SEBI pushes norms to ensure better disclosures, boost transparency
Mumbai, March 29, 2023
Regulator’s board clears reforms aimed at better protecting investors’ interest; allows PE firms to own stakes in AMCs
The Securities & Exchange Board of India (SEBI) on Wednesday moved to improve the disclosure norms and enhance transparency by mandating that large listed companies must confirm or deny price-sensitive market rumours, and in the case of material board decisions disclose the same to the stock exchanges within 30 minutes.
To bring more transparency and to ensure timely disclosure of material events or information by listed entities, the SEBI board made it mandatory for the top 100 listed companies by market capitalisation to verify, confirm or deny or clarify any market rumours. This would come into effect from October 1, 2023. And in the case of the top 250 listed entities by market capitalisation, the deadline to adhere to this norm would be April 2024.
The markets regulator has also made it mandatory for upstreaming of clients’ funds by stock brokers and clearing members to Clearing Corporations, a move aimed at protecting retail investors’ funds in the secondary market.
“This will mitigate credit risk on intermediaries and risk of potential misuse of clients’ funds,” SEBI chairperson Madhabi Puri Buch said at a press conference after a meeting of the regulator’s board.
Under the approved new framework clients’ funds held by stock brokers and non bank clearing members will have to be moved to the clearing corporations on ‘end of day’ basis so as to ensure that clients’ funds are not retained by brokers. The first phase of this framework is expected to be implemented from July 1, 2023.
The board also approved a framework to provide for an institutional mechanism for prevention and detection of fraud or market abuse by stock brokers.
SEBI’s latest board meeting comes in the wake of the Hindenburg Research report on the Adani Group and the stock rout at the conglomerate.
Ms Buch declined to comment on the issues concerning the Adani Group, observing that the matter was in the Supreme Court and that the apex court had asked SEBI to submit a report on the status of the investigation to the committee set up by the court..
In a bid to provide greater flexibility to the Mutual Funds (MF) industry, SEBI has now allowed Private Equity firms to own stakes in Asset Management Companies (AMCs) that operate mutual funds.
The SEBI board approved amendments to SEBI (Mutual Funds) Regulations, 1996, introducing an alternative route to enable a diverse set of entities to become sponsors of MFs.
“Such entities, who otherwise may not have been eligible to be sponsors, include private equity funds, with requisite safeguards included in the proposal,” SEBI said.
The amendments also allow for “Self Sponsored AMCs” to continue the mutual fund business, subject to the said AMCs fulfilling certain criteria.
This would give the original sponsor flexibility to voluntarily disassociate itself from the MF without needing to induct a new and eligible sponsor, Ms. Buch said.
The board has also approved amendments to SEBI (Alternate Investment Funds) regulations, 2012, for setting up of Corporate Debt Market Development Fund (CDMDF) in the form of an Alternative Investment Fund to act as a backstop facility for purchase of investment grade corporate debt securities during times of stress to instil confidence among the participants in the corporate bond market.
“CDMDF, based on a guarantee to be provided by National Credit Guarantee Trust Company may raise funds, for purchase of corporate debt securities during market dislocation. This fund will have a total corpus of ₹33,000 crore and SEBI will have the trigger button,” Ms. Buch said.
The SEBI board also approved a regulatory framework for ESG disclosures, ratings and investing.