SEBI 204th Board Meeting: Key Decisions & Amendments (15th March, 2024)

Introduction: SEBI’s 204th Board Meeting on 15th March 2024 witnessed significant decisions aimed at enhancing India’s financial landscape. This article delves into the approved measures, ranging from T+0 settlement to amendments in ICDR and relaxations for FPIs and AIFs.

1. Launch of Beta version of optional T+0 settlement for 25 scrips with selected brokers. Progress will be reviewed at three and six months from the date of implementation for further decisions. Currently, T+0 settlement allows both funds and securities transactions to be settled on same day of trading. Presently, T+1 settlement cycle is operating where settlement happens on next day of trade.

2. Relaxations for FPIs: Exemption from additional disclosure requirements granted to FPIs holding more than 50% of their India equity AUM within a single corporate group. This exemption applies when the concentrated holdings of these FPIs are in a listed company with no identified promoter, provided that following conditions are fulfilled:

• FPI’s India equity AUM within the corporate group, excluding its stake in the parent company with no identified promoter, shall not be more than 50%.
• The combined holdings of all such FPIs, exceeding the 50% concentration threshold and not granted exemption, in the company with no identified promoter, amount to less  than 3% of its total equity share capital.
• Notification of material changes by FPIs is categorised in two types i.e., Type I material changes to be informed by FPIs to DDP within 7 working days of occurrence and supporting documents, if any, to be submitted within 30 days of such change and Type II other material changes to be informed along with supporting documents, if any, to their DDP within 30 days of such change.
• If FPIs registration is expired due to non-payment of fee then it can be reactivated within 30 days from expiry and disposal of holdings by FPIs is also permitted during these 30 days. Further, 180 days provided for disposal of holdings if registration is not reactivated within 30 days.
• If FPIs do not dispose off securities within 180 days, following shall apply: FPIs are granted an extra 180 days to sell their securities, with a 5% financial disincentive from sale proceeds, credited to IPEF by the custodian and Unsold securities after the additional 180-day period will be considered compulsorily written off by the FPI.
• Expired FPI registrations with securities will have a one-time chance for disposal over 360 days. The first 180 days carry no financial disincentive, while the subsequent 180 days include a 5% disincentive. Unsold securities afterward are considered compulsorily written off by the FPI and will be transferred to escrow account operated by exchange empaneled broker.
• Minimum 180 days or end of registration block, whichever is later, shall be provided for disposal of securities in case of: 1) Adverse change in compliance status of the home jurisdiction of the FPI , 2) Non-submission of documents for reclassification of FPI category from I to II.

3. SEBI approved following amendments to ICDR, 2018 for IPOs/fund raising:

• Mandate of 1% Security deposit in public/rights issue of equity shares is removed.
• Promoter group entities and non-individual shareholders holding more than 5% of the post-offer equity share capital can now contribute to the minimum promoters’ contribution (“MPC”) without being designated as promoters themselves.
• Equity shares derived from compulsorily convertible securities held for one year before the submission of DRHP will be considered for MPC requirement.
• Fresh filing of Offer for Sale (“OFS”) will be determined by only one criterion: changes are either of issue size in rupees or the number of shares, as indicated in the draft offer document.
• The minimum extension for the bid/offer closing date due to force majeure events will be reduced to one day from the current requirement of three days.

4. Amendments to on-going compliance requirements for listed companies:

• Market capitalization based compliance to be determined on basis of average market capitalization over a six-month period ending on December 31, rather than relying on the market capitalization of a single day (March 31). Additionally, a sunset clause of three years is introduced, after which the market capitalization-based provisions will no longer apply.
• The timeline for filling vacancies of Key Managerial Personnel, which requires approval from Statutory authorities, will be extended from 3 to 6 months.
• Harmonization and reduction of timelines for prior intimation of board meetings to two working days.
• Maximum permissible gap between two consecutive meetings of the Risk Management Committee extended from 180 days to 210 days.

5. Rumour verification norms for listed companies:

• On the proposal of Industry Standards Forum (consisting of ASSOCHAM, CII AND FICCI), SEBI has approved following uniform approach to verify market rumours by listed entities:
• Specifying a uniformly evaluated criterion for verifying rumours, based on significant price movements in the equity shares of listed entity.
• Listed entities will need to do rumour verification within 24 hours from the trigger of material price movement of equity shares.
• Promoters, directors, key managerial personnel and senior management are obligated to timely respond to listed entities for verifying market rumours.
• Unverified event or information reported in print or electronic media not to be considered as ‘generally available information’ under SEBI (PIT) Regulations, 2015.

6. Relaxations for AIFs:

• To ensure compliance, Sebi has mandated that an Alternative Investment Fund (AIF), its manager and key management personnel should carry out “specific due diligence” of both their investors and investments.
• The Board approved allowing AIFs to retain unliquidated investments during winding up by entering a Dissolution Period, replacing the previous option of launching a new scheme (Liquidation Scheme).
• Extension of Liquidation Period for AIF schemes by one year to manage unliquidated investments, subject to certain conditions.

7. Issuance of subordinate units by a privately placed InvIT: SEBI approved amendments to Invit Regulations, 2014 for issuance of subordinate units by privately placed InvIT to mitigate risk and to address valuation discrepancies that may occur due to variations in asset valuation between the Sponsor (acting as the asset seller) and the InvIT (acting as the asset buyer).

8. Timeline of mandatory applicability of listing norms (i.e., Regulation 16 to 27 of LODR, 2015) on High Value Debt Listed Entities is extended till March 31, 2025.

9. SEBI has decided to recognize Stock Exchanges as a Research Analysts Administration and Supervisory Body (“RAASB”) and Investment Advisers Administration and Supervisory Body (“IAASB”).

Conclusion: SEBI’s decisions at the 204th Board Meeting reflect a balanced approach towards regulatory reforms, aiming to foster investor confidence, market integrity, and operational efficiency. The approved measures are poised to shape India’s financial ecosystem, facilitating sustainable growth and development in the years ahead.