Nirma, Mahindras, MNC, etc and now he, along with like minded friends who are all CAs and one is ex-Director of the BSE has formed a duly registered SMALL INVESTORS’ WELFARE ASSOCIATION , with a motto

SIREN- SMALL INVESTORS’ RIGHTS ENFORCEMENT

Members are welcome to send in their grievances and also their willingness to join in the crusade against unfair treatment of small investors –

ANG Financial Consultants (P) Ltd.

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