The Securities and Exchange Board of India (Sebi) has established a revised framework for obtaining pre-approval for changes in control of stock brokers, custodian participants and other market intermediaries.
The framework will apply to broker/clearing member, custodian participant, investment advisor, research analyst or research entity, registrar with an issue and share transfer agent and KYC (Know Your Client) Registration Agencies (KRAs).
In a circular on Monday, the regulator said the changes were made to streamline the process of approving the proposed change in control over the entities.
Under the provisions, which go into effect Dec. 1, an intermediary must apply for Sebi’s pre-approval online and along with the application, the affected entity must submit several details, including the applicant’s current and proposed shareholder pattern.
“The pre-approval granted by Sebi is valid for a period of six months from the date of such approval, within which the applicant must apply for a new registration pursuant to a change of control,” it said.
The application must be accompanied by information/declaration/commitment about itself, the acquirer/person as well as the director/partner of the acquirer/person who will have control.
Information on whether any action has been taken against the entity under the Sebi regulations and any pending investor complaints must be submitted to the regulator.
Among other things, the entity must provide a statement that there will be no change to the board of directors until pre-approval has been granted.
“…subject to the granting of pre-approval by Sebi, the incumbent will inform all existing investors/customers of the proposed change prior to implementation, to enable them to make an informed decision on whether to continue or otherwise the new board,” the circular said.
The criteria ‘fit and proper person’ must also be met.
If the entity is a registered broker, clearing member or depository participant, a NOC (Certificate of No Objection) must be obtained from all stock exchanges/clearing houses/custodians where the entity is a member/depository participant. A self-certified copy thereof must be submitted to Sebi.
When it comes to settlement cases that require approval from the NCLT, Sebi said that the application for approval for the proposed change in the control of the intermediary must first be submitted to Sebi before submitting the application to NCLT.
Approval in principle is granted for three months, provided that all other legal requirements are met, as stated in the circular.
Within 15 days of the date of the National Company Law Tribunal order, the intermediary must submit an online application for Sebi’s final approval.
(Except for the headline, this story has not been edited by DailyExpertNews staff and is being published from a syndicated feed.)
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