The Securities and Exchange Board of India (Sebi) on Thursday approved 13 regulatory proposals, including a comprehensive overhaul of portfolio management services (PMS) rules, allowing foreign portfolio investors (FPIs) to participate in physically settled, non-agricultural commodity derivatives and easing settlement proceedings for alleged securities market violations.
The Sebi board approved several measures to ease doing business for portfolio managers, allowing PMS providers to invest in initial public offerings (IPOs), primary market debt issuances and exchange-traded derivatives, while broadening their investment opportunities.
Under the revised framework, PMS providers will be permitted to invest up to 10% of client assets under management in investment-grade unlisted debt securities under discretionary PMS, subject to client consent. The regulator also approved a new category of independent fund managers who can manage client portfolios in association with registered portfolio managers, subject to investor protection safeguards.
For FPIs, the board approved participation in non-agricultural index derivatives contracts, irrespective of whether the underlying is cash-settled, and in non-cash-settled non-agricultural commodity derivatives contracts, subject to safeguards. FPIs will, however, have to exit such positions before delivery obligations arise.
The regulator also allowed real estate investment trusts (REITs) and publicly listed infrastructure investment trusts (InvITs) to issue depository receipts in permissible overseas jurisdictions.
The board approved widening the pool of accredited investors by allowing individuals with securities market assets of Rs 5 crore and body corporates with such assets of Rs 20 crore to qualify, alongside the existing income and net-worth criteria. The move is aimed at expanding the pool of accredited investors and encouraging greater participation in alternative investment funds.
Sebi also approved a major overhaul of settlement proceedings, including changes to settlement terms, a new formula for computing settlement amounts and separate treatment for wrongful gains.
Under the revised process, Sebi will issue a settlement notice before a show-cause notice, giving entities 60 days to apply for settlement, except in cases where an interim order is expected.
Settlement will also be extended to cases involving misrepresentation of financial statements and diversion of funds. A fast-track settlement mechanism has been introduced for disclosure-related violations where the settlement amount is up to Rs 10 lakh.
Meanwhile, Sebi chairman Tuhin Kanta Pandey said the regulator had received more than 3,500 comments on its ongoing consultation on reforms to the closing auction session (CAS). Once the consultation closes on October 3, Sebi will introduce changes to the newly implemented price discovery method, he said.
On brokers’ concerns over the 0.02% merchant discount rate on UPI transactions in capital markets, Pandey said the issues faced by capital market participants differed from those of typical merchants.
“We have heard the brokers, and are looking at how we can represent them. They have also made representation to the government,” he said.