SEBI Observations on Draft Offer Documents Pending Regulatory Actions Order

SEBI (ISSUING OBSERVATIONS ON DRAFT OFFER DOCUMENTS PENDING REGULATORY ACTIONS) ORDER, 2006 General Order No. 1 of 2006 under S. 11A of the Securities and Exchange Board of India Act 1992 In exercise of powers conferred under Section 11A (1)(b) of the SEBI Act, 1992, the Securities and Exchange Board of India ("the Board") hereby passes a General Order to formalize the issuance of observations on draft offer documents filed with the Board , where an investigation, enquiry, adjudication, prosecution or other regulatory action is pending against the issuer or its promoter(s)/director(s)/ group companies ("the entities"). Whereas no person is presumed to be guilty unless proved so, it is in the interest of the investors and the securities market that some reasonable restrictions be imposed when any form of investigation, enquiry, adjudication or prosecution has been initiated against the entities. Whereas , the Board does not regulate offer/issue of securities on merits but only mandates true and fair disclosures including the possibility of a sanction where entities are put on notice. Whereas this order lays down general terms subject to which observations on draft offer documents may be issued where probable cause for enquiry, adjudication, prosecution or other regulatory action is found.

1. Treatment after a probable cause of violation has been found Where the appropriate authority has found probable cause for enquiry, adjudication, prosecution or other regulatory action against the entities, observations on draft offer documents filed by the issuer with the Board shall be kept in abeyance for a period of 45 days after such probable cause of violation is found or the date of filing of the draft offer document with the Board, whichever is later. Provided that where a show cause notice is issued against entities, the issuance of observations shall be subject to the terms of clause 2 of this Order.
2. Treatment where Show Cause Notice has been issued Where a show cause notice has been issued to the entities, observations on draft offer document(s) filed by the issuer with the Board shall be kept in abeyance for a period of 90 days from the date of show cause notice or filing of draft offer document with the Board, whichever is later. The appropriate authority shall, in a fit case, within the period of 90 days, pass an appropriate interim or final order after hearing the person affected, Provided that where there is any pending show cause notice as on the date of issuance of this General Order, the period of 90 days shall begin from the date of issuance of this General Order. Provided further that any time taken by such entities/noticee(s) shall be excluded while computing the 90 days period. Where no such interim or final order is passed within the period of 90 days , the Board may process the draft offer document for the purpose of issuance of observations subject to relevant disclosures in the offer document about receipt of the show cause notice and the possible adverse impact of the order on the entities. Issued by the Securities and Exchange Board of India by General Order dated 8 th December 2006 in terms of power vested in it by S. 11A(1)(b)

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