Sebi proposes uniform timeline for credit, trading of bonus shares

New Delhi, Aug 5 (PTI) Markets regulator Sebi on Monday proposed a uniform timeline to ensure timely credit and trading of bonus shares in a bid to streamline the process to enable T+2 trading of such shares after the record date.

In its consultation paper, the Securities and Exchange Board of India (Sebi) proposed that bonus issue of shares will be available for trading within two days (T+2) from the record date. Here, T stands for the record date.

The current ICDR (Issue of Capital and Disclosure Requirements) rules prescribe overall timelines regarding the implementation of the bonus issue, however, there is no specific timeline for credit of bonus shares and trading of such shares, from the record date of the issue.

"Thus, the absence of any specific guidelines on this aspect leads to non-uniformity with respect to timelines in which shares are credited and made available for trading in bonus issues," Sebi said.

Currently, after a bonus issue, existing shares continue to trade under the same ISIN, and the new bonus shares are credited and available for trading within 2-7 working days post-record date.

Therefore, to have uniformity in timelines for credit and trading of bonus shares, it is imperative that timelines are prescribed for credit and trading of bonus shares from the record date, ensuring bonus issue is implemented in a timely manner, Sebi said.

"Accordingly, to facilitate fast credit and trading of shares allotted pursuant to bonus issue and to reduce investors' risk of market volatility due to any delay in credit of bonus shares, it is proposed to streamline and reduce timelines of bonus issue enabling T+2 trading of shares post record date (T day)," Sebi said.

With regards to the procedure, Sebi said the issuer, proposing the bonus issue of shares, should apply for in-principle approval from the stock exchange within five working days of the board meeting that approves the bonus issue.

When setting and notifying the record date (T day) to the stock exchange, the issuer must record the deemed date of allotment as the next working day (T+1 day).

After receiving the record date and necessary documents, the exchange should notify the acceptance of the record date and the number of shares in the bonus issue, including the deemed date of allotment (T+1 day).

The issuer should submit the required documents to depositories for crediting bonus shares by 12 PM on the next working day after the record date (T+1 day).

The issuer should upload the distinctive number ranges in the depository's database, and the stock exchange should update the relevant dates before crediting the bonus shares.

The bonus shares will be available for trading on the next working day after allotment (T+2 day), Sebi said.

The regulator has sought comments till August 26 on the proposals. PTI SP MR