The Sebi board meeting scheduled for Thursday is set to consider more than 10 proposals, including a comprehensive overhaul of portfolio management services (PMS) regulations, changes to the settlement framework and allowing REITs and InvITs to raise foreign capital through depository receipts.
According to a source familiar with the meeting agenda, the board will also consider measures to improve the functioning of alternative investment funds (AIFs), allow REITs and InvITs to invest in third-party projects and increase foreign portfolio investor (FPI) participation in physically deliverable commodity derivatives.
The proposed PMS overhaul seeks to expand investment options, lower entry barriers and ease compliance requirements. PMS managers may be allowed to invest in foreign securities, including listed overseas stocks and debt, overseas mutual funds investing in listed equities, debt and REITs, besides securities that are proposed to be listed.
The board may also approve the proposed mutual fund-only PMS category, or MF-PMS, which would invest exclusively in direct mutual fund plans, including ETFs and specialised investment funds. The final norms may halve the minimum investment requirement to Rs 25 lakh and reduce the applicant's minimum net-worth requirement to Rs 2 crore from Rs 5 crore.
The board is also set to consider changes to the settlement framework, which has faced criticism over low penalties. The proposal seeks to rationalise settlement amounts and provide greater flexibility in cases involving market-wide impact, investor losses or market-integrity concerns.
Under the proposed framework, the base settlement amount could be linked to the minimum penalty prescribed under securities laws, while wrongful gains and investor losses would be excluded from the base calculation and recovered separately through disgorgement, the source said.
The board may also allow FPIs to participate in physically deliverable non-agricultural commodity derivatives, subject to them squaring off or rolling over their positions three days before the delivery period.
If an FPI fails to exit its position, the open position would be transferred to a designated broker or trading-cum-clearing member under a pre-agreed arrangement. The transfer would take place at the exchange-declared closing or settlement price, with the designated broker assuming delivery-related risks and allowed to reduce excess positions within two trading days.
To widen the funding pool for REITs and InvITs, Sebi may allow them to issue depository receipts backed by their units, enabling them to raise foreign capital through overseas exchanges. The proposal would permit fresh depository receipts to be issued against new units as well as transfer of existing units by unitholders to foreign depositories.
REITs and InvITs may also be allowed to invest minority stakes in under-construction third-party projects within existing exposure limits. Other proposals include reducing the offer-for-sale cooling-off period and recognising remote common infrastructure as real estate.
The board may also consider measures to improve the functioning of AIFs, along with certification requirements for associated persons, research analyst call recordings and regulations governing vault managers.
Other proposals include demat portability, digital disclosure documents, simpler reporting requirements, relaxed dealing-room and qualification requirements and easing power-of-attorney norms. Sebi may also widen the accredited investor framework.
Common advertising code
Sebi may introduce a common advertising code for investor-facing communications by regulated entities, replacing multiple entity-specific requirements with a unified set of norms covering stockbrokers, mutual funds, portfolio managers, investment advisers, research analysts and other intermediaries.
Advertisements featuring celebrities may require prior approval, while endorsements could be restricted to the entity or brand rather than specific products or services.
The board may also consider a fast-track settlement route for cases involving amounts up to Rs 10 lakh, extending the application deadline from 60 to 90 days and allowing voluntary market debarment or trading suspension as settlement terms in serious cases.
In another proposal aimed at reducing compliance costs, Sebi may ease non-convertible debenture (NCD) listing norms for first-time issuers by removing the mandatory retrospective listing of outstanding unlisted NCDs. Existing debt could be permanently grandfathered, while mandatory listing would continue for all future issuances.