The Securities and Exchange Board of India (SEBI) has introduced ASBA (Application supported by Blocked Amount)-like process for trading supported by Blocked Amount in the secondary market w.e.f. January 1, 2024. This move is aimed to safeguard investors’ cash collateral.
- This information by SEBI is provided in exercise of the powers conferred under Section 11(1) of the SEBI Act, 1992, read with Section 10 of the Securities Contracts (Regulation) Act, 1956 to protect the interests of investors in securities and to promote the development of the securities market.
What is this method?
This method utilizes the funds held in the investor’s bank account, rather than requiring upfront transfer to the trading member. It integrates Reserve Bank of India (RBI) approved Unified Payments Interface (UPI) mandate service of single-block-and-multiple-debits with the secondary market trading and settlement process and ‘UPI block facility’. This method provides improved security for cash collateral and promotes smooth trading in the secondary market.
i.In this framework, investor funds remain in their bank account but are blocked in favor of the Clearing Corporation (CC) until the block is released or debited for trading obligations.
ii.The CC directly handles settlement of funds and securities, eliminating the involvement of the trading member.
iii.A UPI block acts as collateral and can be used for settlement purposes. Investors blocking a lump-sum amount can have multiple debits from the block, as long as there’s enough balance to meet obligations over several days.
Other Features:
i.Cash-equivalent collateral (e.g., bank guarantees, fixed deposits) not allowed. Only approved securities can be pledged.
ii.Funds pay-in settlement exclusively through UPI block.
iii.Single block limit of Rs 5 lakh, with multiple blocks within UPI limit.
iv.Clients can request block release via app, communicated to CC through clearing member.
v.Upon release, client’s bank unfreezes the amount.
SEBI
SEBI comes out with disclosure formats for compliance reports on Governance, annual secretarial by REITs, InvITs
SEBI also comes out with disclosure formats for compliance reports on governance and annual secretarial for emerging investment vehicles — Real Estate Infrastructure Trusts (REITs) and Infrastructure Investment Trusts (InvITs) which will come into force from FY 2023-24 onwards.
Format for Compliance Report on Governance
Under this, the format for compliance report on governance, InvITs and REITswill have to disclose the name of the investment managers, the composition of the Board of Directors (BODs) of the investment managers as well as the composition of committees, meetings of the board of directors, along with meetings of committees, on a quarterly basis.
- For the governance report, such investment managers are required to submit a quarterly compliance report to the stock exchanges within 21 days from the end of each quarter.
- The report needs to be signed either by the compliance officer or the chief executive officer (CEO) of the investment manager.
Annual secretarial compliance report:
With regard to the annual secretarial compliance report, the investment manager of the InvIT and REIT will have to appoint a practising company secretary on an annual basis to examine the compliance of all applicable rules, consequent to which, the practising company secretary is required to submit a report to such investment managers.
- The investment managers of the investment instruments have to disclose the compliance with the regulatory norms, deviations and observations made by the practising company secretary.
- The compliance report on both governance and annual secretarial would also be made part of the annual report of the InvITs and REITs.
Key Points:
i.REITs invest majorly in completed and rent-generating real estate assets. Privately placed InvITs can invest in under-construction assets as well as completed and revenue-generating assets.
ii.Format for Annual Secretarial Compliance Report for InvITs
This circular is issued in exercise of the powers conferred under Section 11(1) of the SEBI Act, 1992 and Regulation 26J of the SEBI (Infrastructure Investment Trusts) Regulations 2014.
iii.Format for Annual Secretarial Compliance Report for REITs
This circular is issued in exercise of the powers conferred under Section 11(1)of the SEBI Act, 1992 and Regulation 26Dof the SEBI (Real Estate InvestmentTrusts) Regulations2014.
iv.Format of Compliance Report on Governance for REITs
This circular is issued in exercise of the powers conferred under Section 11(1) of the SEBI Act, 1992 and Regulation 26Eof the SEBI (Real Estate Investment Trusts) Regulations, 2014. This circular is issued with the approval of the competent authority
v.Format of Compliance Report on Governance for InvITs
This circular is issued in exercise of the powers conferred under Section 11(1) of the SEBI Act, 1992 and Regulation 26Kof the SEBI (Infrastructure Investment Trusts) Regulations, 2014. This circular is issued with the approval of the competent authority.
Recent Related News:
i.SEBI has mandated alternative investment funds (AIFs) to provide investors with the option of a “direct plan” and introduced a trail model for distribution commission. The framework for direct investments will go into effect on May 1, 2023.
ii.SEBI decided to establish the Corporate Debt Market Development Fund (CDMDF) in the form of an Alternative Investment Fund (AIF) with an initial corpus of Rs 3,000 crore to act as a backdrop facility for the purchase of investment-grade corporate debt securities during times of stress.
About Securities Exchange Board of India(SEBI):
Chairperson -Madhabi Puri Buch
Headquarters – Mumbai, Maharashtra
Establishment – 12 April 1992
