SEBI Rejects Suggestion To Spread Out Ownership Of Share Registry, Transfer Agents
The market regulator rejected a suggestion to spread out the ownership of share registry and transfer agents, paving the way for acquisition to two such entities by private equity firms.
The Securities and Exchange Board of India may continue with the existing regulatory requirements regarding ownership and governance prescribed under the SEBI (Registrar to an Issue and Share Transfer Agents) Regulations, 1993, according to the agenda notes of the June board.
The status quo ends nearly a year of uncertainty over two private equity deals involving Karvy Computershare Pvt Ltd. and Computer Age Management Services Pvt. Ltd.
In August 2017, General Atlantic had agreed to acquire 83 percent in Karvy Computershare. The deal would see the exit of Australian share registry company Computershare Ltd. and other shareholders, General Atlantic had said in a statement.
Great Terrain Investment Ltd., an affiliate of Warburg Pincus, had agreed to acquire 37.5 percent in CAMS. The National Stock Exchange of India Ltd., HDFC Ltd. and other shareholders had agreed to sell stake to the private equity firm.
Share registry and transfer agents, which maintain the register of shareholders, are considered important for capital market infrastructure. A committee, headed by Reserve Bank of India’s former Deputy Governor R Gandhi, recommended that governance of such firms should be aligned with that of market infrastructure institutions. The panel also suggested that their ownership should be dispersed or held by entities regulated by financial sector regulators worldwide.
SEBI had invited feedback on the committee’s report. It received 13 public comments on the issue of ownership and governance. All stakeholders, including mutual funds, didn’t agree with the suggestions, according to the regulator’s board meeting agenda.
Here’s the feedback SEBI received:
- Ownership of the share registry and transfer agents shouldn't be with a regulated entity either directly or through a wholly owned step-down subsidiary.
- SEBI should review the limits defined for ownership and clarify that in the event of listing and wider holding, no further ownership norms shall be applicable, including no requirement of holding by a regulated entity. The report sought to restrict holdings of non-regulated entities at 49 percent collectively and 15 percent individually.
- The industry is at the threshold of digital transformation, and restricting investments only by existing registrar of shares and transfer agents or regulated entities may not be in the best interest of the industry.
- The key concerns over data security and addressing data availability can be achieved through enhanced regulation by SEBI.
SEBI’s board said the regulator should enhance monitoring and reporting of such entities. It will issue a circular to bring in periodic reporting on key risk areas, data security measures, business continuity, high standards of governance, measures for enhanced customer service and grievance redressal.