SEBI circular dated 2nd September, 2020 doing away with disclosure obligations in relation to shares encumbered with trading member/ clearing member as a collateral from clients for margin obligations in the ordinary course of stock broking business. Hitherto, disclosures were required to be made under the Takeover Code both at the time of placing the shares for encumbrance and releasing it thereafter. Gist of SEBI circular follows:
- Regulation 29 (4) of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011 (herein after referred as “Takeover Regulations”) provides that for the purposes of disclosure under regulation 29(1) and (2), shares taken by way of encumbrance shall be treated as an acquisition, shares given upon release of encumbrance shall be treated as a disposal, and disclosures shall be made by such
person accordingly in such form as may be specified.
- SEBI vide circular dated February 25, 2020 issued guidelines on acceptance of collateral from clients in the form of securities by Trading Member(TM) / Clearing Member (CM), only by way of ‘margin pledge’, created in the Depository system.
- In this regard, considering the representations received and in consultation with market participants, for ease of doing business it has been decided that disclosures specified under Regulation 29(4) of Takeover Regulations, in relation to shares encumbered with TM /CM as a collateral from clients for margin obligation in the ordinary course of stock broking business are dispensed with.