SEBI, the body that regulates the stock market, has proposed that all payments such as dividends, interest etc. by listed companies should be made only through electronic means. The aim is to streamline payment processes and enhance security, convenience and efficiency for all investors. SEBI’s current LODR (Listing Obligations and Disclosure Requirements) rules allow electronic payments, but also allow cheques or warrants if electronic transfer fails. This is especially for amounts above Rs 1,500.
Problem due to wrong bank details
Sebi said payment failures occur when the security holder’s bank details are incorrect or not available, requiring companies to send cheques. According to recent data, 1.29 per cent of electronic dividend payments fail for the top 200 listed companies. In its consultation paper, Sebi has proposed making all payments, including dividends and interest, in electronic form for both demat and physical security holders holding shares.
Investors will be encouraged to upgrade their correct bank details with depository participants to ensure smooth payments. SEBI has sought comments from the public on the proposal by October 11.
This decision is for mutual funds
Apart from this, SEBI has allowed mutual funds to both buy and sell credit default swaps (CDS). Its purpose is to increase liquidity in the corporate bond market. SEBI said in a circular that this flexibility to participate in CDS will act as an additional investment product for mutual funds.
what is the meaning
In market parlance, credit default swaps are like insurance contracts that protect against default by a borrower. For mutual funds, CDS helps them manage the risk of the debt securities they hold. When a mutual fund buys a CDS, it pays a premium to the seller in exchange for protection against default of a specific bond (reference entity).
