Sebi prohibits market purchase of shares by firms for staff schemes

Tags: Knowledge

Says such purchases by the trusts raise regulatory concerns

The Securities and Exchange Board of India (Sebi) has prohibited acquisition of shares by employee welfare trusts from the secondary market for employee benefit schemes like ESOPs, saying such market purchases by the trusts “raise regulatory concerns”.

Sebi, in a circular issued on Thursday, also decided to prohibit the listed entities from framing any employee benefit schemes involving acquisition of own securities from the secondary market.

Amending the Sebi Employee Stock Option Scheme (Esos) and Employee Stock Purchase Scheme (ESPS) Guidelines Sebi said: “Some listed companies have been framing their own employees benefit schemes wherein trusts have been set up to deal in their own securities in the secondary market, which was not envisaged within the purview of Sebi Esos and ESPS Guidelines.”

Sebi said it has observed that some entities may frame such schemes with the purpose of dealing in its own securities with the object of inflating, depressing, maintaining or causing fluctuation in the price of the securities by engaging in fraudulent and unfair trade practices. “Such dealings in the company’s shares by the trusts may also raise regulatory concerns regarding compliance with SEBI Prohibition of Fraudulent and Unfair Trade Practices Regulations and SEBI Prohibition of Insider Trading Regulations,” the securities regulator said.

Those companies which have already framed and implemented any employee benefit schemes involving dealing in the securities of the company, which are not as per Sebi guidelines have been directed to inform the details of their schemes to the stock exchanges within 30 days and have to disseminate the said information on their website.

Companies have to align any existing employee benefit schemes with Sebi (Esos and ESPS) guidelines by June 30, 2013, Sebi said.

The market regulator also sought details of secondary market purchases and sales by the company or trust or any other agency managing the scheme if any, since April 1, 2012.

The details to be submitted to Sebi by companies setting up such trusts include details on whether promoters/persons belonging to the promoter group/directors, are also beneficiaries in the scheme.

Sebi would also like to know by June 30 as to how the trusts/agency is proposing to deal with the existing holding in terms of whether it will be transferred to the employees, if so, details regarding proposed date of such transfer or sale.

raviranjan@mydigitalfc.com

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