Exclusive: SEBI board to meet on Monday, may discuss speeding up rights issues, MF rules, Hindenburg allegations
The first meeting of Capital market regulator Securities and Exchange Board of India (SEBI) after the release of a report by US short seller Hindenburg Research is scheduled for Monday, September 30. The board is expected to discuss and approve various policy measures. and issues at the meeting, and may face serious allegations leveled by Hindenburg against the SEBI chairman, as well as protests by the regulator’s staff against senior management.
On the policy side, the issue of immediate rights issues can be taken up by the board, as it will facilitate the raising of funds from companies. It would also reduce the role of merchant bankers and reduce the post-board meeting timeline to about 20 days. This will be a kind of combination of rights issues and preference issues. The idea is to make rights issues the preferred method of raising capital for companies. Data shows that companies prefer QIP and preferred issue routes to rights issue due to longer timelines and other complexities.
“It is noticed that many times, the promoters choose a special news channel for the benefit of the elected people instead of the existing shareholders, so the whole issue is simplified,” said a regulatory source.
Another major policy step for board negotiations will be ease of doing business and harmonization of ICDR and LODR norms. While the ICDR rules apply to financial disclosure and disclosure requirements, the LODR norms include listing obligations and disclosure requirements regulations. This includes the review of regulations related to related transactions, classification of promoters, and a single system for filling IPOs in all stock markets, providing a three-month timeline for filling board vacancies and strengthening issues related to corporate governance on the part of the ICDR. They include pre-issue announcements and price band announcements, which enable issuers with additional stock appreciation rights (SARs) to file draft offer documents and grant approval to obtain a loan certification from peer-reviewed chartered accountants, pre-disclosures. -IPO activities after filing the DRHP, clarification on the lock-in periods of the promoter where the proceeds are used to repay loans and are used for capex.
#ZbizExclusive | सेबी बोर्ड की सोमवर को होगी बेखेट. किन किन पर बोर्ड में हो सकती है चार्चा? Analysts, brokers and merchant bankers and MF investors ke liye kya hai khas? Hindenburg is in focus pūri khabar bata rahe hain brjesh kumar. #Sebichief #SEBI… pic.twitter.com/NCuui4Ra7L
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The SEBI board is also likely to revise the rules for merchant banks that define what activities they can and cannot undertake. Additionally, the total capital requirement for merchant banks is likely to be raised from Rs 5 crore to Rs 50 crore. It was last revised in 1995. The administrator is looking for only serious players in the market. SEBI has observed that at times, bankers are engaged in private placement of unlisted companies, project advisory services, and sale of rupee term loans, which are outside the purview of SEBI. The regulator believes that such activities may create significant regulatory and systemic risks as such activities are outside its scope.
A long-pending proposal for a performance assurance agency may go to the board for consideration. SEBI had floated a consultation paper for the same. The entity under NSE will be the first such agency. SEBI may initially allow it for investment advisors, research analysts, and algo makers. This will be voluntary for market participants so that their applications can be verified.
Extending summary arbitrator proceedings is another matter the board can discuss and approve. There are certain cases of infringement where it has been recognized that the infringement is obvious in nature or admitted by the arbitrator or requires little documentation or evidence to establish the facts. Therefore, if such violations are covered under abbreviated procedures, it will improve the board’s ability to act quickly to protect the interest of investors and maintain the integrity, transparency, and efficiency of the securities market. It may deal with issues related to the expulsion of members from the trade, non-payment of subscription fees, and incorrect claims for refunds and performance.
Another long-pending and much-discussed issue regarding the light-touch rules for passive funds may also be brought before the board for discussion.
Considering the low risk involved in managing passively managed MF schemes, the proposed MF Lite Regulations aim to reduce the compliance requirement, encourage innovation, promote competition, and promote ease of entry for MFs interested in launching passive schemes only. It is expected to promote ease of entry, encourage new players, reduce compliance requirements, increase penetration, facilitate investment diversification, increase market capitalization, and encourage innovation. The proposal is to allow existing and new mutual funds to enter this category.
Another proposal regarding New Asset Class is also likely to be taken up by the board. The new class will bridge the gap between mutual funds (MFs) and portfolio management services (PMS). A minimum investment of Rs 10 lakh has been suggested in this New Legacy collection, which will be riskier than mutual funds and will not be allowed to be advertised as a mutual fund product, but will be suitable for high-risk investors who have previously invested in it. an unregulated field. Such investors may now find a well-managed business. There was a need for such type of asset class as MFs allow investment from Rs 100 onwards, but PMSes and AIFs require minimum investment of up to Rs 50 lakh and Rs 1 cr respectively.
To address the ongoing problem of insider trading, the SEBI board may consider widening the scope of ‘connected person’. SEBI has observed that certain categories of persons, not included in the scope of the definition of ‘connected persons’ under the existing rules, may be in a position to receive UPSI from ‘connected persons’ to the company, due to their close relationship with such ‘connected persons’. Such people who are thought to be connected, because of their proximity and close relationship with the people they are connected with, are considered to be in a position where they cannot indulge in insider trading. In the proposed regulation, it is intended that the relatives of a ‘connected person’ are also recognized as connected persons. The definition of ‘next of kin’ is also expanded. The credit for this proposition goes to the in-house trading environment of the Delhi-based business group.
The board is expected to discuss and approve regulations related to investment advisers (IA) and research analysts (RA), which is a proposed step to remove the requirement to pass the basic certificate every three years and the relaxation of the existing basic requirements to register as an IA or RA from the back from graduation to graduate degrees. The Board may also issue experience requirements for registration as IA and RA on the condition that they have the relevant knowledge and skills desired to render their services. The overall eligibility criteria may be relaxed for individuals. There may not be a requirement for any total amount of IAs and RAs but for non-individuals, a fixed deposit requirement based on the number of clients may be imposed. Also, registration as both an investment advisor and research analyst may be permitted and the fee structure may be revised.
“There are more than twenty items on the board’s consideration list, but it depends on how much time will be left for policy issues because the Hindenburg issue may be discussed in detail,” said another source.
“The board will discuss these allegations and if the Chairman of SEBI is exposed enough, he can discuss the issue of labor unrest. It was an unprecedented incident where almost half of the workers came out to protest against the top management,” the source added.
A few other issues, related to FPIs and debt issues, may come to the board for discussion.
