SEBI approved Single-window Clearance System for Approval to Change in Control of Management

Market regulator, Securities and Exchange Board of India (SEBI) on 3 August 2011 approved a single-window clearance system for market entities like stock brokers, for grant of prior approval for change in control of their management structures.

SEBI approved of the single-window system with an objective to expedite the process of granting prior approval (in case of change of control).

Market intermediaries such as stock brokers, merchant bankers, debenture trustees, registrar to an issue and share transfer agents, underwriters, depository participants, bankers, and credit rating agencies which have more than one registration with the Sebi, are to submit multiple applications for prior approval to change in control.

In case an applicant holds multiple registrations with the regulator, it shall make only one application to SEBI providing certain information about itself and the acquirer and its directors or partners. The information sought relates to whether any application was made in the past to Sebi seeking registration in any capacity which was not granted and its details, and what kind of action was initiated on the application and its current status.

The applicant is also required to furnish details on any investor complaint pending against it, details of litigation, payment of due fees to SEBI, and a guarantee that there will be no change in the Board of Directors of the firm, till the time prior approval is granted.

The applicants are required to inform all its existing investors and clients in order to enable them to take informed decision regarding their continuance or otherwise with the entity with new management.
In case, the applicant is registered stock broker and or depository participant, it shall also have to obtain approval or non-objection certificate from all the stock exchanges of which it is a member and submit a self attested copy of the same to SEBI.

SEBI’s notification noted that any prior approval granted under the single-window system shall be valid for a period of 180 days from the date of communication.

SEBI had in June 2011 waived the requirement for bankers, debenture trustees and credit rating agencies to seek prior approval from it to change their status and constitution, in a move aimed at doing away with unnecessary rules and red-tapism. However, market entities still need to seek Sebi's prior approval in case of change in control.