Sebi board meeting: 10 key changes approved by the regulator that you need to know
Dec 18, 2024
Synopsis
The Securities and Exchange Board of India (SEBI) has announced new regulations aimed at enhancing investor protection and market integrity. Key changes include stricter norms for SME IPOs, relaxed ESG reporting requirements, simplified debt listing rules, and enhanced surveillance of trading platforms. These measures aim to improve transparency and promote investor confidence in the Indian capital markets.
In its latest board meeting, capital markets regulator Sebi approved a series of key measures aimed at protecting investor interest and improving various aspects of market regulations. From tightening SME IPO norms to easing certain reporting requirements, here are 10 key changes you need to know.
1. Stricter rules for SME IPOs
Sebi has made it mandatory for companies planning to tap the SME IPO market to show operating profits of Rs 1 crore in at least two of the last three financial years. Further, promoters and other major stakeholders selling under the OFS have been capped up to 50% of their holdings during the IPOs.
The regulator has also reined in on the misuse of IPO proceeds by approving funds that cannot be used for repaying loans taken from promoters, directors, or related parties.
Further, Sebi said that the allocation methodology for non-institutional investors (NIIs) in SME IPOs to be aligned with methodology used for NIIs in mainboard IPOs
2) Review of merchant banker regulations
Under the new norms approved by Sebi, merchant Bankers, other than banks, public financial institutions and their subsidiaries, will undertake only permitted activities. These bankers may carry out other regulated activities as a separate business unit after obtaining registration from the respective regulatory authority.
Other changes for merchant bankers include maintaining a liquid net worth of at least 25% of the minimum net worth requirement, at all times and an underwriting limit prescribed as 20 times of liquid net worth.
3) Relaxation in ESG reporting
Sebi has relaxed norms related to ESG reporting where companies now have more time to comply with ESG reporting. Mandatory reporting of value chain data has been deferred by 1 year to FY26, and it will remain voluntary until then.
4) Regulated entities responsible for use of AI
During the board meeting, Sebi has also approved tweaking rules related to artificial intelligence, where it assigned the responsibility of using the AI tools to market infrastructure institutions, registered Intermediaries and other persons regulated by Sebi.
Sebi said regulated entities including brokers and AMCs are responsible for the privacy and security of stakeholders’ data and also the output arising from the usage of such tools.
5) Simplified debt listing rules
Sebi has eased norms for listing debt securities, making it easier and faster for companies to raise funds through bonds. The measures include mandating listed or to be listed debt instruments issuance and its transfer only in demat form.
6) Strengthening corporate governance
SEBI has introduced stricter rules to enhance corporate governance standards. Companies will need to disclose more details on related-party transactions and the use of funds, ensuring greater transparency for investors.
Sebi board approves stricter rules for SME market, including financial stability before IPOs
7) Amendment to mutual funds norms
Sebi has approved amendments to rules that specify timelines for deployment of funds collected by mutual funds in new fund offers (NFO).
The objective of the framework is to provide a timeline within which the fund manager would be required to deploy the funds garnered in an NFO as per the required asset allocation of the scheme.
The new framework is aimed at encouraging AMCs to collect only as much funds in NFOs as can be deployed in a reasonable period of time, since in the open-ended funds investors always have the option to enter the scheme at a later date at the prevailing NAV.
The framework also provides an option to investors to exit the scheme without exit load in case the fund manager is unable to deploy the fund within the specified timeline.
8) Investor protection for REITs and InvITs
Sebi approved reforms to strengthen investor protection for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). These include better disclosures and mechanisms for safeguarding investor money in these asset classes.
9) Regulations for startups
Sebi has relaxed eligibility norms for startups listing on the innovators growth platform (IGP). Startups now need only 25% of pre-issue capital to be held by qualified investors, making it easier for them to list and raise funds.
10) Alternative Investment Funds (AIFs)
AIFs will now need to provide detailed quarterly disclosures on their investments, valuations, and performance, helping investors track their money more effectively.
Enhanced surveillance of trading platforms
To prevent market manipulation, Sebi has introduced stricter surveillance mechanisms for trading platforms. This includes real-time monitoring of suspicious trades and stronger penalties for entities found violating market norms.
[The Economic Times]
