Sebi Issues New Guidelines to Streamline Trading of Bonus-Issues to T+2 Days

The Securities and Exchange Board of India (Sebi) has announced new rules for trading bonus shares, applicable from October 1. As per the guidelines, the bonus shares will be credited to shareholders’ accounts for trading within two days from the record date as compared to its present time frame of nearly two weeks, according to MoneyControl.com. 

“As a part of the continuing endeavor to streamline the process of Bonus issue of equity shares, in consultation with the market participants, it has been decided to reduce the time taken for credit of bonus shares and trading of such shares, from the record date of the Bonus Issue...,” said the regulator in a circular dated September 16. 

The new rules will enable more efficient and timely trading of bonus shares. Additionally, Sebi in its circular also highlighted that failure to comply with the new guidelines will attract penalties. 

“Any delay in compliance with the timelines will attract penalties as determined under point 4.1 of the SEBI circular... dated August 19, 2019,” said Sebi in the notice. 

The procedure to implement the new rule is broadly laid down by the regulator in its recent circular. 

Step 1: The issuer proposing a bonus issue shall apply for the in-principle approval under Regulation 28(1) of SEBI (LODR) Regulations, 2015, to the stock exchange within 5 working days of getting approval from the board. 

Step 2: The issuer, while fixing and intimating the record date (T day) to the stock exchange for the proposed bonus issue, should additionally also mention the deemed date of allotment on the next working date of the record date (T+1 day). 

Step 3: The stock exchange(s) after receiving the relevant documents, shall issue notification accepting the record date, the number of shares, and the deemed date of allotment (T+1 day). 

Step 4: Following step three, the issuer shall ensure submission of the requisite documents to depositories for credit of bonus shares in the depository system. 

Step 5: The issuer shall upload the distinctive number (DN) ranges in the DN database. The same shall be ensured by the stock exchange(s). 

Step 6: The shares allotted pursuant to the bonus issue shall be made available for trading on the next working date of allotment (T+2 day).