The Securities and Exchange Board of India (SEBI) convened its 207th board meeting, resulting in several significant decisions aimed at enhancing market operations, easing regulatory burdens, and introducing new investment frameworks. Here are the key highlights:
1. Secondary Market Reforms
Trading Options: Investors can now choose to trade in the cash segment using the UPI block mechanism or a 3-in-1 trading facility, mandatory for Qualified Stock Brokers (QSBs) starting February 1, 2025.
T+0 Settlement Cycle: The optional T+0 settlement cycle will be expanded from the top 25 to the top 500 scrips by market capitalization. All stock brokers, including QSBs and custodians, are required to facilitate seamless participation in this cycle.
2. Investment Advisers and Research Analysts
SEBI has revised the regulatory framework to ease registration and compliance requirements for Investment Advisers (IAs) and Research Analysts (RAs), including relaxation in eligibility criteria and simplified compliance protocols.
3. Primary Market Enhancements
Rights Issues: The timeline for completing a Rights Issue is reduced to 23 working days. The process is streamlined to exclude the need for SEBI’s observation on the Draft Letter of Offer, relying on stock exchanges for compliance checks instead.
Flexibility for Promoters: Promoters can now renounce their rights entitlements to specific investors, and issuers can allot under-subscribed portions to specific investors, subject to appropriate disclosures.
4. Mutual Funds and Alternative Investments
New Investment Product: SEBI is introducing a new investment product under the Mutual Funds framework, intended to bridge the gap between Mutual Funds and Portfolio Management Services, offering higher flexibility and risk-taking capabilities.
MF Lite Framework: A liberalized framework for passively managed mutual fund schemes, known as “MF Lite,” has been approved, promoting ease of entry and reducing compliance requirements.
Alternative Investment Funds (AIFs): New regulations ensure pro-rata and pari-passu rights for AIF investors and allow certain entities to subscribe to junior classes of units with specified exemptions.
5. Offshore Derivative Instruments
SEBI has extended disclosure requirements to Offshore Derivative Instruments (ODIs) and segregated portfolios of Foreign Portfolio Investors (FPIs), ensuring parity with FPI disclosure norms. Additionally, ODIs can no longer be hedged with derivatives, moving to cash-equity positions instead.
6. Investor Protection and Market Surveillance
Nomination Facilities: New norms enhance investor convenience and uniformity in nomination facilities across demat accounts and mutual fund investments, increasing the maximum number of nominees and simplifying transmission processes.
Insider Trading Regulations: Amendments to the Prohibition of Insider Trading Regulations include expanding the definition of “connected person” and “immediate relative” to improve the scope of investigation and enforcement.
7. Sustainable Finance and Debt Markets
SEBI is expanding the scope of the Sustainable Finance Framework to include social bonds, sustainability bonds, and sustainability-linked bonds, all categorized as Environment, Social, and Governance (ESG) Debt Securities.
Measures to streamline compliance and disclosures for listed Non-Convertible Securities were approved to foster the growth of the bond market.
8. Legal and Procedural Reforms
SEBI has moved to replace the requirement of attestation by a Notary Public or Gazetted Officer with self-attestation for certain documents to promote ease of doing business.
The Informal Guidance Scheme has been revised to include regulated entities and streamline the guidance process.
