The Securities and Exchange Board of India (Sebi) toughened rules for public share transactions during its final board meeting of the year on Tuesday.

The board has tightened regulations for IPO proceeds usage, mandated a minimum 5% gap in IPO price bands, prolonged the anchor investor lock-in period to 90 days, and limited the amount a majority investor can sell through an offer for sale.

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Anchor investors must commit to a 30-day lock-in period for 50% of the portion allotted to them. A 90-day lock-in period will apply to the remaining portion. Sebi has also barred investors with more than a 20% shareholding from selling more than 50% of their shares through an offer for sale. Both of these approaches are intended to reduce price volatility upon listing.

“Selling shareholders and merchant ban­kers will now be more realistic in pricing the issue,” said a securities lawyer.

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Sebi has also tightened disclosures about IPO goals. It said that the amount for the general corporate purpose (GCP) would not exceed 25% of the total amount raised “where the issuing firm has not identified acquisition or investment goal, as described in the draft offer document and the offer document.” 

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Such restrictions will not apply, however, provided “suitable specific disclosures concerning such acquisitions or investments are given in the draft offer document and the offer document.”

Sebi has also revised the allotment for wealthy investors, reserving a third of the allocation for applications ranging from Rs 2 lakh to Rs 10 lakh and two-thirds for applications above Rs 10 lakh.

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The board amended the AIF Regulations to include Special Situation Funds, a sub-category of Category I AIF that can invest in certain types of “stressed assets.”

The regulator rationalised the time frame for firms to file settlement applications to 60 days from the date they received a show-cause notice. 

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The watchdog has also agreed to include measures governing the appointment or reappointment of people who are not elected as directors, including whole-time directors, managing directors, and managers, at a listed entity’s general meeting.