Sebi Chief Tuhin Kanta Pandey held his first board meeting on March 24, where he approved key regulatory changes aimed at enhancing market transparency, governance, and investor confidence.
The market regulator also greenlit several proposals related to the ease of doing business, disclosures for foreign portfolio investors (FPIs), and market infrastructure institutions (MIIs). Here’s a look at some of the key updates announced by the Sebi:
Charging of Advance Fee By IAs and RAs
The market regulator has mandated that investment advisors (IAs) and research analysts (RAs) can charge advance fees for up to a period of one year. Prior to the announcement, RAs and IAs were only allowed to charge an advance fee for two quarters.
Advertisement
The Sebi added that rules regarding fee limit, modes of payment of fees, refund of fees, advance fee etc shall only be applicable in the case of individual and HUF clients (not being accredited investors).
Formation Of High-Level Committee To Cover Conflict of Interest And Related Matters
Sebi has chosen to form a ‘high-level panel’ to comprehensively review the provisions that govern matters such as conflict of interest and disclosures of property, investments, liabilities, etc. for members and officials of the board. The market watchdog added that the high-level panel will consist of eminent individuals and domain experts in the realm of constitutional, statutory, or regulatory bodies, along with members from the public sector, private sector, and academia.
Advertisement
Higher Disclosure Threshold For FPIs
FPIs have to mandatorily comply with the Prevention of Money Laundering Act, 2002, and the Prevention of Money Laundering (Maintenance of Records) Rules, 2005. As a part of compliance, FPIs are required to disclose details of all entities holding any ownership, economic interest, or control.
The market regulator increased the applicable threshold for such disclosures from Rs 25,000 crore to Rs 50,000 crore. The Sebi stated that the threshold has been raised on account of the doubling of cash equity market trading volumes between FY 2022-23 and the current FY 2024-25. Notably, the previously applicable threshold of Rs 25,000 crore was set in FY 2022–23.
Advertisement
Appointment of Public Interest Directors (PIDs)
Sebi mandated that the appointment of PIDs for Market Infrastructure Institutions (MIIs) will continue to require Sebi's approval. Additionally, if the governing board of an MII decides to re-appoint an incumbent PID, they communicate the reason for the decision with the Sebi.
The market regulator has left the decision to prescribe a minimum cooling-off period for an MIIs key managerial personnel with the MIIs governing board. Notably, the appointment, re-appointment, or termination of an MII's managerial personnel will require the approval of the governing board of the MII.
Advertisement
Revision Of AIF Regulations
Sebi said that currently, Category II Alternate Investment Funds (AIFs) are required to put the majority of their investments in unlisted securities. However recent changes in the Listing Obligations and Disclosure Requirements Regulations (LODR) 2015 require that if an entity has issued listed debt securities, they can only issue fresh debt in a listed form. This in turn can potentially lead to a reduction in the availability of unlisted debt securities. To mitigate the issue, the market regulator proposed that investments by Category II AIFs in listed debt securities that have ratings of ‘A’ or below will be treated the same as investments in unlisted securities.
Deferment Of Proposals Related to Merchant Bankers
Sebi mentioned that some amendments in regulations related to merchant bankers, debenture trustees, and custodians have been postponed till the market regulator’s next meeting.
Buy Outlook Money March 2025 Magazine Issue on Amazon Here.
