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Sebi to gradually phase out share buyback through stock exchange route

New Delhi, Dec 20, 2022

The Securities and Exchange Board of India (Sebi) on Tuesday said that it would gradually phase out buyback of shares by companies through the stock exchange route.

Sebi chairperson Madhabi Puri Buch said the regulator has chosen the tender offer route for share buyback as the present mode is vulnerable to favouritism.

At present, companies have both options of stock exchange and tender offer.

This means that buyback from the open market will be phased out in a gradual manner and until then a separate window will be created the stock exchanges to conduct such repurchases.

“Changes will create a level playing field for all investors,” Buch said at a subsequent briefing.

In an official statement, Sebi also increased the minimum utilisation amount for buybacks through stock exchange to 75% from 50%.

It has also permitted upward revision of buy back price until 1 worling day prior to record date.

The markets regulator also approved steps to boost governance at stock exchanges and other market infrastructure institutions.

"These amendments aim to streamline the process of buy-back, create a level playing field for investors and promote ease of doing business," the statement said.

Strengthens governance norms for stock exchanges

Sebi also decided to amend the governance norms for stock exchanges and market infrastructure institutions, including categorising their functions into three verticals and rationalising the appointment process for public interest directors.

The changes, cleared by the board, have been finalised after a comprehensive review of the governance of MIIs -- stock exchanges, clearing corporations and depositories.

Going forward, the function of an MII will be categorised into three verticals -- critical operations, regulatory, compliance and risk management, and other functions, including business development.

The Key Management Personnel (KMPs) heading the functions under the first two verticals will be at par in the hierarchy with the KMPs heading the third vertical. Also, MIIs will have to give higher priority to the resource allocation towards the functions under the first two verticals.

In a release, Sebi said that MIIs will be required to mandatorily appoint Public Interest Directors (PIDs) with background and expertise in the areas of technology, law and regulation, finance and accounts and capital markets.

PIDs will continue to meet every six months, and in addition to the submission of a report to the board of the MII, they will be required to submit a report to Sebi after the meeting.

[The Times of India]

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