The Securities and Exchange Board of India (Sebi) on Monday approved easing ‘fit and proper’ person criteria for market intermediaries. The regulator said that a criminal complaint, first information report (FIR), or a chargesheet alone should not be the ground for automatic disqualification of such intermediaries, which is currently the case.
“This particular itself is under legal challenge. Right now, there are 16 petitions in the High Court,” Sebi Chairman Tuhin Kanta Pandey said in a press conference.
Sebi said that initiation of winding up proceedings as a ground for disqualification should be removed. “However, the extant provision of disqualification upon an order of winding up shall remain,” as per a press release issued by the regulator.
Disqualification of an intermediary due to conviction for an offence involving moral turpitude should include conviction for any economic offence or any offence under securities laws, it added. Sebi’s board also approved reducing the time period of non-consideration of registration of a market intermediary due to the issuance of a show-cause notice to six months from 1 year earlier.
Ease in AIF norms
Sebi also approved easing certain norms for alternative investment funds (AIFs) to reduce their compliance burden while retaining regulatory oversight. The board also gave its nod to amend Sebi’s AIF Regulations, 2012 for a scheme to retain liquidation proceeds of portfolio even after the completion of its tenure.
AIFs are currently required to distribute the liquidation proceeds to investors within the permissible fund life and achieve a NIL bank account balance before surrendering their certificate of registration.
“It has also been approved to introduce a framework for tagging certain AIFs as ‘inoperative funds’ with lighter compliance requirements till surrender of their registration certificate,” as per the press release.
An AIF will be permitted to retain the proceeds of a fund after the tenure if they meet one of the three conditions. It should have the consent of at least 75% of investors in value terms, substantiation of amounts retained for operational expenses through invoices or have a demonstrable receipt of a litigation notice or tax demand, Sebi said.
REITs, InvITs
Sebi said that Infrastructure Investment Trusts will be permitted to continue to hold investment in special purpose vehicles after the conclusion or termination of a concession agreement.
InvITs with leverage exceeding 49% and up to 70% of the value of their assets will be allowed to avail fresh borrowings for various purposes, including capital expenditure, major maintenance expense for road projects, and refinance of existing debt. Currently, InvITs with the leverage exceeding 49% and up to 70% of the value of their assets are allowed to undertake fresh borrowings only for acquisition or development of infrastructure projects.
InvITs and Real Estate Investment Trusts (REITs) will be permitted to invest in units of liquid mutual fund schemes where the credit risk value is at least 10 and which fall under the Class A-I or Class B-I in the potential risk class matrix, Sebi said.
SIF minimum investment
The board approved reducing the minimum application size for investors in social impact fund (SIF) of AIFs to ₹1,000 from the current ₹2 lakh.
“This would align the requirement of minimum application size for subscribing to Zero Coupon Zero Principle Instruments…with the requirement of minimum value of investment by individual investors in Social Impact Fund.”