Markets regulator Sebi’s board on Monday cleared 17 proposals, including an amendment to insider trading rules to clarify the definitions of ‘connected person’ and ‘immediate relative’ and relaxed eligibility criteria and compliance requirements for investment advisers and research analysts.
In a statement issued by Sebi after the board meeting, the regulator said it has been decided to introduce provisions for “summary proceeding” in the intermediaries rules to handle certain minor violations of securities laws by intermediaries more swiftly and efficiently.
Also, it has decided to provide more flexibility for allotting shares to specific investors in rights. Further, promoters would be permitted to transfer their rights entitlement to select investors during rights issues, potentially attracting more investment into the market.
Mutual Funds Lite
The board also cleared a relaxed framework with ‘light-touch’ regulations for entities desirous of launching only passive mutual fund schemes.
MF Lite framework or light-touch regulations include relaxed requirements relating to eligibility criteria for sponsors, including net worth, track record and profitability, the responsibility of trustees, approval process and disclosures, Sebi said.
Rights Issue Processing Time
In addition, the regulator has rationalised the disclosure requirements in the offer document and reduced the rights issue processing time to make it a preferred fundraising route.
“Sebi’s initiative in reducing timelines (i.e. rights issue to be completed in 23 days approx from the existing time required of 317 days) for rights issue is a welcome step. With reduced timelines, corporates can have faster access to funds through rights issues,” Makarand M Joshi, founder of corporate compliance firm MMJC and Associates, said.
UPI Block Mechanism
The board has also approved a proposal on a UPI block mechanism and 3-in-1 trading facility, whereby Qualified Stock Brokers (QSBs) should offer either a UPI block (like ASBA for secondary markets) or a 3-in-1 trading facility, and expand the optional T+0 settlement cycle for faster trade settlements in a phased manner from the top 25 to top 500 stocks in terms of market capitalisation.
Amendments in (LODR) Regulations
To promote ease of doing business and facilitate smoother processes, it has amended (LODR) Regulations, 2015, and Sebi (ICDR) Regulations, 2018, and approved measures to simplify compliance and ease of disclosures for non-convertible securities.
Informal Guidance Scheme
The board has given its go-ahead to the Informal Guidance Scheme to provide wider access and streamline the process.
Rules For Merchant Bankers
Also, it has overhauled the rules for merchant bankers, specified ‘pro-rata and pari-passu rights’ of investors of alternative investment funds (AIFs) and decided to bring offshore derivative instruments (ODIs) and FPIs under the same disclosure requirements.
Norms On Nomination In Securities Market
The regulator has decided to introduce a uniform, investor-friendly norms for nomination in the Indian securities market, expanded the scope of the framework to promote corporate fundraising through sustainable finance and replaced the requirement of document attestation by a notary or Gazetted officer with self-attestation.
New Asset Class
Sebi cleared a proposal to introduce a new asset class for high-risk profile investors to bridge the gap between mutual funds and portfolio management services in terms of flexibility in asset construction.
The minimum amount of Rs 10 lakh can be invested for the new asset class per investor across all investment strategies of the new product in a particular AMC.
“The new product also aims to curtail the proliferation of unregistered and unauthorised investment schemes/entities, which often promise unrealistic high returns and exploit investors’ expectations for better yields, leading to potential financial risks,” Sebi said in a press statement after the conclusion of the board meeting.
The new asset class will provide a regulated product with features like SIP (Systematic Investment Plan), higher risk-taking capability, and a higher ticket size to meet the needs of the emerging category of investors.
The higher threshold will deter retail investors from investing in this product while attracting investors with investible funds between Rs 10 lakh and Rs 50 lakh, who are being drawn to unauthorised and unregistered portfolio management service providers.
In its statement, Sebi said that safeguards for the new product will include; no leverage, no investment in unlisted and unrated instruments beyond those already permitted for mutual funds and derivatives exposure limited to 25% of AUM for purposes other than hedging and rebalancing. It further said that offerings under the new product will be referred to as ‘Investment Strategies’ to maintain a clear distinction from the schemes offered under traditional mutual funds.
“The new product is intended to add depth and variety to the investment landscape of the country through a new asset class,” Sebi said.
Sebi Board Meeting Outcome
This was the first board meeting after the US-based short seller Hindenburg Research and Congress party made allegations against Sebi’s chairperson Madhabi Puri Buch.
Hindenburg accused Buch and her husband of having investments in offshore funds controlled by Vinod Adani, the brother of Adani Group chairman Gautam Adani, which were allegedly used to round trip funds and inflate stock prices.
Also, it was alleged that Sebi had amended rules pertaining to real estate investment trusts (REITs) in a way that benefited Blackstone, where Buch’s husband was a senior advisor. Buchs and Sebi had denied the allegations.
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