Financial Daily from THE HINDU group of publications
Wednesday, Aug 27, 2003
Central Listing Authority now has say on securities
New Delhi , Aug. 26
THE Central Listing Authority (CLA) has been empowered to make recommendations to the Securities and Exchange Board of India (SEBI) on issues concerning the protection of interests of investors in securities and the development and regulation of the securities market.
Besides the principal function of receiving and processing applications for "letter precedent to listing", the CLA can now specifically make suggestions on investor protection, development and regulation of the securities market, including listing agreements, listing conditions and disclosures to be made in offer documents.
SEBI has come up with a new set of regulations on CLA that has broad-based the functions of the authority, besides making alterations in its composition. Interestingly, the revamped regulations has dispensed with the self-regulatory character of the CLA, which was enshrined in the previous regulations issued in February 2003.
The main objective behind the setting up of a CLA was to bring about uniformity in the exercise of `due diligence' in scrutinising listing applications.
In the earlier dispensation, CLA's function was primarily confined to "processing applications of corporates, mutual funds or collective investment schemes for the letter of recommendation and making recommendation as to listing conditions or provisions of the listing agreement".
As per the new comprehensive regulations on CLA, a merchant banker can, on behalf of a company, mutual fund or collective investment scheme, approach the authority to apply for a "letter precedent to listing".
A "letter precedent to listing" means a letter issued by CLA to permit the applicant to make a listing application to any exchange, including for re-listing and listing of an already listed security at an exchange other than the exchange where it is currently listed.
As against the earlier norm of having at least four members as representatives of stock exchanges in the CLA, the revised regulations have specified that at least three members should be representatives of exchanges in the 11-member authority (including the President and Vice-President).
The revised regulations also provide that a CLA can, in consultation with SEBI board, appoint a Chief Executive Officer, who will be the ex-officio member-secretary of the authority.
A member of CLA can also be a CEO of the authority. The CLA will prescribe the functions of CEO.
Further, the regulations now provide that an order passed by the authority declining to grant or even withdrawing a "letter precedent to listing" would be deemed to be an order of the SEBI board.
Appeal against such order would now lie with the Securities Appellate Tribunal (SAT). Post-listing monitoring and compliance is not part of the CLA's agenda even under the revised regulatory framework in which the authority will now operate.
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