Outcome of the SEBI Board Meeting on 7 February 2011

The outcome of the SEBI Board meeting held on 7 February 2011(press release available here) is as follows:

1. The ASBA facility will become mandatory from 1 May, 2011 for non retail investors (QIBs and NIIs) making applications in public / rights issues.
2. The certificate of registration granted to an intermediary will now be for an initial period of five years and only on assessment of the performance of the intermediary and its track record during the initial five years, it will be granted registration on permanent basis. If the performance is not satisfactory the certificate of registration granted to an intermediary may be terminated or may be temporarily granted for an additional term of five years- As per the existing regulation 11 of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008, the certificate granted to an intermediary is permanent unless surrendered by the intermediary or suspended/cancelled in accordance with the said regulations.
3. The currency derivative segment will have self clearing members and the self clearing members are required to have a net worth of INR five crores.
4. SEBI will recommend to the Ministry of Corporate Affairs to suitably amend Clause 166 of the Companies Bill, 2009 to disallow interested shareholders from voting on the special resolution of the prescribed related party transaction- This will protect small and diversified shareholders in listed companies from abusive related party transactions. This view was taken based on the findings from the investigation in the matter of Satyam Computer Services Limited. Section 300 of the Companies Act, 1956 does not allow an interested director to participate or vote in Board proceedings in which the director is interested. If the recommendations of SEBI are accepted, similar restrictions may apply to shareholders voting on a special resolution. This issue has been discussed insightfully in the Indian Corporate Law blog here.