The Bimal Jalan committee report, posted on the Sebi website was emphatic that bourses should not be allowed to make ‘super normal’ profits suggesting strict monitoring of profits and diversified shareholding for SEs (stock exchanges).
The committee views that MII (market infrastructure institutions) being a public utility should not be permitted to misuse its monopoly position and earn profits disproportionately at variance from average industry earnings in the country. All the same, it is not for imposing a cap on the return on the maximum profit that an MII can earn which might serve to stifle the market.
It also backed the concept of an anchor investor in Indian SEs which could pick up to 24 per cent in a bourse. These investors could be local financial institutions such as banks, said the report, which was the outcome of the Sebi committee's deliberations for months among members and also analysing outside opinion,Eligibility criteria
The report is likely to be taken up for consideration at the next meeting of Sebi board.
While making a suggestion on diversified shareholding structure for the bourse, the committee said although it favours anchor investors to be given a total of 49 per cent stake, out of which one investor can own a maximum of 24 per cent.
Although the thinking of the committee is that the concept of dispersed ownership is essential for well functioning of the bourses. However, certain select institutions fulfilling stringent eligibility criteria may be permitted to hold a higher percentage of shareholding in SEs.
However, every anchor investor would need to bring down its stake to 15 per cent in ten years from the time of becoming an anchor, it clarified. Investors like banks, stock exchanges, insurance companies and public financial institutions can hold up to 15 per cent, while all others can have a maximum 5 per cent, the committee said.
The committee made it clear that only banks and public financial institutions with a net worth of minimum Rs 1,000 crore are to be allowed as anchor investors, with the committee suggesting a shareholding larger than 5 per cent for shareholders only after a detailed due diligence and adherence to rules to be prescribed by Sebi.
It may be recalled that the Sebi Board, in its meeting held on December 22, 2009, had decided to set up the committee to look into issues related to ownership and governance of market infrastructure institutions (stock exchanges, clearing corporates and depositories) and give suitable recommendations.
Later in April 2010, Sebi announced the constitution of committee, which decided to adopt a consultative process and sought comments from market players and public on a questionnaire related to Ownership and Governance of Market Infrastructure Institutions by May 10, 2010.
Among other issues, the committee deliberated on self listing of the bourses, their regulatory role, foreign shareholding as also appointment and remuneration for the top management personnel.
The committee has favoured bourses having a regulatory role. For new exchanges, it said that the applicant would have to name the anchor investors in the application itself from among the shareholders having 15-24 per cent.
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