SEBI Board Meeting: Mutual Funds Lite, New Asset Class, T+0 Settlement, Faster Rights Issues—Key Highlights

The Securities and Exchange Board of India on Monday approved a slew of changes to ease regulatory compliance, introduce a new asset class and make it easier for mutual funds to offer passively managed schemes. However, there were no developments to deal with F&O trading frenzy.

Here are the key highlights from SEBI's board meeting:

SEBI approved enhancements to the optional T+0 settlement cycle following stakeholder feedback. The number of eligible scrips will increase from 25 to the top 500 based on market capitalisation. All registered stock brokers can now offer this option to clients and set different broking fees.

Qualified stock brokers and custodians must implement systems for client participation, with timelines determined through stakeholder consultations. Institutional investors, including foreign portfolio investors and mutual funds, will also have access. Additionally, a new Block Deal window will be introduced from 8:45 AM to 9:00 a.m., alongside the existing T+1 settlement options.

The proposal to shift from optional T+0 to instantaneous settlement is not under consideration at this time. The T+0 settlement will continue to coexist with the T+1 cycle.

The changes brought by the board include lowering the minimum qualification to a graduate degree, eliminating experience requirements, and replacing net-worth criteria with reduced deposit requirements.

Compliance will be eased by allowing individuals to register as both IAs and RAs, as well as permitting part-time registrations for those with other business activities. IAs will have more flexibility in fee structures, and the threshold for corporatisation has been raised.

The review also clarifies that investment advice will be limited to securities regulated by SEBI, outlines responsibilities for using artificial intelligence, and provides guidelines for model portfolios.

The Board has approved amendments to the SEBI (Intermediaries) Regulations, 2008, to expedite the handling of certain violations by intermediaries through summary proceedings.

The summary proceedings will cover situations like expulsion from stock exchanges, termination of depository agreements, non-payment of fees, and failure to submit reports.

The Board has introduced measures to shorten the process from an average of 317 days to just 23 working days.

This includes allowing issuers to file for approval with stock exchanges instead of SEBI and streamlining the content of the Letter of Offer. The requirement for appointing a Merchant Banker has been made optional, and issuers can now directly manage certain activities.

Promoters can renounce their rights entitlements to specific investors, and a Monitoring Agency will be required for all rights issues to ensure proper use of proceeds. Rights issues under Rs 50 crore will also now fall under SEBI regulations.

The Board has approved amendments to the SEBI (Mutual Funds) Regulations, 1996, introducing a new investment product to bridge the gap between mutual funds and portfolio management services. It will be known as "investment strategies," with a minimum investment limit of Rs 10 lakh.

SEBI has launched the MF Lite framework, easing regulations for passive mutual funds and promoting market liquidity. Existing AMCs can separate active and passive schemes, while AIF investors will receive pro-rata distributions.

To enhance enforcement of insider trading regulations, the Board clarified definitions related to "connected persons." This now includes partners and household members of connected persons. 

The maximum number of nominees has been increased from three to ten, and nominees will now have the authority to act on behalf of incapacitated investors. The transmission process for transferring assets to nominees has been simplified to require minimal documentation. Additionally, nominees will need to provide unique identifiers such as PAN, passport, or Aadhar numbers.

The Board approved new frameworks for issuing social bonds and sustainability-linked bonds, aiming to promote sustainable finance within the Indian securities market. These frameworks will provide guidelines for companies looking to engage in environmentally and socially responsible funding.