Sebi board may take up listing of ARC securities at next meeting

Mumbai: The Securities and Exchange Board of India (Sebi) in its next board meet would take up listing of receipts issued by asset reconstruction company (ARC), said a senior Sebi official.

A security receipt is issued by an ARC. In the Union budget for the current fiscal year, finance minister Arun Jaitley had proposed a plan to make security receipts tradable on stock exchanges to enhance capital flows into the securitisation industry and solve the bad loan problem plaguing the banking system.

“We are working on expediting the matter. The Reserve Bank of India (RBI) has two basic concerns which need to be resolved. We would like the proposal to be taken up in the next board meet,” said the Sebi official.

The Sebi board will be meeting next on 18 September.

RBI’s basic concerns include the class of investors who can subscribe to these securities, and clarity on who is a ‘qualified buyer’ under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (SARFAESI) and RBI guidelines, said a second person, with direct knowledge of the matter.

In the month of March, Sebi had formed a panel of RBI officials, credit rating agencies, ARCs, private equity players, law firms and exchanges to define the rules. “The panel has worked out the enabling framework, RBI concerns are being ironed out. The regulators are meeting next week to understand the concerns,” said the second person.

Sebi may allow alternative investment funds (AIFs) and qualified institutional buyers (QIBs) to buy security receipts issued by ARCs.

In the board meeting, Sebi will also take a stock of the regulator’s action on shell companies.

So far 10 companies have made representations to the regulator on being labelled as shell companies.

“Sebi has granted them personal hearing and has sought additional documents from these companies. The companies are expected to give their replies next week. After their replies come in we will decide the next course of action,” said the Sebi official.

Sebi on 6 August had asked stock exchanges to act against 331 listed entities suspected to be shell companies. Out of them 162 were actively trading.

The exchanges have also started the verification process. In the first round 100 companies have been identified for verification. The verification process involves looking at the tax returns and financials of the companies for the past three years.