SEBI issues regulations for listing of preference shares

The Securities and Exchange Board of India (SEBI) has issued guidelines for the public sale of preference shares and said it will allow hybrid securities, with debt and  equity components, to be listed on exchanges.

For listing of non-convertible redeemable preference shares of companies, SEBI has prescribed a minimum rating of `AA-minus' and a tenure of at least three years.

SEBI said corporates are being allowed to privately place preference shares to be listed in exchanges, in a bid to create a market for the trading of these securities.
SEBI, however, has fixed a minimum application size of Rs10 lakh for listing of privately placed non-convertible redeemable preference shares.

SEBI also allowed banks to count some preference shares and perpetual debt instruments as part of their Tier I capital, after SEBI adopted the Basel III recommendations on the subject as part of the measures announced on Friday.

As per Basel III norms, banks can issue non-equity instruments such as perpetual non-cumulative preference shares and innovative perpetual debt instruments, which are in compliance with the specified criteria for inclusion in additional Tier I capital.

SEBI additionally simplified the registration process for stock brokers, allowing them to obtain a single certificate from an exchange
to trade across all equity instruments.

Although Indian companies have previously issued preference shares, SEBI had not unveiled specific regulations covering the sale of these securities, which provide dividends and priority over stock investors in recouping investments in cases of defaults, but do not confer voting rights.

Previously brokers had to register separately for each category of equity products, such as derivatives.