The Market Regulator Security Exchange Board of India (SEBI) met in Mumbai on Tuesday i.e. 29th June 2021. The Board of SEBI takes decisions on the following mentioned topics:-
(A). Review and Merger of SEBI (Issue and Listing of Debt Securities) Regulations, 2008 and SEBI (Non-Convertible Redeemable Preference Shares) Regulations, 2013 into a single Regulation – SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021.
(B). Review of Regulatory provisions related to Independent Directors.
(A). Amendments to SEBI (Infrastructure Investment Trusts) Regulations, 2014.
(C). Amendment to SEBI (Mutual Funds) Regulations, 1996.
(D). Amendment to SEBI (Credit Rating Agencies) Regulations, 1999.
(E). Amendment to SEBI (Bankers to an Issue) Regulations, 1994.
(F). Amendments to the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015.
(A). Introduction of Framework for Accredited Investors in securities market.
(B). Permitting Resident Indian fund managers to be constituents of FPIs.
(C). Annual Report: 2020-21.
Firstly we will discuss related to Review part:-
(A). Review and Merger of SEBI (Issue and Listing of Debt Securities) Regulations, 2008 and SEBI (Non-Convertible Redeemable Preference Shares) Regulations, 2013 into a single Regulation – SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021-
The Board considered and approved the proposals relating to the review and merger of the SEBI (Issue and Listing of Debt Securities) Regulations, 2008 and SEBI (Non-Convertible Redeemable Preference Shares) Regulations, 2013 into a single Regulation to be called– SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021.
Now Board combine the two regulations into single regulation to be called as SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021.
Major Provisions Of The New Regulations Are As Under:
1. Eligibility– Issuers other than unlisted REITs and InvITs who are in existence for less than3 years, have been facilitated to tap the bond market, provided:
a. Issuance of their debt securities is made only on a private placement basis;
b. The issue is made on the EBP platform irrespective of the issue size; and;
c. The issue is open for subscription only to QIBs.
In case special purpose vehicles issuers want to list their debt instruments purely on private placement basis and they don’t have any three year existence history they can also do so by complying others conditions.
2. Identification for risk factors- Parameters for identification of risk factors have been introduced to assist issuers in disclosing pertinent risk factors on risks intrinsic to the issuer as well as the instrument, other risk factors which may have an impact on the issue.
3. Minimum Rating Criteria- The requirement to have a minimum ratingof AA- for a public issuance of NCRPS has been done away with in requirement as is the case for a public issue of debt securities.
4. Tenure- The requirement of a minimum tenureof three years for a public issuance of NCRPS has been removed thus providing flexibility to the issuers to structure their issuance as per their resource requirement and raise funds through an issue of NCRPS.
5. Raise Funds Quickly- To enable issuers to raise funds quickly without filing a separate prospectus each time,the restriction of not more than four issuances of debt securities in a year through a single shelf prospectus has been done away with.
6. Option for Call & Put- The option for call and put has been introduced in case of debt securities issued on private placement basis. This will provide greater flexibility to the issuers and investors of debt securities and NCRPS as well. Further, the period for exercise of call and put option has been brought down to 12 months from 24 months in order to provide increased flexibility, both to issuers and investors.
7. Default in payment of Interest / dividend/ redemption- Issuers who have cured the default in payment of interest / dividend / redemption amount to raise funds through non-convertible securities, have been permitted to file shelf prospectus post such curing of default provided they have cured the default atleast 30 days prior to filing the draft shelf prospectus.
8. Minimum size- In order to encourage public issuances of debt securities, the present stipulation that the minimum size of Rs. 100 crore has been done away.
9. Electronic Book Provider- Electronic Book Provider (EBP) platformhas been made mandatory for issuance of eligible securities on private placement basis proposed to be listed amounting to INR 100 crore or above in a financial year which will improve price discovery and transparency.
10. Creation of charge- The provision of creation of charge on the assets and properties of the issuer has been harmonized with the Companies Actthus allowing issuer to have an option to create charge over its properties or assets (movable, immovable, tangible, intangible), shares or any interest thereon, of the issuer or its subsidiaries or its holding companies or its associate companies. This will provide greater flexibility to the issuers for creation of charge.
11. Abridged prospectus- Requirement of abridged prospectus has been streamlined to around 10 pages from over 50 pages, in order to enhance readabilityfor the investor.
12. Roll over Debt securities- If issuer wishes to roll over the debt securities the provision of e-voting has been introducedin addition to postal ballot to facilitate issuers to seamlessly obtain voting for passing the resolution. This will also encourage wider investor participation in the voting.
(B). Review of Regulatory provisions related to Independent Directors.
The Board approved amendments to Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations) pertaining to regulatory provisions related to Independent Directors (IDs), which include the following:
1. Appointment/Re-appointment and Removal of IDs-
a) It shall be done through a special Resolution for all listed Entities.
b) While selecting the candidates with the help of NOMINATION AND REMUNERATION COMMITTEE for the appointment of independent Director made more transparent elaborated and enhancing the disclosures in relation to skill required.
c) Composition of NRC has been modified to include 2/3rd IDs instead of existing requirement of majority of IDs.
d) Shareholder approval for appointment of all directors including IDs shall be taken at the next general meeting, or within three months of the appointmenton the Board, whichever is earlier.
2. Eligibility requirement-
Cooling period- Cooling period of three years has been introduced for Key Managerial Personnel (and their relatives) or employees of the promoter group companies, for appointment as an Independent Director, but relative of employees of the Company its Holding, subsidiary, and associate has permitted to become Independent Director without the requirement of cooling period.
3. Resignation – Resignation Letter has been disclosedalong with a list of her/his present directorships and membership in board committees.
Cooling period of one year been introduced for an ID transitioning to a whole-time director in the same company/ holding/ subsidiary/ associate company or any company belonging to the promoter group.
4. Audit Committee– – At least 2/3rd of the members of the audit committee shall be independent directors and all related party transactions shall be approved by only Independent Directors on the Audit Committee.
5. Director and Officer Insurance– It applicable on top 1000 companies(by market capitalization).
Secondly we will discuss related to Amendment part:-
|1.||Amendments to SEBI (Infrastructure Investment Trusts) Regulations, 2014
|Minimum number of unit holders, other than sponsor, its related parties and its associates shall be five together holding not less than 25% of the total unit capital of the InvIT.
(Min no. unit Holder- 5+ Holding 25% of total unit capital).
|2.||Amendments to SEBI (Infrastructure Investment Trusts) Regulations, 2014 and SEBI (Real Estate Investment Trusts) Regulations, 2014.||Revision in minimum subscription and trading lot for publicly issued REITs and InvITs.
The revised minimum application value shall be within the range of INR 10,000-15,000 and the revised trading lot shall be of one unit.
|3.||Amendment to SEBI (Mutual Funds) Regulations, 1996.||Investment of a minimum amount as skin in the game in the Mutual Fund (MF) schemes by Asset Management Companies (AMCs) based on the risk associated with the scheme.|
|4.||Amendment to SEBI (Credit Rating Agencies) Regulations, 1999.||Rating of securities that are listed or proposed to be listed on a recognized stock exchange, and to provide for an explanation in clause (f) of Regulation 9 specifying that ratings undertaken by a CRA under the respective guidelines of a financial sector regulator or authority shall be under the purview of the concerned financial sector regulator or authority.|
|5.||Amendment to SEBI (Bankers to an Issue) Regulations, 1994.||To provide easy access to investors participate in Public/Rights issues by using various payment avenues, the Board approved the proposal of amending the SEBI (Bankers to an Issue) Regulations, 1994 by way of permitting such other banks, other than scheduled banks, as may be specified by SEBI from time to time, to register as a Banker to an Issue.|
|6.||Amendments to the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015.||The amendments, inter alia, include the following:
1. The maximum amount of reward has been increased from Rupees One Crore, at present, to Rupees Ten Crore.
2. If the total reward payable to the informant is less than or equal to Rupees One Crore, then the reward may be granted by SEBI, after the final order is issued.
3. If the total reward payable to the informant is more than Rupees One Crore, then an interim reward not exceeding Rupees One Crore may be granted by SEBI, after the final order is issued.
The remaining reward amount will be granted only upon receipt of the monetary sanctions amounting to at least twice the balance of the reward amount payable by SEBI.
Provisions related to others part:-
|1.||Introduction of Framework for Accredited Investors in securities market.||Board approved the proposal to introduce a framework for ‘Accredited Investors’ in the Indian securities market, a class of investors who may be considered to be well informed or well advised about investment products.
The salient features of the proposed framework include:
1. Eligibility criteria -Individuals, HUFs, Family Trusts, Sole Proprietorships, Partnership Firms, Trusts and Body Corporates based on financial parameters and information as may be specified by SEBI.
2. Eligible subsidiaries of depositories and specified stock exchanges, and any other specified institutions to be recognized as Accreditation Agencies.
Accreditation Agencies to grant accreditation status and issue Accreditation Certificate to Accredited Investor.
3. Modalities of accreditation and procedure to avail benefits linked to accreditation.
The benefits linked to accreditation include:
1. Accredited Investors shall have flexibility to participate in investment products with an investment amount lesser than the minimum amount mandated in the Alternative Investment Funds (AIF) Regulations and Portfolio Managers (PMS) Regulations.
2. Each investor invests minimum investment amount of Rs. 70 Crores may avail relaxation from regulatory requirements such as portfolio diversification norms, conditions for launch of schemes and extension of tenure of the AIF.
3. Accredited Investors with minimum investment of Rs. 10 Crores with registered PMS provider, may avail relaxation from regulatory requirement with respect to investment in unlisted securities and can enter into bilaterally negotiated agreements with the PMS provider.
4. Accredited Investors who are clients of Investment Advisers will have the flexibility to determine the limits and modes of fees payable to the Investment Adviser through bilaterally negotiated contractual terms.
|2.||Permitting Resident Indian fund managers to be constituents of FPIs.||The Board approved the proposal to amend the SEBI (Foreign Portfolio Investors) Regulations, 2019–
Permit eligible Resident Indian Fund Managers (other than individuals) to be constituents of Foreign Portfolio Investors (FPIs). Such FPIs shall be investment funds approved by Central Board of Direct Taxes (CBDT) under Section 9A of the Income-Tax (IT) Act, 1961, read with the IT Rules, 1962.
|3.||Annual Report: 2020-21||Annual Report would be submitted to the Central Government.|