8-Apr-2022: Cabinet approves signing of Bilateral Memorandum of Understanding (MoU) between Securities and Exchange Board of India and Financial Regulatory Commission, Mongolia

The Union Cabinet chaired by the Prime Minister, Shri Narendra Modi, today has approved the proposal for signing a bilateral Memorandum of Understanding (MoU) between Securities and Exchange Board of India (SEBI) and Financial Regulatory Commission, Mongolia (FRC).

Major impact: FRC, like SEBI, is a co-signatory to International Organization of Securities Commissions’ Multilateral MoU (IOSCO MMoU). However, the IOSCO MMoU does not have under its scope the provision for technical assistance. The proposed bilateral MoU would, in addition to contributing towards strengthening the information sharing framework leading to effective enforcement of securities laws, also help in establishing a technical assistance programme. The technical assistance programme would benefit the Authorities by way of consultations on matters relating to capital markets, capacity building activities and training programmes for the staff.

Background: The Securities and Exchange Board of India (SEBI) was established under the Securities and Exchange Board of India Act, 1992 to regulate the securities markets in India. The objectives of the SEBI are to protect the interest of the investors and to regulate and promote development of securities markets in India. Clause (ib) under sub-section (2) of Section 11 of SEBI Act, 2002 empowers SEBI to call for information from, or furnishing information to, other authorities, whether in India or outside India, having functions similar to those of the Board, in the matters relating to the prevention or detection of violations in respect of securities laws, subject to the provisions of other laws.  For furnishing any information to any authority outside India, SEBI may enter into an arrangement or agreement or understanding with such authority with the prior approval of the Central Government.  In this backdrop, FRC has requested SEBI to sign a bilateral MoU for mutual cooperation and technical assistance. Until now, SEBI has signed 27 bilateral MoUs with capital market regulators of other countries.

Established in 2006, the Financial Regulatory Commission (FRC) is a parliamentary authority mandated to supervise and regulate the non-bank sector; including the insurance and securities markets, and participants of the microfinance sector. The FRC is responsible for providing stable and sound financial markets. The Commission exercises power over non-bank financial institutions, insurance companies and intermediaries, securities firms, and savings and credit cooperatives. At the same time, it ensures the rights of individual financial market clients (securities holders, domestic and foreign investors, and insurance policyholders) and protects against financial malpractices.

8-Jul-2020: SEBI signs MoU with CBDT

Securities   and   Exchange   Board   of   India   (SEBI)   signed   a   Memorandum   of Understanding (MoU) with Central Board of Direct Taxes (CBDT), Government of India, today,  for  data  exchange  between  the  two  organizations.

The  MoU  was  signed  by Ms. Anu J Singh, Pr. DGIT(Systems), CBDT and Ms. Madhabi Puri Buch, Whole Time Member, SEBI in the presence of senior officers from both the organizations via video conference.

The MoU will facilitate the sharing of data and information between CBDT and SEBI on an automatic and regular basis. The MoU will ensure that both CBDT and SEBI have seamless linkage for data exchange.

In addition to regular exchange of data, CBDT and SEBI will also exchange with each other, on request and Suo moto basis, any information available in their respective databases, for the purpose of carrying out scrutiny, inspection, investigation and prosecution.

The MoU is an ongoing initiative of CBDT and SEBI, who are already collaborating through various existing mechanisms. A Data Exchange Steering Group has also been constituted for the initiative, which will meet periodically to review the data exchange status  and take steps to further improve the effectiveness of the data sharing mechanism. The MoU marks the beginning of enhanced  cooperation and synergy between SEBI and CBDT. The MoU comes into force from today.

24-Jun-2020: Relaxations for Listed Companies having stressed assets

SEBI  has  decided  to  relax  the  pricing  methodology  for  preferential  issues  by  listed companies  having  stressed  assets  and  exempt  allottees  of  preferential  issues  from open offer obligations in such cases, with immediate effect. 

Relaxations

1. Eligible  listed  companies  having  stressed  assets  will  be  able  to  determine pricing  of  their  preferential  allotments  at  not  less  than  the  average  of  the weekly  high  and  low  of  the  volume  weighted  average  prices  of  the  related equity shares during the two weeks preceding the relevant date.
2. Allottees  of  preferential  issue  in  such  eligible  companies  will  be  exempted from  making  an  open  offer  if  the  acquisition  is  beyond  the  prescribed threshold or if the open offer is warranted due to change in control, in terms of Takeover Regulations.
   
   Eligibility

A  listed  entity  satisfying  any  two  out  of  the  following  three  conditions  shall  be considered as stressed and therefore be eligible for aforesaid relaxations:

1. Any listed company that has made disclosure of defaults on payment of interest/ repayment of principal amount on loans from banks / financial institutions/  Systemically  Important  Non-Deposit  taking  Non-banking financial  companies/  Deposit  taking  Non-banking  financial  companies and /or listed or unlisted debt securities in terms of SEBI Circular dated November 21, 2019, and such default is continuing for a period of at least 90 calendar days after occurrence of such default.
2. Existence of Inter-creditor agreement in terms of Reserve Bank of India (Prudential  Framework  for  Resolution  of  Stressed  Assets)  Directions 2019 dated June 07, 2019.
3. Downgrading  of  credit  rating  of  the  financial  instruments  (listed  or unlisted), credit instruments / borrowings (listed or unlisted) of the listed company to “D”.
   
   Other Conditions

Eligible  listed  companies  shall  also  be  required  to  comply  with  the  following conditions to avail the relaxations:

1. The preferential issue will be made to persons/entities that are not part of the promoter  or  promoter  group.  Further,  certain  other  persons  including  an Undischarged  insolvent,  Wilful  defaulter,  Fugitive  economic  offender,  those Disqualified to act as director, prohibited by SEBI from trading in securities and accessing the securities market will also be ineligible.
2. The resolution for the preferential issue at the aforesaid pricing and exemption from open offer shall be passed by majority of minority.
3. Proposed end-use of proceeds of such preferential issue will be disclosed. The proceeds should not be used for any repayment of loans taken from promoters/ promoter group/ group companies.
4. Monitoring agency will be appointed for monitoring end-use of the proceeds of such a preferential issue. The monitoring agency shall not be an associate to the company. The Audit Committee shall also monitor the proceeds of such a preferential issue.
5. The  shares  issued  to  the  investors  in  such  an  issue  shall  be  locked in  for  a period of three years from the latest date of trading approval granted by all the stock exchanges where the specified securities are listed.
6. The statutory auditor and the Audit Committee shall certify that eligibility norms as mentioned at point 2 above and conditions at point 3 (i) to (iii) have been met at the time of dispatch of notice for general meeting proposed for passing the special resolution and also at the time of allotment.

The  above  framework  is  aimed  at  helping  stressed  companies  raise  capital  through timely financial intervention, at the same time protecting the interest of shareholders. To give effect to these relaxations, SEBI ICDR Regulations and SEBI Takeover Regulations have been amended. The relaxations introduced vide notifications dated June 22, 2020, are expected to make fund  raising through preferential allotments relatively easier for stressed companies.

26-Feb-2020: Mauritius FPIs can continue to invest in India, SEBI

The Securities and Exchange Board of India (SEBI) has clarified that foreign portfolio investors (FPIs) from Mauritius will continue to be eligible for registration as foreign investors in India but subject to increased monitoring.

The regulatory clarification was necessitated after Mauritius was placed in the list of ‘jurisdictions under increased monitoring’, commonly referred to as the ‘Grey List’.

This led to apprehensions that the Mauritius-based FPIs will not be able to trade in the Indian capital market.

19-Sep-2018: SEBI changes total expense ratio (TER) of mutual funds

SEBI has announced changes in the total expense ratio (TER) of mutual funds. It made the changes to bring in transparency in appropriation of expenses, and reducing mis-selling and churning.

Transparency in expenses: All commission and expenses, etc. shall necessarily be paid from the scheme only and not from the AMC/Associate/Sponsor/Trustee, or any other route. Further, SEBI said that the mutual fund industry must adopt the full trail model of commission in all schemes without payment of any upfront commission or upfronting of any trail commission.

Total Expense Ratio: The total expense ratio (TER) will be as follows:

In case of close-ended and interval schemes, TER for equity-oriented schemes shall be a maximum of 1.25 per cent and for other than equity oriented schemes shall be a maximum of 1.00 per cent.

The TER for index schemes, Exchange Traded Funds (ETFs) and Fund of Funds shall be maximum of 1.00 per cent. The TER for fund of funds (FoFs) shall be a maximum of twice the TER of the underlying funds.

• FoFs investing primarily in Liquid, Index and ETF schemes: Total TER (including the TER of underlying schemes) shall be maximum of 1.00 per cent.
• FoFs investing primarily in active underlying schemes: Total TER (including the TER of the underlying schemes), shall be maximum of 2.25 per cent for equity oriented schemes, and maximum of 2 per cent for other than equity oriented schemes.

Additional expenses of 30 bps for penetration in B-30 cities: The additional expense permitted for penetration in B-30 cities, shall be based on inflows from retail investors. The definition of ‘retail investors’ shall be determined in consultation with the industry. Pending such clarification, the additional incentive shall be permitted for inflows from individual investors only and not on inflows from corporates and institutions. Further, the B-30 incentive shall be paid as trail only.

Performance Disclosure: Adequate disclosure of all schemes’ returns (category wise) vis-à-vis its benchmark (total returns) shall be made available on the website of AMFI.

Upon implementation of the above decisions, the trustees and AMC boards shall monitor the implementation by the respective AMCs and shall report to SEBI periodically.

25-Apr-2018: Further amendments to the Laws on REITs and INVITs in India

The Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014 (SEBI REIT Regulations) and the Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014 (SEBI InvIT Regulations), which were last amended on 27 December 2017, have been further amended by the notifications issued by the Securities and Exchange Board of India (SEBI) on 10 April 2018 (hereinafter referred to as the REIT Amendment Regulations and InvIT Amendment Regulations, respectively). The REIT and InvIT Amendment Regulations have been introduced to further facilitate the growth of infrastructure investment trusts (InvIT) and the real estate investment trusts (REIT).

REITs are similar to mutual funds. While mutual funds provide for an opportunity to invest in equity stocks, REITs allow one to invest in income-generating real estate assets. REITs raise funds from a large number of investors and directly invest that sum in income-generating real estate properties(which could be offices, residential apartments, shopping centres, hotels and warehouses). The trusts are listed in stock exchanges so that investors can buy units in the trust. REITs are structured as trusts. Thus, the assets of an REIT are held by an independent trustee on behalf of unit holders.

30-May-2017: SEBI targets participatory note norms

The Securities and Exchange Board of India (SEBI) plans to further tighten norms for issuance of offshore derivative instruments (ODIs) and participatory notes (PNs) as part of its overall effort to reduce the exposure investors take via such instruments in the Indian equity market.

In a consultation paper released on Monday, the capital market regulator has proposed levying a regulatory fee of $1,000 on every foreign portfolio investor (FPI) that issues ODIs or PNs.

It is proposed that beginning April 1, 2017, for a period of every three years, regulatory fees of $1,000 be levied on each ODI issuing FPI for each and every ODI subscriber coming through such FPI.

Government is concerned that P-notes are being used for money laundering. Special Investigation Team (SIT) wants stricter compliance measures put in place for trading P-notes. However, when the government proposed putting trading restrictions on P-notes in the past, the Indian market became extremely volatile.

A few ODI subscribers invest through multiple issuers. This move will discourage the ODI subscribers from taking ODI route and encourage them to directly take registration as an FPI.

The regulator has also proposed to prohibit ODIs from being issued against derivatives for speculative purposes. Currently, ODIs are issued against derivatives along with equity and debt.

SEBI has given time until December 31, 2020, to wind up ODIs issued against derivatives, which are not for hedging purpose.

In June last year, SEBI issued instructions on Know Your Customer (KYC) norms for ODI subscribers, transferability of ODIs, reporting of suspicious transactions and periodic review of systems.

1-Mar-2017: Shri Ajay Tyagi takes charge as Chairman, SEBI

Shri Ajay Tyagi took charge as Chairman, Securities and Exchange Board of India.  Prior to this, he was Additional Secretary, Department of Economic Affairs, Ministry of Finance, handling the portfolios of Capital Market Division, Investment Division, Infrastructure Division and Currency and Coinage Division.

He is an Indian Administrative Service Officer of Himachal Pradesh Cadre. He has held several responsible positions with distinction in the State and Central Governments.