SEBI, vide its Circular dated 28th June, 2022 revised threshold for Adjustments in derivative contracts for dividend announcements from 5 per cent and above to 2 per cent and above.
Currently, dividends below 5 per cent of the market value of the underlying stock are treated as ordinary dividends and no adjustment is made in the strike price but with this amendment now strike price would be adjusted for dividend at and above 2 per cent. Therefore above 2 per cent dividend would also be treated as extra-ordinary dividends.
SEBI, further added that, decision was taken after receiving representations from stakeholders and also after taking examination and suggestions from Secondary Market Advisory Committee (SMAC).
The revised threshold, as stated above, would be applicable for dividend announcements done on or after the effective date of the circular.
Further, SEBI circulars dated 21st June, 2001, 18th December, 2002 and 05th July, 2018 shall, accordingly, be modified to the above extent. All other provisions of the said SEBI circulars shall continue to remain applicable.
The provisions of this circular shall come into effect from 29th June, 2022.
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