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Q. Revamp SEBI norms: Discuss the need to revamp SEBI norms for institutional and non-institutional investors.
Sep 16, 2016 Related to : GS Paper-3

Ans :

Introduction-

The Securities and Exchange Board of India (SEBI) regulates the securities market in India. SEBI was established in 1988 and given statutory powers in 1992 through the SEBI Act, 1992.

An institutional investor is a nonbank person or organization that trades securities in large enough share quantities and it qualifies for preferential treatment and lower commissions. Non-institutional investors are any investors that aren't institutional. There are the one who buys and sells debt, equity or other investments through a broker, bank, real estate agent etc.

In news-

Recently SEBI has put out discussion papers seeking to revamp rules for the Institutional Trading Platform (ITP), which allows small and medium enterprises (SMEs) to list and issue capital without an initial public offering (IPO).

Why to revamp norms-

  • Currently India is witnessing big push of start-ups, technological entrepreneurship, and growing new models of business hence to adjust itself with new economic trend, there is need to revamp existing norms.
  • The newly designed ITP framework The makes possible trading in specified securities of SMEs for informed investors, either institutional or non-institutional, to arrive at better valuation.
  • At present, the norms stipulate that 75% of the net offer needs to be allocated to institutional investors, and remaining 25% for the non-institutional investors. But new norms have sought to revise this to not less than 50% for institutional investors, and not more than 50% for non-institutional investors.
  • The currents norms distort valuation and hence these barriers need to be removed.  New norms are intended to remove these barriers. With this non institutional investors can get chance to invest more than 25% on ITP.
  • Similarly SEBI paper seeks to raise the ceiling on allotment to individual institutional investors from 10% to 25%.
  • These changes are market friendly especially as the definition of institutional investor is sought to be broadened to include family trusts etc. with net worth of more than Rs 500 crore.
  • In this background and with changing economic trends changes sought by SEBI through discussion paper are welcome move. And SEBI must revamp norms for institutional and non-institutional investors as soon as possible.

Conclusion-

Recently SEBI has sought to revamp its norms for institutional and non-institutional investors through discussion paper. These changes sought by SEBI are in accordance with changing trends of Indian economy, especially in the backdrop of growth of new business models in India. Hence there is need to revamp norms according to current situation, in this backdrop changes sought by SEBI are welcome move.


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