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SEBI postpones new MF Nomination Rules to Oct 1; Imposes Rs 3 Lakh penalty on BSE

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SEBI defers new MF nomination rules to Oct 1

The Securities Exchange Board of India (SEBI) has postponed the implementation of new rules on nomination for mutual fund investors till October 1, 2022 which were supposed to come into force from August 1, 2022.

  • The circular for the same has been issued in exercise of the powers conferred under Section 11 (1) of the SEBI Act, 1992, read  with  the provision of Regulation 77 of SEBI (Mutual Funds) Regulations, 1996.
  • These rules mandate investors, subscribing to mutual fund units, to submit details of nomination or opting out of nomination.

Key Points:

i.Now, After October 1, 2022, investors subscribing to mutual fund units will have a choice to submit the nomination form or the declaration form for opting out of nomination in physical or online as per the choice of the unitholders.

ii.In case of physical option, the forms will carry the wet signature of all the unitholders.

iii.In case of online option, instead of wet signatures, Asset Management Companies (AMCs) will validate the forms using e-Sign facility or through two factor authentication.

iv.The move is aimed at bringing uniformity in practices across all constituents in the securities market.

SEBI lays rules for Automated Deactivation of Trading, Demat Accounts in case of inadequate KYCs

SEBI also released a framework for automated deactivation of trading and demat accounts of investors in case of inadequate Know Your Client (KYC) details w.e.f. August 31, 2022.

  • The framework has been issued in exercise of powers conferred under Section 11(1) of the SEBI Act, 1992.

Aim Behind new Framework:

To ensure the client furnishes accurate or updated details of address and ensures that KYC details are correct.

Reason behind this decision:

Addresses form a critical part of the KYC procedures, and intermediary is required to update the address from time to time but in some cases accurate or updated addresses of clients are not maintained. When SEBI issues any notices, during the course of any enforcement proceedings on such addresses, the same remains unserved.

Now, under the rules, Market Infrastructure Institutions (MIIs), stock exchanges, except commodity derivatives exchanges, and depositories will have to physically serve Show Cause Notice (SCN) or order issued by the regulator to the concerned entity.

  • The MIIs will have to forward the signed acknowledgement of its receipt by the concerned addressee to the regulator within 30 days from the date of receipt of such instructions from SEBI.
  • If none of the MIIs is able to deliver the SCN or order at any of the addresses mentioned in the KYC records linked to any trading or demat account of the entity; and obtain a signed acknowledgement of its receipt from the entity or its authorized representatives then all MIIs will deactivate all trading and demat accounts within five working days from the last unsuccessful delivery report.

SEBI penalizes BSE with Rs 3 Lakh for its subsidiary buying stake in Indus Water without Prior Approval

SEBI also imposed a penalty of Rs 3 Lakh on BSE (Bombay Stock Exchange) Ltd for indirectly engaging in works that were unrelated to its activities as a stock exchange without the approval of SEBI.

What is the issue?

The order came after SEBI examined investments made by BSE Ltd in which it found that BSE Institute Limited (BIL), a separate legal entity and a wholly-owned subsidiary of BSE Ltd, had acquired an 8% stake in Indus Water Institute Ltd. sSuch activities are not related to the activities as carried out by the exchange, and requires SEBI’s prior approval.

  • For the violation of not seeking prior approval, SBI imposed a fine of Rs 3 lakh on the exchange.

In October 2020, SEBI imposed Rs 6 crore penalty on NSE (National Stock Exchange) for picking up stakes in six entities without obtaining the SEBI’s approval.

Recent Related News:

i.SEBI has established a 20-member Hybrid Securities Advisory Committee (HySAC), which will make recommendations for boosting the growth of such instruments, including measures focusing on ease of issuance and attracting domestic & global capital. Kundapur Vaman Kamath(KV Kamath), the Chairperson of the National Bank for Financing Infrastructure and Development, will chair the committee.

ii.SEBI provided an additional payment option of Unified Payments Interface (UPI) to retail investors to apply in the public issue of units of Infrastructure Investment Trust (InvIT) and Real Estate Investment Trust (REIT) for application value up to Rs 5 lakh w.e.f. August 1, 2022.

About Securities and Exchange Board of India (SEBI):

SEBI was constituted as a non-statutory body on 12th April 1988 and later it was established as a statutory body in 1992. The provisions of SEBI Act, 1992 (15 of 1992) came into force on 30th January, 1992.
Chairperson– Madhabi Puri Buch
Headquarters– Mumbai, Maharashtra