SEBI Policy: Changes in Payment Procedure for SEBI Investor Protection and Education Fund

Introduction:

The Securities and Exchange Board of India (SEBI) has recently made important changes to the payment procedure for remittances to the SEBI Investor Protection and Education Fund. In their circular dated July 2020, SEBI has advised all market participants to exclusively utilize the payment link provided on SEBI’s homepage for making remittances to the fund. This revised circular, SEBI/HO/GSD/TAD/P/CIR/2023/149 dated September 04, 2023, emphasizes the importance of complying with this updated mode of payment.

Sebi Policy Changes in Payment Procedure for SEBI Investor Protection and Education Fund

Purpose of the Circular: SEBI Policy

The objective of this circular is to streamline the remittance process and ensure that all market participants make their contributions to the SEBI Investor Protection and Education Fund through the designated payment link provided on the SEBI website. This change has been implemented to enhance transparency and accountability in the remittance process, as well as to ensure smoother administrative procedures for SEBI.

Key Changes and Guidelines: 

1. Exclusively Online Payments: Going forward, all remittances to the SEBI Investor Protection and Education Fund must be made online through the payment link available on the SEBI website’s homepage. This measure aims to provide a secure and efficient payment channel while minimizing errors and delays.
2. Furnishing Requisite Information: While making online remittances, it is essential for remitters to provide all the necessary information as specified in the circular. This includes accurate details such as account numbers, transaction references, and any other prescribed information.
3. Importance of Compliance: It is of utmost importance for all market participants to comply with the revised payment procedure. Failure to adhere to the new guidelines may result in delays or rejection of remittances. To avoid any such complications, market participants are advised to carefully read and understand the circular and ensure full compliance with the specified requirements.

Benefits of the Updated Payment Procedure:

The revised payment procedure offers several advantages for market participants and SEBI alike. Some of the key benefits include:

1. Enhanced Transparency: By directing all remittances through the designated payment link, SEBI can maintain a clear and transparent record of all contributions to the Investor Protection and Education Fund, ensuring accountability and trust.
2. Efficient and Secure Process: Online payments provide a faster, more efficient, and secure mode of remittance, reducing the possibility of errors and minimizing administrative burdens for both market participants and SEBI.
3. Simplified Compliance: By clearly outlining the necessary information to be furnished during online remittances, market participants can easily fulfill their compliance obligations.

Conclusion:

SEBI’s circular dated September 04, 2023, bringing about changes in the mode of payment for the SEBI Investor Protection and Education Fund, signifies a commitment towards streamlining processes and enhancing transparency in the financial market. Market participants are strongly advised to meticulously follow the revised payment procedure and utilize the designated online payment link provided on the SEBI website’s homepage for all future remittances to the fund. This initiative will contribute to the overall growth and efficiency of the financial market, while ensuring a secure and accountable framework for investor protection and education.

Source: SEBI/HO/GSD/TAD/P/CIR/2023/149 dated September 04, 2023

SEBI Policy: SEBI Introduces New Format for Abridged Prospectus for Public Issues

Introduction:

The Securities and Exchange Board of India (SEBI) has recently revised the format for disclosures in the Abridged Prospectus. This new format will be mandatory for public issues of Non-Convertible Debt Securities and/or Non-convertible Redeemable Preference Shares opening on or after October 1, 2023. The purpose of the revised format is to provide simplified and consistent disclosures across various documents and to include critical information in the abridged prospectus.

SEBI Policy Introduces New Format for Abridged Prospectus for Public Issues

Key Changes and Guidelines: SEBI Policy

1. Purpose of the Abridged Prospectus: The Abridged Prospectus provides a summarized version of the prospectus for public issues of Non-Convertible Debt Securities and/or Non-convertible Redeemable Preference Shares. It aims to provide key information about the issue in a clear, concise and simplified manner, and shall not contain any qualitative statements that cannot be substantiated with quantitative factors.
2. Format of the Abridged Prospectus: The revised format will contain key information such as the purpose of the issue, the issuer’s credit rating, details of the instrument(s) offered, and the terms and conditions of the issue, among others. The Abridged Prospectus shall clearly provide the terms of issue as put forth in the prospectus to ensure transparency and to benefit investors by providing them with the necessary information required to make informed investment decisions.
3. Availability of Abridged Prospectus: The Issuer, Merchant Bankers, and Registrar to an Issuer, will make available a copy of the Abridged Prospectus via their website. Additionally, a link to download the Abridged Prospectus will be made available in the issue advertisement for the public issue. The Abridged Prospectus will also contain a Quick Response (QR) code that links directly to the Prospectus.

Benefits of the Revised Format:

The revised format of the Abridged Prospectus delivers several key advantages, including:

1. Improved Clarity and Consistency: By providing simplified and consistent disclosures, the revised format ensures that investors receive accurate, pertinent and useful information allowing them to make informed decisions.
2. Additional Information: The Abridged Prospectus will now encompass more key areas in a summarized format than was previously possible. Providing an overview of critical information for investors that was earlier scattered across multiple documents, the Abridged Prospectus will now include additional critical information such as the issuer’s credit rating.
3. Accessibility: The Issuer/Merchant Bankers now have the responsibility to ensure that the Abridged Prospectus is available to the public, making it easy to access and review.

Conclusion:

SEBI’s revision to the format of the Abridged Prospectus for public issues of Non-Convertible Debt Securities and/or Non-convertible Redeemable Preference Shares is aimed at improving disclosures and simplifying the document for the benefit of investors. The revised format of the Abridged Prospectus provides greater transparency and consistency in disclosures to allow investors to make informed decisions. The new format shall be strictly implemented starting October 1, 2023, and will benefit the financial market as a whole by ensuring enhanced accessibility, transparency, and accuracy in disclosures.

SEBI POLICY : SEBI Prescribes a New Template for Sharing Information by Credit Rating Agencies (CRAs) to Debenture Trustees (DTs)

Introduction: SEBI Policy

The Securities and Exchange Board of India (SEBI) mandates credit rating agencies (CRAs) to share certain information with Debenture Trustees (DTs) to ensure greater transparency and accuracy in the credit rating process. To facilitate easier accessibility and analysis of this submitted data by DTs, SEBI has recently prescribed a new template for sharing information. This article delves into this new mechanism introduced by SEBI for information sharing from CRAs to DTs.

SEBI POLICY : SEBI Prescribes a New Template for Sharing Information by Credit Rating Agencies (CRAs) to Debenture Trustees (DTs)

Background:

The Credit Rating Agencies framework of SEBI, introduced in 2021, aims to bring greater accountability, transparency, and accuracy to the credit rating process. In line with this aim, the framework requires CRAs to share certain information with DTs.

Mechanism for Sharing of information:

1. Sharing Requirements: SEBI requires CRAs to mandatorily share certain information with DTs as part of the Credit Rating Agencies framework. This information includes a detailed report on the rated instrument(s), the rationale behind the rating assigned, and the covenant structure, among others.
2. Prescribed Template: SEBI has recently introduced a prescribed template for CRAs to use while sharing information with DTs. This new template will facilitate easier analysis and interpretation of the data submitted by standardizing the format.
3. Facilitating Analysis: The new template introduced by SEBI is expected to facilitate easier analysis of the submitted data as it requires the information to be clearly segregated and organized. Allowing DTs to interpret and analyze the information submitted in a clear and succinct manner ensures a better credit rating process for investors.

Benefits of the Mechanism:

1. Greater Accountability: With the new template in place, CRAs can be held to a higher level of accountability as they must provide detailed and substantiated information in a standardized format. This ensures a more transparent and reliable credit rating process.
2. Better Decision Making: DTs are expected to use the data provided in the template to make informed decisions regarding investments, based on the analysis conducted. The new mechanism enables DTs to perform an easier and more thorough analysis of information submitted, leading to better decision-making.
3. Enhanced Transparency: The prescribed template ensures greater transparency through clear and standardized presentation and organization of vital information, making the credit rating process more transparent. This will help in boosting investors’ trust and confidence in the credit rating process.

Conclusion:

SEBI’s new mechanism for sharing of information by CRAs to DTs is aimed at bringing greater transparency, accountability and accuracy in the credit rating process. The newly prescribed template simplifies the process of sharing information while ensuring a clear presentation and organization of data. DTs can now analyze and interpret the submitted information with greater ease and accuracy for better decision-making. This mechanism is yet another key step by SEBI towards introducing transparency in the Indian financial market.

SEBI, Credit Rating Agencies Framework, Debenture Trustees, mandated sharing, Prescribed Template, Mechanism for Sharing, Greater accountability, Decision-making, Transparency.

SEBI Policy: SEBI Clarifies Treatment of Mutual Fund Schemes in Corporate Debt Market Development Fund Units

Introduction:
The Securities and Exchange Board of India (SEBI) recently issued a clarification regarding the treatment of mutual fund schemes’ investment in units of Corporate Debt Market Development Fund (CDMDF). Pursuant to the SEBI Circular on Investment by Mutual Fund Schemes and AMCs in units of CDMDF, any investment in CDMDF units by mutual fund schemes will be excluded from the base of net assets for the purpose of calculating asset allocation limits. This article delves into the details of this clarification issued by SEBI.

SEBI Clarifies Treatment of Mutual Fund Schemes in Corporate Debt Market Development Fund Units

Background: SEBI POLICY 

In March 2021, SEBI introduced a framework for investment by mutual fund schemes and Asset Management Companies (AMCs) in units of CDMDF, aimed at promoting the development of the corporate debt market. The framework allows mutual fund schemes to invest in units of CDMDF, which in turn invests primarily in instruments issued by corporates.

Clarification:

1. Treatment of Investment: SEBI has issued a clarification stating that any investment by mutual fund schemes in units of CDMDF shall be excluded from the base of net assets for calculating asset allocation limits.
2. Exclusion from Base of Net Assets: The investment in CDMDF units will not be counted as an asset while calculating the allocation limit for mutual fund schemes. This means that the investment in CDMDF units will not be considered while determining the permissible ceiling of investment for mutual fund schemes.
3. Request by AMFI: This clarification was issued by SEBI following a request by the Association of Mutual Funds in India (AMFI) to address any ambiguity regarding the treatment of mutual fund schemes’ investment in units of CDMDF.

Benefits of the Clarification:

1. Clarity: The clarification by SEBI brings clarity for mutual fund schemes and AMCs while investing in units of CDMDF. The exclusion of investment in CDMDF units from the base of net assets will provide greater clarity regarding the permissible ceiling of investment for mutual fund schemes.
2. Boost to Corporate Debt Market: The clarification is expected to boost the corporate debt market by encouraging more investments in CDMDF units by mutual fund schemes. This, in turn, will provide a better avenue for funding to corporates and promote the development of the corporate debt market in India.

Conclusion:

SEBI’s clarification regarding the investment in units of CDMDF brings greater clarity to mutual fund schemes and AMCs while investing in the corporate debt market. The exclusion of investment in CDMDF units from the base of net assets will provide greater clarity to mutual fund schemes regarding the permissible ceiling of investment. This clarification is expected to promote the development of the corporate debt market, providing a better avenue for funding to the corporates.

Source: SEBI/HO/IMD/PoD2/P/CIR/2023/152 dated September 06, 2023

SEBI, Clarification, Investment, Mutual Fund Schemes, Corporate Debt Market Development Fund Units, Asset Allocation Limits, Exclusion, Net Assets

SEBI Policy: SEBI Framework for Board Nomination Rights to Unitholders of Infrastructure Investment Trusts (InvITs)

Introduction

The Securities and Exchange Board of India (SEBI) has introduced a framework granting board nomination rights to eligible unitholders of Infrastructure Investment Trusts (InvITs). This framework, outlined in Regulation 4(2)(h) of SEBI (Infrastructure Investment Trusts) Regulations, 2014, specifies that unitholders holding at least ten percent of the total outstanding units of the InvIT, either individually or collectively, are entitled to nominate one director on the board of directors of the Investment Manager, as per the guidelines set by the Board. This article explores the details of SEBI’s framework for board nomination rights in InvITs.

SEBI Framework for Board Nomination Rights to Unitholders of Infrastructure Investment Trusts (InvITs)

SEBI Framework for Board Nomination Rights to Unitholders of Infrastructure Investment Trusts (InvITs)

Overview of Board Nomination Rights:

The framework introduced by SEBI grants eligible unitholders of InvITs the ability to exercise board nomination rights. This means that unitholders who own at least ten percent of the total outstanding units of the InvIT, whether individually or collectively, can nominate one director to the board of directors of the Investment Manager. SEBI’s Regulation 4(2)(h) provides the basis for these nomination rights and outlines the process for exercising them.

Benefits of Board Nomination Rights:

1. Participation in Decision Making: Granting board nomination rights allows eligible unitholders to actively participate in the decision-making processes of the InvIT. By nominating a director, unitholders can voice their opinions and influence the strategic direction of the Investment Manager.
2. Protection of Interests: Board nomination rights provide a mechanism for unitholders to protect their interests and ensure that their concerns are adequately represented in the decision-making process. This can help safeguard the investments and rights of unitholders.
3. Enhanced Transparency and Accountability: The inclusion of unitholder-nominated directors on the board of directors promotes transparency and accountability within the InvIT. These directors can provide independent oversight and ensure that the Investment Manager acts in the best interests of the unitholders.

Drawbacks of Board Nomination Rights:

1. Concentration of Power: Granting nomination rights to unitholders holding at least ten percent of the total outstanding units may result in a concentration of power in the hands of a few large unitholders. This could potentially limit the representation and influence of smaller unitholders.
2. Potential Conflicts of Interest: While board nomination rights empower unitholders, they may also lead to conflicts of interest if the nominated director prioritizes the interests of the nominating unitholders over the overall interests of the InvIT.

Impact on Business with SEBI’s Policy:

SEBI’s framework for board nomination rights in InvITs has several implications for businesses in this sector. Some of the notable impacts are:

1. Greater Investor Confidence: The policy ensures greater investor confidence in InvITs by providing unitholders with a voice in the decision-making process. This can attract more investments into the InvIT sector.
2. Improved Governance: The inclusion of unitholder-nominated directors enhances corporate governance within InvITs. It promotes transparency, accountability, and responsible decision-making.
3. Increased Competition: InvITs that demonstrate strong corporate governance and provide opportunities for unitholder participation through board nomination rights may gain a competitive advantage in attracting investors.

SEBI Policy: SEBI Framework for Board Nomination Rights in Real Estate Investment Trusts (REITs)

Introduction

The Securities and Exchange Board of India (SEBI) has implemented a framework that grants eligible unitholders of Real Estate Investment Trusts (REITs) the right to nominate a director on the board of the Manager. This framework, outlined in Regulation 4(2)(g) of SEBI (Real Estate Investment Trusts) Regulations, 2014, specifies that unitholders who hold a minimum of ten percent of the total outstanding units of the REIT, either individually or collectively, have the authority to nominate one director.

Overview of Board Nomination Rights

Under SEBI’s framework, eligible unitholders of REITs gain active participation in the governance of the REITs. Unitholders who individually or collectively hold at least ten percent of the total outstanding units are empowered to nominate one director to the board of directors of the Manager. This right offers unitholders a voice in decision-making processes, ensuring that their interests are represented at the highest level of management.

Benefits of Board Nomination Rights

1. Enhanced Participation: The provision of board nomination rights enables eligible unitholders to actively participate in the decision-making processes of the REITs. By nominating a director, unitholders can express their opinions and influence the strategic direction of the Manager.
2. Safeguarding of Interests: Board nomination rights provide a mechanism for unitholders to protect their interests and ensure their concerns are adequately represented in decision-making. This mechanism helps safeguard the investments and rights of unitholders.
3. Promoting Transparency and Accountability: The inclusion of unitholder-nominated directors on the board fosters transparency and accountability within REITs. These directors provide independent oversight, ensuring that the Manager acts in the best interests of the unitholders.

Drawbacks of Board Nomination Rights

1. Concentration of Power: Granting nomination rights to unitholders holding at least ten percent of the total outstanding units may result in a concentration of power among a few large unitholders. This concentration could potentially limit the representation and influence of smaller unitholders.
2. Potential Conflicts of Interest: While board nomination rights empower unitholders, they may also lead to conflicts of interest if the nominated director prioritizes the interests of the nominating unitholders over the overall interests of the REIT.

Impact on Business

SEBI’s framework for board nomination rights in REITs has a significant impact on businesses in this sector. Some notable effects include:

1. Increased Investor Confidence: The policy ensures greater investor confidence in REITs by providing unitholders with a voice in the decision-making process. This increased confidence can attract more investments into the REIT sector.
2. Improved Governance: The inclusion of unitholder-nominated directors enhances corporate governance within REITs. It promotes transparency, accountability, and responsible decision-making.
3. Competitive Advantage: REITs that exhibit strong corporate governance and provide opportunities for unitholder participation through board nomination rights may gain a competitive edge in attracting investors.

Conclusion

SEBI’s framework for board nomination rights in REITs introduces a mechanism for unitholders of REITs to actively participate in corporate governance and influence decision-making. Board nomination rights provide a means for unitholders to protect their interests, promote transparency and accountability, and enhance their confidence in the REIT sector. While there are potential drawbacks, such as concentration of power and conflicts of interest, SEBI’s framework promotes responsible corporate governance and has a positive impact on businesses operating in the REIT sector.

The revised regulatory reporting format for AIFs by SEBI, in consultation with Indian Venture and Alternate Capital Association (IVCA) and Equalifi, is intended to ensure uniform compliance standards, ease compliance reporting and fulfill regulatory and developmental purposes. The new format will enable the AIF industry to maintain streamlined compliance thus reducing the compliance burden and enhancing the overall ease of doing business in India’s AIF sector.

SEBI POLICY: Improving Corporate Governance in Real Estate Investment Trusts: SEBI’s Framework for Board Nomination Rights

Introduction

The Securities and Exchange Board of India (SEBI) has introduced a framework that enhances corporate governance in Real Estate Investment Trusts (REITs). This framework grants eligible unitholders of REITs the right to nominate a director on the board of the Manager. The framework, known as Regulation 4(2)(g) of the SEBI (Real Estate Investment Trusts) Regulations, 2014, specifies that unitholders who hold a minimum of ten percent of the total outstanding units of the REIT, either individually or collectively, can nominate one director.

Improving Corporate Governance in Real Estate Investment Trusts SEBIs Framework for Board Nomination Rights

Benefits of Board Nomination Rights

Enhanced Participation

The provision of board nomination rights provides eligible unitholders the opportunity to actively participate in governance processes and decision-making within REITs. By nominating directors, unitholders can express their opinions and influence the strategic direction of the Manager. This right offers unitholders a voice in decision-making processes, ensuring their interests are represented at the highest level of management.

Safeguarding of Interests

Board nomination rights provide a mechanism for unitholders to protect their interests and ensure their concerns are adequately represented in decision-making. This mechanism helps safeguard the investments and rights of unitholders.

Promoting Transparency and Accountability

The inclusion of unitholder-nominated directors on the board fosters transparency and accountability within REITs. These directors provide independent oversight, ensuring that the Manager acts in the best interests of the unitholders.

Drawbacks of Board Nomination Rights

Concentration of Power

Granting nomination rights to unitholders holding at least ten percent of the total outstanding units may result in a concentration of power among few large unitholders. This concentration could potentially limit the representation and influence of smaller unitholders.

Potential Conflicts of Interest

While board nomination rights empower unitholders, they may also lead to conflicts of interest if the nominated director prioritizes the interests of the nominating unitholders over the overall interests of the REIT.

Impact on Business

SEBI’s regulatory framework for board nomination rights in REITs has a significant impact on businesses in the REIT sector. Some notable effects include:

Increased Investor Confidence

The framework ensures greater investor confidence in REITs by providing unitholders with a voice in the decision-making process. This increased confidence can attract more investments into the REIT sector.

Improved Governance

The inclusion of unitholder-nominated directors enhances overall corporate governance in REITs. It promotes transparency, accountability, and responsible decision-making.

Competitive Advantage

REITs that exhibit strong corporate governance and provide opportunities for unitholder participation through board nomination rights may gain a competitive edge in attracting investors.

SEBI’s Complaint Redressal Platform

In addition to board nomination rights, SEBI has also strengthened its grievance redressal mechanism for investors through its Complaint Redressal Platform (SCORES). SEBI amended the Securities and Exchange Board of India (Facilitation of Grievance Redressal Mechanism) (Amendment) Regulations, 2023, on August 16, 2023, to make the process more efficient, reduce timelines, and introduce auto-routing and auto-escalation of complaints. The revised framework now covers handling complaints received through SCORES platform for entities and monitoring the complaints by designated bodies.

Conclusion

SEBI has taken a significant step towards improving corporate governance and investor confidence in the REIT sector by introducing board nomination rights. While there are potential drawbacks, such as the concentration of power, this framework promotes responsible corporate governance and has a positive impact on businesses operating in the REIT sector. Furthermore, the strengthened grievance redressal mechanism provided by SCORES ensures greater protection of investor rights. It is critical for businesses to pay attention to these policy changes as they could potentially provide a competitive advantage in attracting investors and improving the industry’s overall health.