The Securities and Exchange Commission (SEC) has called for public comments on the draft rules on Employee Share Option Schemes (ESOS) of publicly listed firms, according to an announcement on the Colombo Stock Exchange website.
In July the regulator put out a consultation paper calling for public comments on these schemes which was then turned into a draft after taking the comments into consideration, a source at the SEC said.
The SEC is now also calling for comments by December 31 on the draft rules.
The source said the new rules reflect international best practices. Explaining some of them, he said that the total number of ESOS to be issued by a listed entity should not ideally be more than 5% of the total number of shares issued by the listed firm according to international standards and that the regulator has incorporated the 5% ceiling in the new draft law.
He also said that SEC has also seen that through ESOS, some major shareholders of listed firms manipulate control, but the new rules will give adequate protection to the investors as they include a provision for any single director/employee being entitled for no more than 1% of the total number of shares issued though the ESOS.
These rules have also covered some existing ESOS, which are not regulated under the present rules. Firms with such ESOS (currently) can purchase their own shares from the market and then allocate these shares to the employers. Now with the new rules they must issue new shares.