The key highlights of the SEBI’s board meeting are as follows:
2. Timeline for listing of shares in Public Issue to be reduced to 3 days
The SEBI, in its board meeting, has approved the proposal to reduce the time period for the listing of shares in Public Issue from the existing 6 days to 3 days, starting from the date of issue closure (T Day).
The revised timeline of T+3 days shall be made applicable in two phases i.e., voluntary for all public issues opening on or after September 01, 2023 and mandatory on or after December 01, 2023.
2.1 Key benefits of the reduction in listing timeline:
The reduction in the listing timeline is expected to benefit the stakeholders in the following ways -
(a) Issuers would receive their funds and allottees would receive their securities in a shorter time period.
(b) Subscribers who were not allotted shares would receive their moneys back quickly.
(c) Curb trading of securities, if any, will be curbed.
(d) Resources of all stakeholders like stock exchanges, banks, depositories, brokers in the public issue process will be deployed for a shorter period.
Impact:
The reduced timeline for listing shares in a public issue will expedite the listing process, enabling the companies to access capital more quickly and providing investors with earlier liquidity opportunities. This ensures subscribers who were not allotted shares in the public issue receive their refund promptly, enhancing investor satisfaction.
Further, the accelerated process enhances market liquidity and improves the efficiency of capital flow in the market.
3. SEBI to enforce stringent disclosure norms for FPIs concerning ownership, economic interest and control
The SEBI has approved of proposal to amend the SEBI (Foreign Portfolio Investors) Regulations, 2019. The objective behind the amendments is to ensure the integrity of the Indian financial markets and prevent any potential circumvention of regulations.
SEBI’S REGULATORY OVERHAUL: BOLSTERING INDIAN CAPITAL MARKETS THROUGH STRICTER FPI NORMS 6
The amendment focuses on two key areas of concern. Firstly, it aims to prevent the circumvention of Minimum Public Shareholding (MPS) routes or the disclosures under the Substantial Acquisition of Shares and Takeovers Regulations, 2011 (SAST). Secondly, it aims to prevent any misuse of the Foreign Portfolio Investor (FPI) route to acquire or takeover stressed Indian companies at a lower valuation.
To achieve these objectives, the amendment mandates additional disclosures pertaining to ownership, economic interest and control in any company. These include -
(a) FPIs holding more than 50% of their Indian equity assets under management (AUM) in a single Indian corporate group or
(b) FPIs that individually or along with their investor group hold more than Rs 25000 crore of equity AUM in the Indian markets.
3.1 Certain entities are to be exempted from making additional disclosures
There are certain entities that are to be exempted from making the additional disclosures. These exemptions are granted to specific categories of investors based on certain conditions. The exempted entities include the following –
(a) Government and Government-related investors
(b) Pension Funds and Public Retail Funds
(c) Certain Listed Exchange Traded Funds (ETFs)
(d) Corporate entities
(e) Verified pooled investment vehicles
3.2 Ineligibility for registration as FPIs
Applicants with investors contributing 25% or more in the corpus that are mentioned in the Sanctions List notified by the UN Security Council are ineligible for registration as FPIs.
3.3 Alignment of FPI eligibility criteria with reduced thresholds under PML Rules
In March 2023, the threshold requirements for identifying beneficial owners (BO) were amended under the Prevention of Money Laundering (PML) Rules. Currently, the threshold stands at 10% for companies and trusts and 15% for partnerships and unincorporated associations or bodies of individuals. The board has approved changes to the FPI Regulations to align the eligibility criteria with the reduced thresholds prescribed under the PML Rules.
Impact:
The implementation of stringent norms aims to strengthen the regulatory framework, enhance transparency, and deter any potential circumvention of regulations in the Indian financial markets. By promoting integrity and preventing misuse, SEBI aims to maintain a level playing field for market participants and protect the interests of investors.
7 SEBI’S REGULATORY OVERHAUL: BOLSTERING INDIAN CAPITAL MARKETS THROUGH STRICTER FPI NORMS
4. Listed entities having outstanding NCDs to list their subsequent issuances of NCDs
The SEBI in its board meeting, approved the amendment to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 which mandates listed entities with outstanding listed NCDs (as on December 31, 2023) to list their subsequent issuances of NCDs at the stock exchange(s). The new requirement will be effective from 01.01.2024.
Further, if an entity with listed debt securities has outstanding unlisted NCDs as on December 31, 2023, the entity will have the option to list them, but it would not be mandatory to do so.
4.1 Board grants approval for delisting of listed debt securities
The Board has approved the proposal to enable entities with listed debt securities to delist such securities, subject to compliance with certain requirements including obtaining approval from all holders of debt securities, and making suitable disclosures to the Stock Exchanges.
Further, unlike equity, wherein approval by a threshold majority is sufficient for approval of delisting, approval of 100% of the debt security holders is mandated for the delisting of debt securities. Impact -
This aims at facilitating transparency in price discovery of non-convertible debt securities, better disclosures to investors and the market, and avoiding ISIN-level confusion and possible mis-selling of unlisted bonds. It will boost market confidence and ensure better regulation of non-convertible debt securities.
5. Enabling direct participation by clients in the Limited Purpose Clearing Corporation (LPCC)
The SEBI, in its board meeting, has approved the proposal to facilitate the setting up of a Limited Purpose Clearing Corporation (LPCC) for clearing and settling repo transactions in corporate debt securities. This in turn is expected to enhance the liquidity in the corporate bond market.
The Board has also approved the proposal to enable direct participation (not through a clearing member) by entities in repo transactions in corporate bonds of the LPCC
SEBI’S REGULATORY OVERHAUL: BOLSTERING INDIAN CAPITAL MARKETS THROUGH STRICTER FPI NORMS 8
Impact -
The launch of the LPCC is expected to facilitate active trading, especially by market makers, by enabling them to finance their inventory of bond holdings through an active repo market. Since the timely availability of funds and securities is critical in a repo market, the direct participation of both borrowers and lenders can widen the market.
Overall, these measures are likely to promote increased trading activity and enhance liquidity in the corporate bond market.
6. Sponsor of InvIT/ REIT to maintain a minimum unitholding for the entire life of the Investment Vehicle
6.1 Present scenario:
Generally, the Sponsor who sets up the InvIT/ REIT, monetizes its assets by transferring them to the InvIT/ REIT and exerts control over the decisions of the InvIT/ REIT through significant shareholding in the Investment Manager/ Manager.
Presently, SEBI Regulations mandate the Sponsor to hold a minimum of 15% of units for a period of at least three years from the date of listing of units.
6.2 Prospective amendment:
To ensure the alignment of interests between the Sponsor and investors during the life of these investment vehicles, the Board has approved an amendment. Under the proposed amendment, the Sponsor of InvIT/ REIT is required to maintain a minimum unitholding on a reducing scale for the entire life of the InvIT/ REIT. The mandatory minimum unitholding shall be locked-in and unencumbered.
Further, to provide additional exit opportunities, the Board has approved the proposal for the introduction of a Self-Sponsored Investment Manager/Manager. This allows an Investment Manager/Manager to assume the responsibilities of the Sponsor of the InvIT/ REIT.
Impact -
The proposed amendment is expected to have a significant impact on the functioning and governance of these investment vehicles. By aligning the interests of sponsors with those of investors, SEBI aims to enhance governance standards and accountability within these entities.
Further, the initiative of additional exit opportunities creates an opportunity for mature and independent, professionally managed Investment Managers to emerge. This will ensure the continuity and effective management of the investment vehicle, enhancing investor confidence.
9 SEBI’S REGULATORY OVERHAUL: BOLSTERING INDIAN CAPITAL MARKETS THROUGH STRICTER FPI NORMS
7. SEBI to introduce board nomination rights for unitholders of InvITs and REITs to strengthen corporate governance
7.1 Present scenario:
The current regulatory framework for InvITs/ REITs does not explicitly provide for unitholders to have a say in the investment decisions made by the Investment Managers/ Managers of these funds.
However, big investors in InvITs/ REITs often have a say in investment decisions by nominating a director on the Board of the Investment Manager/ Manager.
7.2 Prospective amendment:
Accordingly, the SEBI has approved a proposal to provide nomination rights to unitholders holding 10% or more of the total outstanding units of the InvIT/REIT, either individually or collectively, on the board of directors of the Investment Manager / Manager. This ensures pro-rata rights to all unitholders.
Impact -
The introduction of board nomination rights to unitholders is expected to have a positive impact by strengthening corporate governance and enhancing investor protection in the InvIT and REIT sectors in India. It empowers unitholders and aligns their interests with the decision-making process, fostering transparency and accountability within these investment vehicles.
8. SEBI nods to revamp SCORES platform to enable faster redressal of investor grievances
In order to strengthen the redressal process of grievances of the investors in the securities market, the SEBI has approved the proposal to revamp SEBI Complaint Redress System (SCORES) by various measures –
(a) Reduced Timelines – The reduced timelines for grievance resolution and the introduction of auto-routing of the complaints to concerned regulated entities will lead to faster and more efficient handling of investor grievances. This will help in addressing investor concerns promptly and ensuring timely resolution.
(b) Auto-escalation of complaints – The auto-escalation of complaints in case of non-adherence to the prescribed timelines by the regulated entities will increase their accountability. It will encourage regulated entities to prioritize and expedite the resolution of investor grievances to avoid potential regulatory actions.
(c) Designated Bodies for Grievance Handling – The recognition of designated bodies for monitoring and handling investor grievances against regulated entities will provide an additional layer oversight and ensure impartiality in the grievance resolution process. This will give investor’s confidence that their complaints are being addressed by independent authorities.
SEBI’S REGULATORY OVERHAUL: BOLSTERING INDIAN CAPITAL MARKETS THROUGH STRICTER FPI NORMS 10
(d) Providing two levels of review – The provision of two levels of review, first by a designated body and second by SEBI, will enable investors to seek further recourse if they are dissatisfied with the resolution provided at the initial stage. This mechanism ensures that investor grievance receives appropriate consideration at multiple levels.
(e) Integration with Online Dispute Resolution (ODR) platform – Linking SCORES with the ODR platform will provide investors with an additional avenue for resolving their grievances. ODR platforms offer online mediation and arbitration services, allowing parties to settle disputes in an efficient manner.
(f) Creation of a new portal – The creation of a new portal for the collection of market intelligence inputs will help SEBI to gather information related to investor grievances. It will enable SEBI to proactively address investor concerns and make informed policy decisions.
Impact -
Overall, these measures are aimed at strengthening the investor grievance handling mechanism, improving transparency, and ensuring a fair and efficient resolution of investor complaints.
11 SEBI’S REGULATORY OVERHAUL: BOLSTERING INDIAN CAPITAL MARKETS THROUGH STRICTER FPI NORMS
SEBI’S REGULATORY OVERHAUL: BOLSTERING INDIAN CAPITAL MARKETS THROUGH STRICTER FPI NORMS 12 Our Associations Income-tax Department Income-tax Appellate Tribunal Indian Institute of Banking & Finance National Institute of Securities MarketsAn Education Initiative of SEBI
About TAXMANN
Our mission at Taxmann is ‘Spearheading the pursuit of expertise & authenticity’. We at Taxmann strive to provide authentic and fastest reporting of information. We are proud to call ourselves the #1 source for everything on Tax and Corporate Laws in India. Our domain knowledge of more than 60 years has helped us in being trusted by more than 500K legal professionals across the country.
Taxmann Alliance is the only publishing house in India with complete backward and forward integration, right from self-owned paper printing unit to in-house research and editorial team, and finally reaching the readers through its own distribution network all across India. The group has also ventured into the technologies division since 2007.
Taxmann Alliance consists of four independent verticals:
Research & Editorial
Taxmann Research & Editorial comprises of an enthusiastic team of over 200 Legal associates. They are responsible for keeping the readers abreast of the latest developments in the judicial, administrative and legislative fields in the form of authentic articles and updates.
Sales & Marketing
At Taxmann, we believe in marketing our products through various refined sales channels, with a diverse network of Dealers & Distributors and an in-house marketing team.
A quick preview of the strength of our sales is listed below:
Printing
Tan Prints has been carrying out specialized printing jobs since the 1980s in their beautifully landscaped facility spread over 10,000 sq. meters. Tan Prints has a strong presence in Nigeria, Ghana, Ethiopia, Rwanda, Uganda and Kenya. It not only caters to reputed Book Publishers but also Governments, Universities and Institutes.
Technologies
Taxmann’s excellent team of professionals offers the best in class end-to-end website and App designing, development and maintenance solutions.
13 SEBI’S REGULATORY OVERHAUL: BOLSTERING INDIAN CAPITAL MARKETS THROUGH STRICTER FPI NORMS
50+ Delhi-NCR 45+ Gujarat 15+ Tamil Nadu 50+ Maharashtra 25+ Karnataka 15+ Andhra Pradesh & Telangana 10+ West Bengal 900+ Independent Dealers & Distributors, PAN-India 10+ Rajasthan ABOUT TAXMANN
Taxmann Group
Research & Editorial
21/35, West Punjabi Bagh, New Delhi – 110026
Phone : +91-11-45662200 | E-mail : editorial@taxmann.com
Printing - Tan Prints
44 Km. Mile Stone, National Highway, Rohtak Road Village Rohad, Distt. Jhajjar (Haryana)
Phone : 01276-278155-56 | Mobile : 9896514100 | E-mail : sales@tanprints.com
Technologies
59/32, New Rohtak Road, New Delhi - 110005 (India) | Phone : +91-11-46462222 | E-mail : technologies@taxmann.com
Delhi: 59/32, New Rohtak Road, New Delhi - 110005 (India)
Tel: +91-11-45562222 | For Support Enquiry: support@taxmann.com
For Sales Enquiry: sales@taxmann.com | Skype ID: taxmannindia
Mumbai: 35, Bodke Building, Ground Floor, MG Road, Opp. Mulund Railway Station, Mulund (W), Mumbai - 400080
Tel: +91-022-25934806/07/09, 25644807 | Mobile: 09322247686, +91-9619668669
Email: sales.mumbai@taxmann.com, nileshbhanushali@taxmann.com
Ahmedabad: 7, Abhinav Arcade, Ground Floor, Nr. Bank of Baroda, Pritam Nagar Paldi, Ahmedabad - 380007
Tel: +91-079-26589600/02/03 | Mobile: +91-9909984900, 9714105770, 9714105771
Email: bdurgaprasad@taxmann.com, sales.ahmedabad@taxmann.com
Hyderabad: 4-1-369-Indralok Commercial Complex Shop No. 15/1 - Ground Floor, Beside Hotel Jaya International Reddy Hostel Lane Abids Hyderabad - 500001 Mobile: +91-9391041461/09322293945 | Email: bdurgaprasad@taxmann.com, sales.hyderabad@taxmann.com
Pune: Office No. 14, First Floor, Prestige Point, 283 Shukrwar Peth, Opp.Chinchechi Talim, Nr. BSNL office, Bajirao Road, Pune - 411002
Mobile: 9822411811, 9834774266, 9322293945 | Email: sales.pune@taxmann.com
For Contact & Assistance: Tel. : +91-11-45562222 | E-mail : support@taxmann.com, sales@taxmann.com
www.taxmann.com Follow us
SEBI’S REGULATORY OVERHAUL: BOLSTERING INDIAN CAPITAL MARKETS THROUGH STRICTER FPI NORMS 14
