On June 29, 2021, the Securities and Exchange Board of India (SEBI) approved the amendments and frameworks that are made relating to independent directors(IDs), mutual fund (MF) regulations, and others at its board meeting.
List of Amendments and frameworks:
- Amendment to SEBI (Mutual Funds) Regulations, 1996
- Framework for Accredited Investors in securities market
- Amendment over the norms on IDs
- Amendments to SEBI (Infrastructure Investment Trusts) Regulations
- Amendments to SEBI (InVITs and REITs) Regulations
- Permitting Resident Indian fund managers to be constituents of FPIs
- Merging of ‘Debt securities Listing’ Regulations
-Amendment to SEBI (Mutual Funds) Regulations, 1996
SEBI amended the SEBI (Mutual Funds (MF)) Regulations, 1996, and allowed investment of a minimum amount as ‘skin in the game’ in the MF schemes by Asset Management Companies (AMCs) based on the risk associated with the scheme, instead of the current requirement.
- The current requirement is the investment of 1 percent of the amount raised in the New Fund Offer (NFO) or an amount of Rs 50 lakh, whichever is less. This amendment may require MF houses to invest more in their NFOs depending on the risk level.
-Framework for Accredited Investors in securities market:
SEBI has approved the proposal to introduce a framework for the ‘Accredited Investors’ (AI) in the Indian securities market.
Features of the proposed framework:
- They are defined as a class of investors who are well informed or well advised about investment products.
- Individuals, HUFs, Family Trusts, Sole Proprietorships, Partnership Firms, Trusts, and Body Corporates are eligible to become AI (based on financial parameters).
ii.Accreditation Agencies: Subsidiaries of depositories and specified stock exchanges, and institutions that are recognized as Accreditation Agencies are made eligible to grant accreditation status and issue Accreditation Certificate to AI.
iii.Benefits for AI:
- AIs could participate in investment products with an investment amount lesser than the minimum amount mandated in the Alternative Investment Funds (AIF) Regulations and Portfolio Managers (PMS) Regulations.
- AIs with a minimum investment of Rs 10 Crores with a registered PMS provider, may avail relaxation from requirements related to investment in unlisted securities.
- AI who are clients of Investment Advisers(IA) could determine the limits and modes of fees payable to IAs.
-Amendment over the norms on IDs
SEBI has approved amendments to regulations related to IDs under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations).
i.Appointment/Re-appointment and Removal of IDs would be made only through a special resolution of shareholders.
ii.The process that will be followed by the Nomination and Remuneration Committee (NRC), while the appointment of IDs, was elaborated.
- The composition of NRC also has been modified to include 2/3rd IDs instead of the majority of IDs (existing requirement).
iii.A cooling-off period of 3 years has been introduced for Key Managerial Personnel (and their relatives) or employees of the promoter group companies, for appointment as an ID.
iv.Relatives of employees/its holding/subsidiary/associate company are permitted to become IDs (without the requirement of a cooling-off period of 3 years) in line with Companies Act, 2013.
v.A cooling-off period of 1 year has been introduced for an ID transitioning to a whole-time director in the same company.
vi.The members of the audit committee that should be of IDs were made to at least 2/3rd of it. The requirement of undertaking Directors and Officers insurance has been extended to the top 1000 companies (by market capitalization).
Note – The amended norms would be effective from January 1, 2022.
-Amendments to SEBI (Infrastructure Investment Trusts) Regulations, 2014
i.SEBI has amended the SEBI (Infrastructure Investment Trusts (InvITs)) Regulations, 2014, and introduced the minimum number of unitholders of unlisted InvITs, other than sponsor, i.e. its related parties and its associates should be of 5 and their holding in the total unit capital of the InvIT also should not less than 25 percent.
ii.SEBI has approved the amendments to SEBI (Real Estate Investment Trusts (REITs)) Regulations, 2014 and SEBI (InVITs) Regulations, 2014, and revised the minimum application value to be within the range of Rs 10,000-15,000 and the trading lot for publicly issued REITs and InvITs to 1 unit.
-Permitting Resident Indian fund managers to be constituents of FPIs
SEBI (Foreign Portfolio Investors(FPIs)) Regulations, 2019 was amended to permit eligible Resident Indian Fund Managers (other than individuals) to be constituents of FPIs.
- Their Foreign Portfolio Investments should be of investment funds approved by the Central Board of Direct Taxes (CBDT) under Section 9A of the Income-Tax (IT) Act, 1961, read with the IT Rules, 1962.
- These amendments facilitate Indian fund managers in managing investment funds incorporated/established/ registered outside India.
-Merging of ‘Debt securities Listing’ Regulations
SEBI approved the merging of the SEBI (Issue and Listing of Debt Securities) Regulations, 2008 and SEBI (Non-Convertible Redeemable Preference Shares) Regulations, 2013 into a single Regulation called – SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021.
SEBI amended the SEBI (Prohibition of Insider Trading) Regulations, 2015 and increased the maximum amount of reward from Rs 1 Crore to Rs 10 Crore. Amendments were made to SEBI (Credit Rating Agencies) Regulations, 1999 and SEBI (Bankers to an Issue) Regulations, 1994 also.
Recent Related News:
On May 21, 2021, In consultation with the Reserve Bank of India(RBI), SEBIdoubled the overall limit of the investment in overseas markets by alternative investment funds(AIFs), and Venture Capital Funds(VCFs) registered under SEBI (VCFs) Regulations, 1996, from $750 million to $1,500 million (~Rs10,000 crore).
On May 11, 2021, under Section 11(1) of the SEBI Act, 1992 read with Regulation 101 of the Listing of Obligations and Disclosure Requirements (LODR), SEBI issued new disclosure norms over the Business Responsibility and Sustainability Report (BRSR), for the top 1,000 listed companies (by market capitalisation) by FY23.
About Securities and Exchange Board of India (SEBI):
Establishment – 1992
Headquarters – Mumbai, Maharashtra
Chairman – Ajay Tyagi