Newsmakers of D-Street

Market regulator Sebi has disposed of adjudication proceedings against Prime Focus Limited and its directors after concluding that the company had followed the correct accounting treatment while transferring business divisions to its indirect subsidiaries.

In an order dated June 16, Sebi’s adjudicating officer Amit Kapoor held that allegations of misleading financial statements, accounting irregularities and violations of listing and anti-fraud regulations were not established.

The case stemmed from Sebi’s investigation into transactions undertaken by Prime Focus during FY20 and FY22. The company had transferred its visual effects business division to DNEG Creative Services and later sold its post-production services business to DNEG India Media Services, both indirect subsidiaries under common control.

Sebi investigation had alleged that these transactions resulted in gains of Rs 200.27 crore in FY20 and Rs 250.20 crore in FY22, which significantly boosted the company’s reported profits and net worth. The regulator had questioned whether Prime Focus should have applied accounting provisions under Ind AS 103 governing business combinations under common control.

According to the investigation, without the gain from the VFX business transfer, Prime Focus would have reported a consolidated loss of Rs 267.83 crore in FY20. Similarly, the FY22 post-production services transfer contributed Rs 250.20 crore to profits, accounting for a substantial portion of the company’s reported earnings for that year.

However, the adjudicating officer disagreed with the allegations.

The order noted that Appendix C of Ind AS 103 applies to the acquirer or transferee in a common-control transaction and not to the transferor selling the business. Since Prime Focus was the transferor and not the acquiring entity, the accounting provisions cited by Sebi investigation team were found to be inapplicable.

The order further observed that Prime Focus had accounted for the transactions under Ind AS 16 and Ind AS 38 relating to the sale of property, plant and equipment and intangible assets. The gains were recognised as the difference between disposal proceeds and carrying value of assets and were disclosed as exceptional items rather than revenue.

“The Noticee has followed correct accounting treatment in its standalone financial statements,” the adjudicating officer said.

The order also rejected allegations relating to consolidated financial statements. It found that gains arising from intra-group transactions had been eliminated during consolidation in accordance with Ind AS 110 requirements.

The adjudicating officer noted that the company’s statutory auditors had not issued any qualification regarding the accounting treatment or consolidation process.

Sebi had also questioned the timing of receipt of sale proceeds, noting that a substantial portion was received after the regulator initiated its investigation. However, the order stated that there was no evidence of fund rotation among group entities or any indication that the transactions were not genuine.

The order also cleared nine noticees, including promoter-directors Naresh Malhotra and Namit Malhotra, Chief Financial Officer Nishant Fadia and independent directors who served on the company’s audit committee.

Sebi said the allegations against the individual directors were derivative in nature and based entirely on the primary charge that Prime Focus had violated accounting standards and published misleading financial statements. Since the principal allegations against the company failed, the charges against the directors could not survive independently.

Accordingly, the adjudication proceedings initiated through a show-cause notice issued in December 2023 have been disposed of.

India’s markets regulator will review its delisting framework ​in an effort ​to ease capital market processes, its chairman said ​at a summit on Friday.

* “A well-developed capital market must provide fair entry and fair exit,” chairman Tuhin Kanta Pandey said.

* The ‌Securities and ⁠Exchange ⁠Board of India (SEBI) has rolled out a series of reforms over ​the last few years to make the country’s capital markets more ​efficient and attractive to investors, including faster trade settlements and streamlined registration for foreign investors.

* In 2024, the regulator ​permitted the delisting of companies via ⁠a fixed-price ‌route, where shareholders are offered a pre-set ​exit price. ​The mechanism serves as an alternative to ⁠the reverse book-building process, which determines the exit ​price through investor bids.

* The regulator also approved a voluntary delisting framework last year for public sector companies where controlling shareholders owned more than 90%.

* SEBI will also work with other regulators to simplify know-your-customer rules for non-resident Indians, Pandey said.

* Concurrently, ‌the watchdog is reviewing the rules of the Innovators Growth Platform (IGP) for startups to help ​companies better access ​the markets ⁠for long-term capital.* The platform was introduced in 2016 as the Institutional Trading Platform to help startups raise funds and ​list on stock exchanges, but stringent eligibility and lock-in rules limited interest.

* It was revived as the IGP in 2018, with further relaxations in 2019 and 2021 to encourage listings.

The Securities and Exchange Board of India (Sebi) on Thursday proposed a new framework to harmonise price bands and pre-open auction reference prices for stocks listed on multiple exchanges, seeking to address price differences in illiquid shares.

The move is aimed at improving price discovery and liquidity in illiquid stocks by preventing artificial price divergences across exchanges on account of lagging closing prices. At present, stock exchanges take the previous day’s closing price of the scrip as the base price for the pre-open session of a scrip, and the price bands are applicable on the said base price.

Stock exchanges usually implement uniform price bands for scrips trading across the exchanges in a coordinated manner. The stock-wise price bands are applicable independently on individual stock exchanges based on their respective closing prices. However, currently, there is no mechanism to adjust the price bands on the stock exchanges where there is no trading on the previous day, which leads to progressive divergence.

“In respect of a few illiquid scrips, it has been observed that non-trading of scrip on one of the exchanges and a persistent buy-side pressure, along with the practice of application of price band on the previous day closing price has been causing significant price divergence in the closing prices of the scrips across the exchanges,” Sebi said in a discussion paper. “Such divergence also holds the potential of non-trading of the scrip on one of the exchanges,” it said.

To address the issue, the regulator has proposed that when a stock trades on only one exchange, the exchanges where no trading takes place should adopt the closing price from the exchange where the stock was traded for determining the next day’s price band and pre-open call auction base price.

Capital markets regulator Sebi has proposed relaxing mandatory call recording requirements for research analysts interacting with institutional investors, in a move aimed at reducing compliance burden and improving ease of doing business.

In a consultation paper released on Monday, Sebi proposed amendments to the Research Analysts Regulations, 2014 and related master circulars to make maintenance of call recordings optional for institutional investor interactions.

At present, research analysts and research entities are required to maintain records of all communications with clients and prospective clients, including emails, SMS records and telephone recordings.

The existing framework requires these records to be preserved for five years, and longer in case of disputes or regulatory review.

Sebi said the proposal follows representations from market participants and the Industry Standards Forum for Research Analysts, which argued that institutional investors are sophisticated entities capable of independently assessing research inputs and investment risks.

According to the consultation paper, institutional investors generally possess specialised knowledge, stronger due diligence capabilities and better awareness of legal and regulatory protections compared with retail investors.

The regulator said the original requirement for recording client interactions was primarily designed as an investor protection measure and supervisory tool, especially for retail participants.”Considering the fact that research analyst business does not involve client-specific investment advice, asset management or transaction execution, it is proposed to relax the existing requirement of maintenance of call records for clients which are institutional investors,” Sebi said in the paper.

Under the proposal, research analysts would continue maintaining all other communication records with institutional clients, including emails, written records and SMS communication, but telephone call recording would no longer be mandatory.

However, the requirement to maintain full records, including call recordings, would continue unchanged for retail clients.

Sebi said the move is intended to create a more “risk-proportionate approach” while lowering operational and compliance costs for research analysts.

The regulator has also proposed formally defining “institutional investor” under the Research Analysts Regulations by linking it to the definition already provided under SEBI’s ICDR Regulations.

The proposed changes would affect interactions involving institutional investors such as mutual funds, insurance companies, pension funds, banks and qualified institutional buyers.

The consultation paper also highlighted that research analysts differ from investment advisers because their services do not typically involve personalised investment recommendations or direct execution of trades.

Industry participants have increasingly raised concerns over the operational complexity and storage costs associated with maintaining large volumes of recorded conversations, particularly for institutional interactions where communication often takes place frequently across teams and platforms.

Sebi move comes as the regulator continues broader efforts to simplify compliance processes across various market intermediaries while retaining core investor protection safeguards.

Capital markets regulator Sebi has proposed a wide-ranging revamp of exchange-traded derivatives regulations aimed at simplifying compliance norms, removing redundant provisions and easing operational requirements for stock exchanges and clearing corporations.

In a consultation paper released on May 14, the regulator proposed multiple changes across equity, currency, commodity and interest rate derivatives segments as part of a broader “ease of doing business” initiative for market infrastructure institutions.

Sebi said the review seeks to simplify regulatory requirements, discontinue duplication and reduce the compliance burden on exchanges by restructuring and consolidating existing master circulars governing derivatives markets.

One of the key proposals is the removal of the “Close to the Money” (CTM) option series mechanism in commodity derivatives. The regulator said the CTM framework makes the exercise mechanism complex for market participants and creates uncertainty for option sellers.

Sebi noted that leading global commodity exchanges do not follow the CTM concept and that simpler in-the-money and out-of-the-money structures are easier for traders to understand and execute.

The regulator has also proposed reducing the mandatory number of Product Advisory Committee meetings for non-agricultural commodity derivatives from two meetings annually to one meeting per year, aligning them with agricultural commodity norms.

According to the consultation paper, exchanges argued that non-agricultural commodity contracts generally require fewer specification changes and that attendance in such meetings has often remained weak for low-liquidity contracts.Sebi further proposed granting exchanges greater operational flexibility in advancing expiry dates of commodity contracts during sudden disruptions such as strikes, erratic weather or unexpected market closures. Under the proposed framework, exchanges would be allowed to take such decisions with approval from the managing director and provide “adequate notice” instead of the existing mandatory 10-day advance intimation rule.

Another proposal relates to position limit monitoring in derivatives markets. Sebi clarified that exchanges would continue to remain responsible for monitoring position limits but may outsource the operational work to clearing corporations through formal agreements defining roles and responsibilities.

The regulator also proposed discontinuing several outdated requirements, including lower base minimum capital norms for brokers without nationwide terminals, noting that regional stock exchanges have largely ceased operations and internet-based trading has become standard.

Similarly, Sebi proposed removing separate certification guidelines for derivatives dealers and brokers because these are already covered under the Sebi certification regulations for associated persons in securities markets.

In another move toward digitisation, the regulator proposed replacing newspaper disclosures of derivatives transactions with website-based disclosures by exchanges.

The consultation paper also proposes merging multiple derivatives-related circulars and chapters into consolidated frameworks for equity derivatives, currency derivatives and interest rate derivatives to reduce overlap and improve consistency.

Sebi has also suggested separating regulatory provisions applicable to stock exchanges and clearing corporations into distinct master circulars, reflecting increasingly segregated operational roles after interoperability and independent clearing member registration frameworks.

The regulator has invited public comments on the proposals until June 4.

Mumbai: Market regulator Sebi on Friday said market price data of listed companies can now be shared and used for investor education and awareness activities only with a 30-day lag.

The move is aimed at preventing misuse of stock exchange data and keeping the educational content relevant. The new rule will come into effect from July 1, 2026.

The regulator has given a special exemption to the National Institute of Securities Markets.

Mumbai: The Securities and Exchange Board of India (Sebi) has imposed a penalty of ₹10 lakh on Axis Trustee Services for failing to disclose a case linked to former REIT executive Aravind Maiya.

Sebi’s order arises from an August 2024 ruling by the National Financial Reporting Authority(NFRA), which found Maiya guilty of professional misconduct, imposed a monetary penalty, and barred him from audit roles for 10 years. At the time, Maiya was serving as CEO of the manager of Embassy Office Parks REIT.

The Sebi held that the NFRA order was material information that had a direct bearing on the integrity and suitability of the CEO, and therefore, required prompt disclosure to unitholders and stock exchanges. However, the disclosure was delayed by over seven weeks and was made after regulatory intervention.

The regulator held that Axis Trustee failed to ensure timely disclosure and did not exercise independent judgment on whether Maiya met the “fit and proper” criteria mandated under rules.

Market regulator Securities and Exchange Board of India (Sebi) has given approval to BSE to launch derivative contracts on the ‘BSE Focused IT Index’. BSE said in a regulatory filing on Thursday that details regarding the launch and contract specifications will be notified via separate exchange circulars.

The BSE Focused IT is a sector index that measures the performance of the 14 companies belonging to the Information Technology sector that are also BSE 500 firms.

The index constituents are Coforge, Cyient, HCL Technologies, Infosys, KPIT Technologies, LTIMindtree, Mphasis, Oracle Financial Services Software, Persistent Systems, Tata Consultancy Services (TCS), Tata Elxsi, Tata Technologies, Tech Mahindra and Wipro.

BSE Focused IT index was launched on October 7, 2024. The index has delivered negative 24% returns between January and March.

BSE shares ended 3% up on the NSE today at Rs 3,260 despite weak markets. Nifty plunged 222.25 points or 0.93% to finish at 23,775.10. Meanwhile, Sensex declined 947.22 points or 1.22% to settle at 76,615.68.

The stock also hit a fresh 52-week high of Rs 3,285.70. The capital market stock has seen a stellar run on the D-Street, delivering 76% returns in the past year. These returns came at a time when Indian markets faced multiple headwinds including rich valuations leading to FII outflows, tariff issues, a falling rupee and weak earnings. The latest setback for global markets including India has been the Iran-Israel war.

BSE shares are currently trading above their 50-day and 200-day simple moving averages (SMAs) of Rs 2,851 and Rs 2,609, respectively.The multibagger counter has delivered 2,070% returns in the past three years.

Also read: Why FPI interest in India ‘has pretty much died out’: Nithin Kamath points to valuations, taxes and global alternatives

(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)

Market regulator Securities and Exchange Board of India (Sebi) on Tuesday introduced a new framework aimed at simplifying compliance and enhancing transparency in the handling of pledged shares under capital market regulations. In a circular issued to stock exchanges, depositories, and merchant bankers, the regulator said that securities where a traditional lock-in cannot be enforced will now be marked as “non-transferable” for the duration of the lock-in period.

This move follows amendments made on March 21 to the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018.

To operationalise the mechanism, depositories have rolled out a detailed framework requiring issuers to incorporate relevant provisions in their Articles of Association, notify lenders or pledgees, and ensure adequate disclosures in offer documents.

Sebi noted that depositories have already upgraded their systems to support the revised process. Market infrastructure institutions and issuers have been directed to ensure full compliance with the new mechanism.

The move is part of Sebi’s broader push to improve ease of doing business while safeguarding investor interests and strengthening market discipline.

With this move, the Indian capital markets regulator has plugged a key gap in IPO rules by enabling a new mechanism to enforce lock-in on pledged shares. There has been a long-standing demand to rectify this issue.

The move comes following a Sebi relief on Monday to companies planning to tap the capital markets by granting a one-time extension for the validity of its observation letters, citing challenging market conditions due to ongoing geopolitical tensions in the Middle East.Under existing norms, companies are required to launch their public issues within 12 to 18 months from the date of receiving SEBI’s observations. However, the regulator noted that issuers are facing difficulties in mobilising funds and accessing capital markets amid subdued investor participation and heightened uncertainty.

Following representations from industry bodies, SEBI has decided to extend the validity of observation letters that are set to expire between April 1, 2026 and September 30, 2026. These will now remain valid until September 30, 2026, giving companies additional time to proceed with their fundraising plans.

(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)