SEBI makes slew of decisions to protect investors, enhance disclosures

Capital markets regulator SEBI took a slew of decisions focusing of protecting investor interests as well as strengthening market infrastructure.

On the Adani-Hindenburg issue, SEBI chairperson, Madhabi Puri Buch refused to comment saying that the case was sub-judice. "We never comment on entity-specific matters and on top of that, the matter is before the Supreme Court. We never comment on sub-judice matters,” said SEBI Chairperson. She also added “we are duty-bound to follow whatever the Supreme Court has said."

Here are the important decisions taken by the capital markets regulator during the board meet.

Disclosure Norms

SEBI has strengthened norms to ensure more transparency and timely disclosures.
The new norms have put in place a stricter timeline for disclosures. This includes companies having to reveal relevant information from board meetings within 30 minutes of the meeting.

Listed entities will also have to clarify, confirm or deny market rumours that may impact the share price. The top 100 listed companies will have to do this from October 1st 2023 and top 250 listed entities, with effect from April 1st 2024.

In another requirement, companies will now have to ensure that post which are vacant such as directors, CEO, CFO, must be filled within 3 months from the date of vacancy.

ASBA-like facility for secondary market

To protect retail investors SEBI has allowed an ASBA like facility for the secondary market, which will be optional for investors and brokers. This allows an investor to block funds in their bank accounts instead of transferring them upfront to brokers before executing secondary market trades. This will help prevent misuse of client funds and broker defaults. This system is already operational for IPOs.

Stock Broker Regulations

SEBI has put in place a framework that ensures a mechanism to prevent as well as detect fraud or market abuse by stockbrokers. This includes surveillance systems for trading activities, mechanism for reporting issues and whistle blower policy.

Mutual Funds

Private equity funds can now be sponsors of mutual funds. This will give more flexibility to the industry. This amendment will also allow for “Self-Sponsored AMCs” subject to the AMC fulfilling certain criteria.

Environment, Social and Governance Framework

SEBI has mandated more disclosures and compliance around ESG issues. 65% of assets of ESG focussed mutual fund schemes should be in companies which make comprehensive related disclosures.
SEBI has also proposed introducing a regulatory framework for ESG rating providers in the Indian securities market.

Debt Market

A Corporate Debt Market Development Fund (“CDMDF”) in the form of an Alternative Investment Fund to be set up. This will act as a ‘Backstop Facility’ for purchase of investment grade corporate debt securities during times of stress. SEBI says this will also enhance secondary market liquidity.

Alternative Investment Funds

SEBI has also amended AIF regulations to ensure a standardised approach to valuation of their investment portfolios. AIFs will have to dematerialise all units for all new and existing schemes which have a corpus greater than 500 crore, by October 31st 2023. And those schemes with a corpus of less than Rs 500 crore will have to ensure dematerialisation by April 30th 2024.