The Securities and Exchange Board of India (Sebi), in its board meeting on Monday, approved a slew of measures, including the introduction of a new asset class, faster rights issue process, an ASBA-like facility for secondary market, and expanding the scope of insider trading for listed companies. However, the widely-anticipated futures and options guidelines did not get a green signal from the board members.
This was the first board meeting of the markets regulator after allegations were levelled against chairperson Madhabi Puri Buch by US short-seller Hindenburg and the Opposition Congress. Sebi did not hold a press briefing as has been the norm.
The regulator also cleared simplified compliance and eligibility requirements for investment advisers, and the Mutual Funds Lite (MF Lite) framework for fund houses launching only passively managed schemes. However, there was no announcement on the much-awaited rules for the futures and options (F&O) market.
The new asset class, which will offer “investment strategies”, is aimed at higher-risk investors to bridge the gap between mutual funds and portfolio management services (PMS). The minimum ticket size for this product will be `10 lakh.
“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 release.
In a move that will help listed companies quickly raise capital and make rights issues attractive over preferential issues, Sebi has shortened the timeline for a rights issue to only 23 working days from 317 days.
The Sebi board has also decided to broaden the scope of insider trading rules by amending the definition of relatives and connected persons.
It has also decided to keep T+O settlement optional, but increased the number of scrips eligible for trading under optional T+0 settlement in a phased manner from 25 to top 500 in terms of market capitalisation.
The Sebi board also approved streamlining the filing system for listed companies, with companies having to only file relevant reports and documents on one exchange. It also eased the timeline for making post-board meeting stock exchange disclosures, and review of merchant banking rules.
From February 1, 2025, qualified stock brokers (QSBs) will have to provide either an ASBA-like facility for the secondary market or 3-in-1 trading account facility. Clients will continue to have an option between the two and the existing process of transferring funds to brokers.
The new MF Lite framework includes relaxations relating to eligibility criteria for sponsors, including net worth, track record and profitability, disclosures, responsibility of trustees, and approval process.
Sebi has also tightened the disclosure requirements for offshore derivatives instruments (ODIs) and segregated portfolios in order to fill any regulatory gaps with foreign portfolio investors (FPIs). The Sebi board also cleared a new framework for “Informal Guidance” to facilitate wider access to informal guidance from Sebi, and proposal to specify the frameworks for issuance of social bonds, sustainability bonds and sustainability-linked bonds.