On December 28, 2021, the board of the Securities and Exchange Board of India (SEBI) met in Mumbai, Maharashtra under the Chairmanship of Ajay Tyagi. The Part-Time Members joined the meeting through video conferencing. Following decisions have been taken during the meeting.
1.Amendments to SEBI ICDR Regulations, 2018
The Board approved the proposal to amend various aspects of regulatory framework under the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations) and consequential amendment to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as applicable.
- These will be based upon the public consultation process on the proposals recommended by the Primary Market Advisory Committee (PMAC).
The SEBI board has recommended a set of changes that will be applicable for the Draft Red Herring Prospectus (DRHP). Some of the key amendments are as follows:
Initial Public Offerings (IPOs):
i.A 35% spending cap from the total amount being raised in the IPO on future inorganic growth and general corporate purpose. The 35% cap will be applicable when the company has not identified any acquisition or investment target.
ii.The amount spent on objects where the company has not identified acquisition or investment target will be limited at 25% of the amount being raised.
iii.Conditions for offer for Sale (OFS) to public in an IPO where DRHP is filed by issuer without track record i.e. under Regulation 6(2) of ICDR Regulations, 2018:
- Shares offered for sale by selling shareholders, individually or with persons acting in concert, holding more than 20% of pre-issue shareholding of the issuer, shall not exceed more than 50% of their pre-issue shareholding.
- Shares offered for sale by selling shareholders, individually or with persons acting in concert, holding less than 20% of pre-issue shareholding of the issuer, shall not exceed more than 10% of preissue shareholding of the issuer.
iv.The existing lock in of 30 days shall continue for 50% of the portion allocated to anchor investor and for the remaining portion, lock in of 90 days from the date of allotment shall be applicable for all issues opening on or after April 01, 2022.
v.The minimum price band of at least 105% of the floor price will also come into effect.
vi.Credit Rating Agency (CRAs) registered with the board are permitted to act as Monitoring Agency instead of Scheduled Commercial Banks (SCBs) and Public Financial Institutions (PFI).
Changes to Preferential Allotment:
i.In the event of change of control in a company, independent directors will have to provide reasoned recommendations and vote details.
ii.In preferential allotment, the lock-in period for promoters holding up to 20% of the post-issue paid up capital will be reduced to 18 months from the current 3 years.
- For promoters holding above 20% paid-up capital, the lock-in period is reduced to 6 months from the current 1 year.
iii.For non-promoters, the locked-in period for allotments reduced from 1 year to 6 months.
iii.Share swap backed by a valuation report allowed as consideration for a preferential issue.
2.Appointment of persons who had failed to get elected as Directors
The Board approved a proposal to introduce provisions in the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations).
- Under this, appointment or re-appointment of persons who fail to get elected as directors, including as Whole-time directors or Managing Directors or Managers by the shareholders at a general meeting, will be done only with the prior approval of the shareholders.
3.Amendment to SEBI (Alternative Investment Funds) Regulations, 2012
The Board approved amendment to SEBI (Alternative Investment Funds-AIF) Regulations, 2012, to introduce Special Situation Funds (SSF), a sub-category under Category I AIF, which will invest only in stressed assets.
Key features of the regulatory framework for SSF:
i.Exemptions from investment concentration norm in a single investee company.
ii.No restriction on investing their investible funds in unlisted or listed securities of the investee company.
iii.Minimum investment by an investor is Rs 10 crore and Rs 5 crore in case of an accredited investor.
iv.Minimum corpus of Rs 100 crore
v.Initial and continuous due diligence requirements mandated by RBI for ARCs’ (Asset Reconstruction Companies) investors will be applicable to SSFs while acquiring stressed loans in terms of Reserve Bank of India (Transfer of Loan Exposures) Directions, 2021
4.The Board approved amendment to MF (Mutual Fund) Regulations to mandate MF schemes to follow Indian Accounting Standard (IND AS) from Financial Year 2023-24 onwards.
5.The Board also approved amendments to the SEBI {KYC (Know Your Client) Registration Agency} Regulations, 2011 towards enhancing the role of KYC Registration Agencies (KRAs).
- As per the approved amendment, KRAs have been made responsible to carry out independent validation of the KYC records uploaded onto their system by the Registered Intermediary (RI), among others.
6.The Board approved amendments to the SEBI (Stock Brokers) Regulations, 1992 and SEBI (Depository and Participants) Regulations, 2018, to provide for revised Networth requirement for Trading Members (TMs), Self-Clearing Members (SCMs), Clearing Members (CMs), Professional Clearing Members (PCMs), Depository Participants (DPs) and Deposit & Fees requirement for members in Electronic Gold Receipt (EGR) Segment.
7.The Board approved the proposal to amend the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 for issuance of securities in dematerialized form in case of investor requests for issue of duplicate shares etc.
- This move will improve ease, convenience and safety of transactions for investors.
8.The Board considered and approved the amendments to the SEBI (Foreign Portfolio Investors) Regulations, 2019 to enable SEBI to generate unique registration numbers of FPIs (Foreign Portfolio Investors) on receiving the basic details of the applicants seeking FPI registration from SEBI registered Depositories.
9. It was also proposed to amend the SEBI (Settlement Proceedings) Regulations, 2018 (Settlement Regulations) which came into force with effect from January 1, 2019.
- Time-period for filing a settlement application rationalized to 60 days from the date of receipt of the show cause notice or a supplementary notice, whichever is later.
- Time-period for submission of Revised Settlement Terms Form, after the Internal Committee (IC), rationalized to 15 days from the date of the IC meeting.
Recent Related News:
i.SEBI has levied a monetary penalty of Rs 1 lakh on Chandan Gupta, an employee of Titan Company Limited for disclosure lapses, in violating the insider trading norms.
ii.SEBI reduced the minimum application value of real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) to the range of Rs 10,000-15,000 from earlier requirement of Rs 50,000 for REITs and Rs 1 lakh for InvITs.
About Securities and Exchange Board of India (SEBI):
Establishment– 1992
Headquarter– Mumbai, Maharashtra
