On June 28, 2023, the board of Securities and Exchange Board of India (SEBI) has approved a series of decisions such as the reduction of public issue listing timelines, the introduction of regulations for non-convertible debt securities(NCDs), and strengthening investor grievance handling mechanisms to improve the market efficiency and investor protection.
-Reduction of public issue listing timelines
i.The board has approved the proposal for reducing the time period for listing of shares in a public Issue from the existing six days to three days, from the date of issue closure (T Day).
ii.The revised timeline of T+3 days would be made applicable in two phases.
- Voluntary for all public issues opening on or after September 01, 2023
- Mandatory on or after December 01, 2023.
iii.The reduced timeline is expected to benefit issuers, allottees, subscribers, and stakeholders by expediting the process and curbing kerb trading.
-Board representation for retail investors under REITS/InvITs
SEBI board also approves the amendments to the SEBI infrastructure investment trusts (InvITs) Regulations, 2014 and SEBI real estate investment trusts (REITs) Regulations, 2014 to provide nomination rights to unitholders holding 10% or more of the total outstanding units of the InvIT/REIT, either individually or collectively, on the board of directors of the Investment Manager/Manager.
SEBI approved a provision that ensures opinions of retail unitholders are fairly represented in the decisions taken by InvITs and REITs.
Key Points:
i.The sponsor who sets up the InvIT/ REIT, monetizes its assets by transferring them to the InvIT/ REIT and exerts control over the decisions of the InvIT/ REIT through a significant shareholding in the Investment Manager/Manager.
ii.Currently, SEBI Regulations mandate the sponsor to hold a minimum of 15% units for a period of at least 3 years from the date of listing of units.
iii.The board has also approved the sponsor of InvIT/ REIT “be required to hold a certain minimum unitholding on a reducing scale for the entire life of the InvIT/ REIT. The mandatory minimum unitholding shall be locked-in and be unencumbered.
iv.To provide an additional exit option for the sponsor of InvIT/ REIT, the SEBI board approved the proposal for introduction of self-sponsored investment manager/manager or an investment manager/manager who also takes on the responsibilities of the sponsor of InvIT/ REIT.
-Additional disclosures from certain FPIs
i.SEBI has decided to mandate enhanced disclosures from certain class of foreign portfolio investors (FPIs), including furnishing granular level details about ownership and economic interests.
- The new norms will be applicable for FPIs that concentrate holdings in a single corporate group.
ii.Under the proposed framework, FPIs with concentrated single group equity exposures or significant equity holdings will be mandated to make additional granular disclosures.
iii.Such FPIs will be required to provide granular level disclosures regarding ownership, economic interest, and control rights on a full look–through basis.
iv.Applicability and Excemption:
- Thus the FPIs holding more than 50% of their equity Asset Under Management (AUM) in a single corporate group or FPIs that individually, or along with their investor group hold more than Rs 25,000 crore in the Indian markets would be required to comply with the new requirements.
- The funds owned by the government, sovereign wealth funds, pension funds and public retail funds will be exempted, said the market regulator.
-Better redressal for investor grievances
i.SEBI strengthened the investor-grievance mechanism by integrating the SEBI Complaint Redressal System (SCORES) with the online dispute resolution (ODR) mechanism.
ii.SEBI plans to reduce timelines and introduce auto-routing of the complaint to concerned regulated entities and auto-escalation of complaintsin case of non-adherence to the prescribed timelines by the regulated entity.
iii.2 levels of Review:
- SEBI is also providing two levels of review in which at the first review will be by the designated body if investor is dissatisfied with resolution provided by concerned regulated entity.
- The second review will be by SEBI if the investor is still dissatisfied after the first review.
-Listing and voluntary delisting of NCDs
i.SEBI board has approved the introduction of provisions related to the listing of non-convertible debt securities and voluntary delisting of NCDs. ‘
ii.If an entity with listed debt securities has outstanding unlisted NCDs as on December 31, 2023, the entity would now have the option to list them, but it would not be mandatory to do so.
iii.Also, entities having privately placed, listed debt securities wherein the number of debt security holders is less than 200, will be eligible to delist their debt securities under this framework.
-Direct participation by clients in Limited Purpose Clearing Corporation (LPCC)
i.Since timely availability of funds and securities is critical in a repo market, direct participation of both borrowers and lenders can widen the market.
ii.The SEBI board has approved the proposal to additionally facilitate participation by entities desiring direct participation (not through a clearing member) in repo transactions in corporate bonds of the Limited Purpose Clearing Corporation (LPCC).
Note: In September 2020, the SEBI board approved the proposal to set up LPCC for clearing and settling repo transactions in corporate debt securities.
-SEBI Annual Report
The board also considered and approved the SEBI Annual Report 2022-23. the report will be submitted to the Government of India in compliance with section 18(2) of the SEBI Act 1992.
About Securities and Exchange Board of India:
Chairperson– Madhabi Puri Buch
Headquarters– Mumbai, Maharashtra
Establishment– 1992
