The Securities and Exchange Board of India (SEBI) is likely to take several key decisions, including stricter norms for equity derivatives market, overhaul in rules for investment advisors and mutual fund (MF) Lite regulations, in its board meeting on September 30.
This will be the markets regulator’s first board meeting since chairperson Madhabi Puri Buch faced a slew of allegations by US short seller Hindenburg and the Congress party.
Sources said that the board meeting agenda is likely to have as many as 15 items. The introduction of a new asset class and relaxation of the business responsibility and sustainability reporting (BRSR) framework are also likely to be agenda on Monday.
The final norms to curb excessive speculation in the futures and options (F&O) segment is going to be one of the most awaited decisions since the regulator and even the finance ministry has expressed their anguish over the overenthusiasm of retail investors in the segment. Source said that these proposals in the seven-point consultation paper are likely to be passed without any significant change. Two proposals – removal of calendar spread benefit on expiry day and increase in margin near contract expiry – have seen the most pushback from F&O traders in the 6,000-odd responses received by SEBI.
The proposals for registered investment advisors (RIAs) and research analysts are also expected to get a nod. However, there could be some tweaks. “There are some genuine issues that have been raised by investment advisors, which we will address. So, you might see some changes from what was proposed in the draft paper,” said a SEBI official.
Another source said that the idea is to reduce entry barriers, but some changes proposed can restrict existing RIA services from providing services such as estate and tax planning and force them to form separate entities to provide these service – something that is expected to increase paperwork for the advisors. “Such proposals would be tweaked so that existing practices do not get hindered,” the source said.
The regulator may approve the new asset class for higher risk-taking investors to fill the gap between mutual funds and portfolio management services (PMS). Market participants have been excited about the asset class as it allows dabbling into equity derivatives for other than hedging, with an entry barrier of Rs 10 lakh.
“All responses have been extremely positive, and this (new asset class) will likely get approved by the board,” said another source. Nuances like the name of the asset class, branding guidelines, fund structures, and others may be announced on Monday.
SEBI may also clear an earlier proposal of allowing investments by domestic mutual fund houses in overseas funds, exchange-traded funds, and unit trusts that hold up to 20% of their corpus in Indian securities. The board may also approve review of provisions regarding public interest directors and merchant bankers in the meeting.
A source added the proposal to introduce an ASBA-like facility for the secondary market might require more consultation to fine-tune the implementation process and is not expected to be taken up.