SEBI issues regulations on sale of preference shares

The Securities and Exchange Board of India (SEBI) has introduced regulations overseeing the public sale of preference shares and will allow hybrid securities, which debt and equity components, to be listed on exchanges.

SEBI said non-convertible redeemable preference shares sold by Indian issuers must have a minimum rating of "AA-minus" and a tenure of at least three years, according to its statement late on Friday.

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.

Private placements of preference shares will also be allowed to be listed in exchanges, SEBI said, a move that is intended to create a market for the trading of these securities.

Domestic banks will also be allowed 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.

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.

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