Securities and Exchange Board of India (SEBI) issued several circulars during the first fortnight of May 2023, introducing amendments and providing guidance on various matters. These circulars aim to enhance transparency, streamline processes, and ensure compliance within the securities market. In this article, we will summarize the key amendments and directives mentioned in these circulars.
SEBI Circulars – First Fortnight of May 2023
|1.||Issuers who have listed and/ or propose to list non-convertible securities, securitised debt instruments, security receipts and municipal debt securities; and Registered Depositories||Introduction of Legal Entity Identifier (LEI) for issuers who have listed and/ or propose to list non-convertible securities, securitised debt instruments and security receipts||Explained Below.|
SEBI vide its aforesaid circular has introduced LEI (Legal Entity Identifier) i.e. unique global identifier for legal entities participating in financial transactions. LEI is a 20 Character code that uniquely identifies every legal entity in any jurisdiction. Presently there is a threshold of Rs. 25 Crore or above for obtaining LEI by non-individual Borrower as per RBI guidelines.
The circular mandates the issuers having outstanding listed non-convertible securities and issuers having outstanding listed securitised debt instruments and security receipts as on August 31, 2023 are required to obtain and report LEI Code to the Depositories on or before 1st September 2023. Also, the issuer proposing to issue and list non-convertible securities and securitised debt instruments and security receipts on or after September 01, 2023 shall report their LEI Code to the Centralized Database of corporate bonds and to the Depositories respectively at the time of allotment of the ISIN.
In India Legal Entity Identifier India Ltd (LEIIL), a subsidiary of the Clearing Corporation of India Limited (CCIL) is authorized by the RBI under the Payment and Settlement Systems Act, 2007 to allot LEI code to the respective Issuers.
|2.||1. Issuers who have listed and/ or propose to list green debt securities.
2. Recognized Stock Exchanges.
3. Registered Depositories
|Additional requirements for the issuers of transition bonds||SEBI has directed the issuer of non-convertible securities to make an additional disclosures in the offer documents in case of issuance of transition bonds. *|
* The aforesaid disclosure is introduced with the intention of bringing transparency and informed decision making amongst the investors in the transition bonds and to ensure that the funds raised through transition bonds are not being misallocated. Transition Bonds are the sub category of “Green Debt Security”.
Additional disclosures by an issuer desirous of issuing transition bonds in the offer document for public issues /private placements of transition bonds is briefly explained below:
1. Disclosure in Offer Documents: The issuer shall use a denotation ‘GB-T’ on the cover page and in type of instrument field in the term sheet in order to differentiate transition bonds from other categories of green debt security.
2. Disclosure in Transition Plan: Details of interim targets, Brief of the project implementation strategy, Details regarding the usage of technology for the project implementation and Mechanism to oversee the utilization of the funds raised through transition bonds.
3. Disclosure in Centralised Database for corporate bonds: Issuer shall use the Denotation in the Centralized Database for corporate bonds/ debentures by filling the denotation i.e. GB-T.
4. Disclosure to Stock exchange: Revised transition plan along with an explanation for any such revision to the already disclosed plan; if applicable.
5. Disclosure in Annual Report: Disclosure of the transition plan along with a brief on the progress of the implementation of the transition plan.
|3.||SEBI/HO/MRD/TPD/P/CIR/2023/65 dated May 05, 2023||1. All Stock Exchanges
2. All Clearing Corporations
3. All Depositories
|Testing Framework for the Information Technology (IT) systems of the Market Infrastructure Institutions (MIIs)||In accordance with the recommen-dations of the Technology Advisory Committee (TAC), MIIs are hereby directed to ensure certain requirements while establishing the testing framework of their IT systems/ applications. Detailed system requirements are enlisted in the respective circular.|
|4.||SEBI/HO/DDHS/DDHS-POD1/CIR/P/2023/67 dated May 09, 2023||All Registered Debenture Trustees||Registration with the FINNET 2.0 system of Financial Intelligence Unit – India (FIU-India)||Financial Intelligence Unit – India (FIU – India) has directed all registered debenture trustees (Who are registered under FINNET 1.0 and who have not registered themselves with FIU – India) are required to be registered themselves in FINNET 2.0 system as soon as possible.|
|5.||SEBI/HO/MRD/MRD-PoD-1/P/CIR/2023/68 dated May 10, 2023||1. All Recognized Stock Exchanges having Commodity Derivatives Segment
2. All Foreign Portfolio Investors registered with SEBI 3. All Custodians registered with SEBI
|Direct Market Access (DMA) to SEBI registered Foreign Portfolio Investors (FPIs) for participating in Exchange Traded Commodity Derivatives (ETCDs)||DMA generally refers the direct access of exchange trading system by the clients of broker through broker’s infrastructure without manual interruption by the broker. SEBI on the recommen-dations of Commodity Derivatives Advisory Committee (CDAC) allowed stock exchanges to extend DMA facility to FPIs for participation in ETCDs in order to promote in institutional participation in ETCDs.|
|6.||SEBI/HO/IMD/POD-II/CIR/P/2023/0069 dated May 12, 2023||1. Mutual Funds (MFs)
2. Asset Management Companies (AMCs)
3. Trustee Companies/ Board of Trustees of Mutual Funds
4. Association of Mutual Funds in India (AMFI)
|Investment in units of Mutual Funds in the name of minor through guardian||On December 24, 2019 through circular, SEBI had prescribed some uniform process for AMC w.r.t. investment made in the name of the minor through a guardian. Further Mutual Fund Advisory Committee has directed the slight modification in above circular. Now payment in any mode shall be accepted from the bank account of minor, legal guardian/ parent or their joint account and the redemption shall only be made in the verified bank account of the minor. The said changes shall be facilitated by AMC’s w.e.f. 15.06.2023.|
The aforesaid amendments have succinctly covered all the circulars issued by the SEBI from 1st May 2023 to 15th May 2023. In case of more clarifications on the same, detailed circular available on the website of SEBI via https://www.sebi.gov.in may be referred.