MUMBAI: The Securities and Exchange Board of India (Sebi) has proposed guidelines for reclassification of promoter shareholding in listed firms once they choose not to be promoters.

The capital markets regulator has listed a few conditions under which a promoter or group can cease to be classified as one. The proposals come on the heels of instances where promoters reclassified themselves as public shareholders to comply with the minimum public shareholding rules. Sebi, in a discussion paper released on Tuesday, said promoters will be classified as public shareholders after an open offer or if the promoter group's stake falls below 5% or if there is a split within the family.

"Post reclassification, no shareholding agreement shall exist and all past agreements between outgoing promoter/promoter group entities and the continuing promoter/promoter group entities and outgoing entities and the company, shall be made null and void," the regulator said in the paper.



To help in the government's 'smart cities' programme, Sebi on Tuesday proposed a new set of norms for listing and trading of municipal bonds on stock exchanges, while channelising household investments for urban infrastructure development. Issuing draft regulations for such bonds, also known as 'muni bonds', Sebi said that the issuing authorities would need to contribute at least 20% of the total project cost for which they wish to raise funds.

Besides, the municipal authorities would need to have a strong financial track record and such bonds should have a minimum tenure of three years. "Conservative Indian investor mainly invests in fixed deposits, small saving schemes or gold. Bonds issued by municipalities having good financial track record would be an good alternative investment opportunity for such conservative investors, as it provides reasonable return with less risk, which in turn may accelerate the capital markets," Sebi said.

Commonly known as 'muni bonds', these investment products are very popular among investors in many developed nations, especially the United States, where such bonds have attracted investments of over $500 billion.