Brief Overview:
Securities and Exchange Board of India (“SEBI”) in its board meeting held on 30th September 2024 has approved amendments to the various SEBI regulations in order to promote ease of business based on the proposals contained in various consultation papers circulated by SEBI from time to time.
Technical Details:
SEBI has approved the following measures and paved way for regulatory amendments to come to enable the following:
1) Non-Convertible Securities and Listing Obligations and Disclosure Requirements:
(a) Relaxation in ISIN limits for listing originally unlisted non-convertible debentures.
(b) Timeline for intimation of record date to stock exchanges reduced from 7 (seven) working days prior to 3 (three) working days prior.
(c) A copy of the debenture trustee agreement to be accessible by way of a QR code in the offer document.
(d) A copy of the consent letter of the debenture trustee to be set out in the general information document and the same to be available in the key information document in the form of a QR code.
(e) Relaxed timelines for making disclosures in some cases:
(i) 3 hours instead of 30 minutes, for board meeting conclusion post trading hours closure; and
(ii) 72 hours instead of 24 hours for disclosure of material litigations or disputes against the listed entity.
(f) Introduction of a single filing system for automatic dissemination to other stock exchanges.
(g) System driven disclosures for shareholding pattern and credit ratings revision.
(h) Periodic filings integrated into two broad categories: Governance and Filing.
(i) Detailed advertisement of financial results in newspapers would be optional for listed entities.
2) Prohibition of Insider Trading:
(a) (A) a firm or its partner or its employee in which a ‘connected person’ is also a partner; and (B) a person sharing household or residence with a ‘connected person to be deemed as a “Connected Person”
(b) Instead of ‘immediate relative’, a relative to be deemed as a “Connected Person”
3) Mutual Funds
(a) Introduction of a new asset class – “Investment Strategies” for high-risk profile investors to narrow the gap between mutual funds and portfolio management services in terms of flexibility in asset construction. Minimum investment to be INR 10 lakhs per investor.
(b) The above shall provide greater flexibility, higher risk taking capabilities, adequate risk safeguards like no leverage, no investment in unlisted or unrated instruments, limited derivative exposure (25% of asset under management) for purposes other than hedging.
(c) SEBI introduced mutual funds lite framework for entities desirous of launching only passive mutual fund schemes.
4) Investment Advisors (“IA”) and Research Analysts (“RA”):
(a) Relaxation in eligibility requirements for registration as an Investment Advisor or Research Analyst which will result in (i) wider regulatory horizon, (ii) have finfluencers, investment consultants and stock analysts within scope and (iii) encourage more capital market consultants to register.
(b) Blurs the line of distinction between IA and RA and provide more clarity on list of activities.
(c) Permits registration as part-time RA and dual registration as IA and RA.
5) Rights Issue:
(a) Reduction in the timeline for rights issue from 317 working days to 23 working days from the date of the issuer’s board meeting approving the issue.
(b) Dropping the requirement of filing draft letter of offer with SEBI.
(c) Promoters may renounce rights in favour of specific investors
(d) Undersubscribed portion can be allotted to specific investors.
(e) Mandatory appointment of monitoring agency.
(f) Appointment of a merchant banker shall be optional rather than mandatory appointment as long as the rights issue is concluded within the 23 working day time frame.
6) Sustainable Financing:
(a) SEBI to specify the framework for issue of ESG Debt Securities that shall include social bonds, sustainability bonds, sustainability-linked bonds and green debt securities.
(b) Existing debenture framework only captures norms for the issue of green debt securities which will now be widened to capture the above as well
7) Investor Rights in Alternative Investment Fund (“AIF”)
(a) Drawdown of fund from investor and distribution to the investors for return on investments shall be on a pro-rata basis as per the investor’s commitment.
(b) The rights of the investor of a scheme of an AIF shall be on a pari passu basis.
(c) Government owned or controlled entities, multi-lateral or bilateral development financial institutions, state industrial development corporations and other entities specified by SEBI etc. may subscribe to junior classes of units of AIF (less than their pro rata rights).
(d) Existing AIFs with priority distribution model (i.e. prioritize certain investors for returns) cannot accept new investments or make new investments in other companies.
8) Offshore derivatives instrument:
Please refer to our FYI shared on 07th October 2024 ODIs only on one-to-one basis & not against derivatives – Juris Corp | Advocates & Solicitors
9) Other than the above, there have been proposals for amendments in relation to secondary market trading vide ASBA, enhancement of scope of T+0 settlement, ease of doing business in relation to buyback of securities, merchant banking activities, etc.
JC takeaway:
The Board Meeting approved the proposals that were previously open to public comments. We can expect amendments to the SEBI regulations in the near future. These amendments aimed at fostering investor convenience, streamlining operations, and enhancing regulatory framework in the financial market and facilitating ease of doing business.
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