ASBA mandatory for non-retail investors: SEBI

The Securities and Exchange Board of India (SEBI) in its board meeting on Monday decided to make ASBA (application supported by blocked investments) facility mandatory for all non-retail investors when they apply for public or rights issues beginning May 1, 2011.

The Securities and Exchange Board of India (SEBI) in its board meeting on Monday decided to make ASBA (application supported by blocked investments) facility mandatory for all non-retail investors when they apply for public or rights issues beginning May 1, 2011.

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An ASBA application contains authorisation to block the application money in the bank account for subscribing to an issue and the money gets debited on a successful allotment.

In his last board meeting as SEBI chairman, CB Bhave, said that SEBI has decided to recommend the ministry of corporate affairs to suitably amend clause 166 of the Companies Bill, 2009 in order to disallow interested shareholders (including promoters) from voting on special resolutions in order to safeguard the interest of small investors from abusive related party transactions.

The issue came to the forefront when Satyam and Maytas amalgamation was being taken up and questions were raised whether the promoters can vote.

"If there is an interested party then it’s a standard procedure to get the votes of non-interested parties," said C B Bhave, chairman, SEBI. "We do not have that provision in the laws at present and we have decided to make a recommendation for their consideration," he said.

In another major decision SEBI has decided to give permanent registration to all intermediaries such as—merchant bankers, mutual funds and registrars— based on their performance in the initial registration period of five years. As of now the intermediaries are required to renew their registrations on an ongoing basis.

As UK Sinha is set to take up from Bhave whose tenure ends on February 17, Bhave told the media that: "SEBI as an institution has only progressed in its journey since 1992. That journey is not dependent on an individual changing."