31st July, 2018
Sub: Review of Adjustment of corporate actions for Stock Options
To all Listed Companies
Attention of such aforesaid listed companies are drawn to SEBI Circular Ref. No. CIR/MRD/DoP-1/P/00108/2018 dated July 05, 2018 (copy available at CSE web-site at and SEBI web-site at ) wherein
It is mentioned that “SEBI, vide Circular No. SMDRP/DC/CIR- 8/01 dated June 21, 2001, prescribed a framework for adjustment of corporate actions for stock option contracts. Further, SEBI, vide Circular No. SMDRP/DC/CIR-15/02 dated December 18, 2002, set out principles for adjustment in derivative contracts at the time of corporate actions.”
Now, SEBI has been receiving representations from various stakeholders requesting to review the dividend adjustment framework for stock options. The suggestions were examined and placed before the Secondary Market Advisory Committee (SMAC) for deliberations. Based on the recommendations of SMAC, it has been decided to review the mechanism of dividend adjustment for stock options.
1. The adjustment in strike price shall be carried out in the following cases of declaration of dividends:
a. Dividends declared at and above 5% of the market value of the underlying stock ; or
b. All cases of dividends, where the listed entity has sought exemption from the timeline prescribed under the provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
All other conditions stated in Circular No. SMDRP/DC/CIR-8/01 dated June 21, 2001 and Circular No. SMDRP/DC/CIR-15/02 dated December 18, 2002 shall remain unchanged.
This is for information and necessary action.
CS Chandrani Datta