SEBI Streamlines Bonus Share Trading For Investors’ Benefit

The Securities and Exchange Board of India (SEBI) has introduced a new framework to expedite the trading of bonus shares. Effective October 1, 2024, bonus shares will be available for trading within two days of the record date (T+2), significantly reducing the previous waiting period.

Previously, the lag between the record date and the crediting of bonus shares often led to market inefficiencies. SEBI’s updated guidelines aim to address this issue by ensuring a more timely and efficient process.

Key Changes

Accelerated Timelines

• The companies must apply for in-principle approval from the stock exchange within five business days of board approval for the bonus issue.
• The day after the record date will be the “deemed date of allotment.”
• The stock exchange will issue a notification confirming the record date, number of bonus shares, and deemed date of allotment.
• The companies must submit documents to depositories by 12 noon on the next business day after the record date.
• Bonus shares will be available for trading on the following day.

Simplified Crediting

Bonus shares will be credited directly into the permanent ISIN (the same as the existing equity shares), eliminating the need for a temporary ISIN.

Penalties

Delays in adhering to the new timelines will attract penalties as per SEBI’s August 19, 2019, circular on non-compliance with ICDR Regulations.

Impact on the Markets

The T+2 system will benefit investors by reducing the waiting period before trading bonus shares. This is part of SEBI’s broader efforts to modernise and enhance India’s securities markets. By expediting the crediting and trading of bonus shares, the new regulations aim to improve liquidity and investor confidence.

Exchanges and depositories must amend their rules to align with SEBI’s guidelines, ensuring uniformity across the market.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.