KEY HIGHLIGHTS
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No Conclusion On Extended Trading Hours
Tyagi said that the details of extended market timings are yet to come from exchanges, hence a decision has not been taken yet.
Relaxing Consent Mechanism
SEBI had set up a committee to re-look the consent mechanism to have effective enforcement and see if the regulations need rationalisation. In that regard, the regulator has relaxed the consent mechanism to bar only serious cases. It has also introduced confidentiality clause for consent mechanism. “Time shouldn’t be wasted on smaller cases and that can be consented,” Tyagi said.
Settlement Mechanism
The board has approved framing of regulations that will provide for settlement of proceedings under the securities law by issuing an order which will include monetary and may also include non-monetary terms.
Salient features are:
- Board may not settle any proceedings if it thinks that the alleged default has a market-wide impact and will cause loss to investors or affect the integrity of the market.
- No settlement if the applicant is a wilful defaulter, fugitive economic offender or default on penalty payments under securities law.
- In an event of settlement order being revoked due to non-compliance of terms, the amount paid will not be refunded to the applicant.
Common Application For FPIs
A common application form has been decided to be brought in for FPI registration with the regulator. Earlier this was happening sequentially and the move would improve ease of business for FPIs, Tyagi said.
Interoperability Among Clearing Corporations
This is a concept under discussion for some time, Tyagi said adding that the board has approved the proposal. The move provides for linking of multiple clearing corporations. It allows participants to consolidate their clearing and settlement functions, irrespective of the stock exchange on which the trade is executed.
Fair Market Conduct
The board has approved amendments to SEBI’s prohibition of fraudulent and unfair trade practices regulation.
These include:
- Expanding the scope of regulations to include employees and intermediary agents
- Fraud now includes activities like misleading information on digital media, front running by intermediaries, misselling of securities or related services, mis-utilisation of client account, diversion of client funds and manipulating benchmark price of securities.
- Bringing further clarity on sharing of unpublished price sensitive information for due diligence or legitimate purposes.
“On the recommendation that SEBI may seek direct power to intercept calls and electronic communication under the Telegraph Act, it was decided that the matter may be referred to the Government to take an appropriate view,” SEBI said in a press release.
Foreign Investment In Commodities Derivatives
Eligible foreign investors will now be allowed to deal in all commodities derivatives traded on Indian exchanges except those classified as sensitive ones, Tyagi said. He added this will help for better discovery of prices in-line with global commodity markets.
This is the first step for opening the commodity derivatives for foreign entitiesAjay Tyagi, Chairman, SEBI
Amendments To Delisting Regulations
SEBI has also approved amendments to its equity delisting regulations.
- In case of voluntary delisting, if the price discovered through the reverse book building process is not accepted by promoters then they will be allowed to give a counter offer. But that counter offer shouldn't be less than the book value and should also be accepted by “such number public shareholders that the post offer promoter shareholding reaches at least 90 percent”.
- The board also approved certain recommendations regarding a review to be carried out by an external expert.
- Promoters of compulsorily delisted companies will have to provide an exit to public shareholders within 3 months from delisting. Currently there is no timeline in place for this.
Enhanced Borrowing
The board also approved enhanced borrowing by corporates through bond market.
25 percent of the borrowing needs will be met via the bond market as pilot project for first two years, Tyagi said.
- The instant framework will come into effect from April 2019.
- Any large corporate covered under the framework shall raise 25 percent of their incremental borrowings for the year through the bond market.
- Any corporate, other than banks, which has listed its specified securities or debt securities or non-convertible redeemable preference shares, as on March 31 of a financial year, shall be categorised as a large corporate under the instant framework.
Lowering Mutual Fund Costs
Tyagi said that mutual fund expenses to be brought down considering economies of scale.
SEBI undertook an internal study to review the Total Expense Ratio of mutual fund schemes. The working group constituted by the Mutual Fund Advisory Committee then submitted a report.
Based on the findings of the report, SEBI’s board took the following decisions:
- TER for closed-ended equity oriented schemes shall be a maximum of 1.25 percent, and for other closed-ended schemes will be a maximum 1 percent.
- TER for index funds and exchange traded funds will be up to 1 percent.
- In Fund of Funds, the TER will be a maximum of twice of the TER of underlying funds.
- For FoFs investing in liquid, index and ETF schemes, the maximum total TER will be 1 percent.
- For FoFs investing in active underlying schemes, the maximum total TER will be 2.25 percent for equity oriented schemes and 2 percent for other schemes.
TER For Open-Ended Schemes
| AUM Slab (Rs Crore) | TER For Equity Oriented Schemes | "TER For Other Schemes (Excluding Index | ETFs and FoFs)" | |||
|---|---|---|---|---|---|---|
| 0-500 | 2.25% | 2% | ||||
| 500-750 | 2% | 1.75% | ||||
| "750-2 | 000" | 1.75% | 1.50% | |||
| "2 | 000-5 | 000" | 1.60% | 1.35% | ||
| "5 | 000-10 | 000" | 1.50% | 1.25% | ||
| "10 | 000-50 | 000" | "TER reduction of 0.05% for every increase of Rs 5 | 000 crore in AUM" | "TER reduction of 0.05% for every increase of Rs 5 | 000 crore in AUM" |
| "Over 50 | 000" | 1.05% | 0.80% | |||
Revised Circular For Foreign Ownership
SEBI chairman Ajay Tyagi said that the regulator will issue revised circular on fund ownership for FPIs.
The proposed KYC requirements and eligibility conditions for FPIs, with regard to the Apr. 10 circular, were discussed by the board. The draft circular and proposed amendments were discussed and “broadly agreed upon”. A revised circular will be issued soon separately, Tyagi said.
What To Expect
The market regulator’s board met in Mumbai today and is said to have taken up several key issues including easing foreign fund ownership norms.
The board of Securities and Exchange board of India is also likely to adopt recommendations of various panels on issues raging from fair market conduct to making mutual fund investments cheaper, two people with direct knowledge of the matter told BloombergQuint.
The regulator had set up a panel led by HR Khan, former deputy governor of the Reserve Bank of India, to look into concerns stemming from SEBI’s April 10 circular barring non-resident Indians from either holding stake above a threshold or being in control of a fund.
SEBI Chairman Ajay Tyagi is scheduled to address the media at 4:30 p.m. today.
Here are some of the suggestions that may have been taken up:
- Relaxing of foreign fund ownership rules by lifting the restrictions imposed in the Apr. 10 circular.
- Recommendations on intercepting phone records as a surveillance measure to the government for making markets cleaner.
- Enforcement action in the NSEL brokers probe.
- Taking steps to make mutual funds less expensive for investors.
- Widening the scope of the settlement mechanism.
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