Broader definition of ‘connected person’: Sebi has tightened its anti-insider-trading rules. It will apply this classification of those with potential access to unpublished price-sensitive information even to people who share a home with ‘connected’ persons and also firms (or its partners or employees) in which a connected person is a partner.
The ambit of relatives has been expanded beyond “immediate” family members. This will not impact the current code-of-conduct applicable to “designated persons” and their immediate relatives, so no additional disclosures will arise from these changes.
ODI disclosure norms: Offshore derivative instruments (ODI) and segregated portfolios of foreign portfolio investors (FPIs) will be subject to disclosure requirements in line with norms applicable to certain FPIs.
Non-compliance will result in ODI redemption or liquidation of segregated portfolios, while ODI subscribers who violate rules will be barred from positions held through ODIs from any ODI-issuing FPI.
A compliance mechanism will be set up to ensure that ODI-issuing FPIs submit relevant data on ODI subscribers to depositories and segregated-portfolio data to designated custodians.
FPIs will be prohibited from issuing ODIs that reference derivatives and hedging their ODIs with derivative positions on stock exchanges. ODIs, except those with government securities as underlying assets, will now be issued via separately registered FPIs that cannot make proprietary investments.
MF Lite framework: The regulator has approved a liberalized mutual funds (MFs) framework for passively managed schemes. This will ease the entry of players to the MF market, as barriers of the MF sponsor’s net worth, track record and profitability will be lowered.
Simultaneously, revised responsibilities for trustees are aimed at easing compliance and attracting new market participants. Some disclosure requirements, for example, have been eased. On the whole, the MF market should expand as a result.
A new asset class: Sebi’s new asset class aimed at higher-risk investors, with a minimum investment threshold of ₹10 lakh, should help meet India’s growing demand for sophisticated investment options. The new class of funds may draw retail investors away from pursuing risky strategies on their own.
Faster issues of equity rights: To issue shareholders shares, companies will not have to submit draft offer documents to Sebi; filings with stock exchanges for in-principle approval will suffice.
Also read: ‘SEBI changes F&O game, not a bad idea on expiry day’: Capitalmind’s Deepak Shenoy on new derivates framework
Appointing a merchant banker for a rights issue will be optional (with its role to be played by others), subject to its completion within 23 working days. The idea is to speed up issuances.
Eased disclosure norms and streamlined filings: Sebi has made business easier to conduct. Listed entities will be granted more time to report certain material events and disclose information, such as the outcome of a board meeting that ends after trading hours, and also information on litigation or disputes involving claims against the company, subject to such information being maintained in a structured digital database.
Sebi has eased the norms for tax-dispute related disclosures and made the disclosure of fines or penalties mandatory only if they cross a threshold, as against demanding that all these be disclosed within 24 hours.
Other relaxations: For entities looking to get listed on stock exchanges, Sebi has rolled the necessary ‘pre-issue’ and ‘price band’ advertisements into a single ad release with certain information to be disclosed through a QR code link.
It also announced the launch of a single filing system for listed entities on one exchange; if filed with one, the information will automatically be disseminated across all Indian exchanges.
Periodic filings will be slotted into two broad categories: Governance and financial. Aimed at minimizing the number of filings and streamlining disclosures, these revisions should be welcomed by businesses.
Easier norms for research analysts and investment advisors: The rules for both these groups have been relaxed. The new norms reduce requirements of minimum educational qualification, experience and net worth, as also the need to refresh Sebi certification.
Applicants are allowed to function as both research analysts (RAs) and investment advisors (IAs), and could register themselves as part-time RAs or IAs. This should accelerate growth in the number of registered IAs and RAs and help cater to a fast-expanding base of retail investors in need of advice.
Investor-friendly nomination norms: Sebi has raised the limit on nominees for demat accounts and MFs to 10, which will aid the transmission process of securities from one owner to others. Ownership transitions needed to be smoother and the revision is expected to enhance investor confidence.
Also read: Nine out of 10 individual F&O traders lost money in FY24, Sebi study reveals
Sebi has also mandated unique identifiers for nominees across the country’s securities market to allow easier identification. However, note that legal heirs will not have rights if a nominee passes away; the claims of creditors will take precedence in such cases.
On the whole, Sebi’s changes are for the better. They reduce the scope for misdeeds, lighten the burden on companies and make investing safer and easier for people.