MUMBAI: The board of the markets regulator SEBI which met Monday, has left a much-awaited decision on curbing the fast rising derivatives play by retail investors who have been losing heavily from that but has taken a slew of other pro-investor measures.
Some of the key decisions include slashing the number of days to complete a rights issue to just 23 working days from the present 317 days, increasing the T+0 settlement to top 500 stocks from the present 25 and has also decided not to push for instantaneous settlement. Measures to deepen the bond markets by easing disclosure norms about debenture trustees and introduced single filing system for listed and to be listed entities to file relevant reports, documents etc on one exchange which will be automatically disseminated at the other exchanges. Among others.
Market has been closely watching today’s board meeting outcome to see if the regulator would rollout a new framework to govern index derivatives. But in an anti-climax, the regulator did not make any changes to the index-derivatives rules at all at the meeting which was the first since a volley of allegations were raised against the chairperson Madhabi Puri Buch mid-August by a US short-seller Hindenburg and the main opposition party Congress accusing her of conflicts of interest and favouring certain corporates where her husband Dhaval Buch has some pro-profit assignments.
At the 207th meeting of the board was held in Mumbai, SEBI approved the much-anticipated introduction of the regulatory framework for a new investment product/asset class in the mutual fund business by introducing the liberalised MF lite (MF Lite) framework for passively managed fund schemes.
Amending the mutual funds regulations of 1996, the Sebi introduced new investment product called MF lite under the existing mutual fund framework. The new product will bridge the gap between MFs and portfolio management services in terms of flexibility in portfolio construction. The new product also aims to curtail the proliferation of unregistered and unauthorized investment schemes/entities, which often promise unrealistic high returns and exploit investors’ expectations for better yields, leading to potential financial risks.
It has also allowed investors the option to trade in the secondary market (cash segment) either using UPI block mechanism (Asba-like for secondary markets), or 3-in-1 trading facility in addition to the current mode of trading.
The regulator has said from now on one of the two facilities have to be mandatorily offered by stock brokers and other incidental matters.
The board also enhanced the scope of optional T+0 settlement cycle from the present 25 stocks to top 500 based on their market capitalization in a phased manner.
With this, all registered brokers can offer access to the optional T+0 settlement cycle to their investors and allowed them to charge differential brokerage for the same. This will allow foreign portfolio investors and mutual funds to access the optional T+0 settlement cycle.
Along with this, it has also allowed the introduction of an optional block deal window under the T+0 settlement cycle from 8.45-9 am session, alongside the existing block windows under T+1 settlement cycle.
For the primary markets, it has allowed faster rights issues with flexibility of allotment to specific investors by amending the capital and disclosure requirements regulations of 2018.
To ensure the rights issue process is faster it has allowed flexibility to allot to specific investors by amending the issue of capital and disclosure requirements of 2018. This also gives investment opportunities to existing shareholders.
Accordingly, the rights issue to be completed in 23 working days from the date of the issuer’s board approval as against the present average timeline of 317 days. This mechanism would be even faster than the preferential allotment route that takes 40 working days. In addition, it would give existing shareholders an opportunity to participate even more, in the future potential growth of the company.
To protect the rights of investors in alternative investment funds, the Sebi has allowed entities such as those owned or controlled by governments, multilateral or bilateral development financial institutions, and state industrial development corporations to subscribe to junior classes of units of AIFs with less than their pro-rata rights in the investments of the scheme.
The board has also approved a proposal to ensure that offshore derivative instruments (erstwhile P-notes) and segregated portfolios of FPIs are subject to disclosure requirements on par with FPIs.
To help deepen the bond market it has streamlined the compliance mechanism for listed NCDs by easing the disclosures regarding appointment of debenture trustees in the offer document.
The board has also permitted promoters to renounce their rights entitlements to any specific investors and allowing the issuer to allot an under-subscribed portion of rights issue to any specific investors, provided appropriate disclosures are made through advertisement in this regard.
For reporting, the time has been increased from 30 minutes to 3 hours. It has also allowed an additional 72 hours instead of 24 hours now for disclosure of litigations or disputes involving claims against the listed entity subject to maintaining such information in structured digital database as specified.