In a significant move aimed at streamlining the process of crediting and trading bonus shares, the Securities and Exchange Board of India (SEBI) has introduced new guidelines. Starting October 1, investors will be able to trade bonus shares just two days after the record date, significantly reducing the waiting period. Currently, under the Issue of Capital and Disclosure Requirements(ICDR) regulations, there are broad timelines in place for the execution of bonus issues.
However, no specific timeline exists for the crediting of bonus shares and their subsequent trading from the record date. This has often led to delays, leaving investors unable to trade their newly issued shares promptly.
What SEBI's new guidelines mean?
With the new SEBI guidelines, the process of crediting and enabling the trade of bonus shares will be accelerated. By introducing a clear two-day timeline, SEBI aims to enhance market efficiency and improve the investor experience. As per reports, the new rule is expected to benefit a large section of investors who participate in bonus share issues and will bring more clarity to market operations surrounding corporate actions. Meanwhile, market experts have welcomed SEBI’s decision, noting that it aligns with global best practices and will make Indian markets more investor-friendly.
Issuing the operational procedure, Sebi said companies proposing a bonus issue are required to apply for in-principle approval from the stock exchange within five working days of the board meeting that approved the bonus. When the company sets the record date (T day) for the bonus issue, it needs to note the deemed date of allotment, which is the next working day (T+1 day). After receiving the record date and necessary documents, stock exchanges will issue a confirmation notice that includes the deemed allotment date and the number of shares being issued as bonuses.
It should be noted here that issuers are required to submit all documents to the depositories by 12 pm on T+1 day to facilitate the quick credit of bonus shares. Also, the regulator has eliminated the earlier requirement to use a temporary ISIN for bonus shares, permitting direct credit into the existing permanent ISIN of the company's shares.
(With PTI inputs)
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