Key highlights from the SEBI board meeting held today.
Secondary Market related
ASBA - like facility for trading in Secondary Market: Option to investors
The Board has approved the broad framework for Application Supported by Blocked Amount (ASBA) like facility being made available to investors for secondary market trading.
The facility is based on blocking of funds for trading in the secondary market through UPI.
The said facility shall be optional for investors as well as stock brokers.
Upstreaming of clientsâ funds by Stock Brokers (SBs) / Clearing Members (CMs) to Clearing Corporations (CCs) to mitigate credit risk on intermediaries
With the first phase starting on July 1st, 2023, clientsâ funds shall be sent by SB/non-bank CMs to CCs on End of Day basis, so as to ensure that clientsâ funds are not retained by SBs/non-bank CMs.
The funds shall be upstreamed only in the form of cash, lien on Fixed Deposit Receipts (subject to certain conditions), or pledge of units of Mutual Fund Overnight Schemes (MFOS).
Introduction of Regulatory Framework for Index Providers
The Board has in-principle approved a proposal to regulate Index Providers with the objective of fostering transparency and accountability in governance and administration of financial benchmarks in the securities market.
Amendments to Stock Brokers Regulations to institute a formal mechanism for prevention and detection of fraud or market abuse by stock brokers
The Board has approved a framework to provide for an institutional mechanism for prevention and detection of fraud or market abuse by stock brokers. Accordingly, SEBI (Stock Brokers) Regulations, 1992 will be amended to provide as under:
- Systems for surveillance of trading activities and internal controls;
- Obligations of the stock broker and its employees;
- Escalation and reporting mechanisms
- Whistle blower policy.
The approved amendments will come into effect from October 01, 2023.
Mutual Funds related
Review of Regulatory Framework for Sponsors of Mutual Funds to give greater flexibility to the industry
Strengthening the existing eligibility criteria for sponsors, SEBI introduced an alternative route to enable a diverse set of entities like PE funds with requisite safeguards to become sponsors of MFs.
The amendments also allow for âSelf Sponsored AMCsâ to continue the mutual fund business, subject to the said AMCs fulfilling certain criteria.
Framework for âCorporate Debt Market Development Fundâ: Backstop Facility for specified Debt Funds during market dislocations
The Board approved setting up of Corporate Debt Market Development Fund (âCDMDFâ) in the form of an AIF to act as a Backstop Facility for purchase of investment grade corporate debt securities during times of stress to instill confidence amongst the participants in the Corporate Bond Market and to generally enhance secondary market liquidity.
CDMDF, based on a guarantee to be provided by National Credit Guarantee Trust Company (NCGTC) may raise funds, for purchase ofcorporate debt securities during market dislocation.
The Board also approved the framework for triggering of CDMDFâs asset purchases during market dislocation.
Bringing clarity on the roles and responsibilities of Trustees and Board of Asset Management Companies of Mutual Funds with a focus on Unitholder protection.
ESG related
Balanced Framework for ESG Disclosures, Ratings and Investing
In order to enhance the reliability of ESG disclosures, the BRSR (Business Responsibility and Sustainability Report) Core shall be introduced, which contains a limited set of Key Performance Indicators (KPIs), for which listed entities shall need to obtain reasonable assurance.
A glide path is prescribed for applicability of BRSR Core, beginning with the top 150 listed entities (by market capitalization) from FY 2023â24 which shall be gradually extended to the top 1000 listed entities by FY 2026-27
In order to facilitate the credibility of ESG Ratings, ERPs shall offer a separate category of ESG Rating called âCore ESG Ratingâ, which will be based on the assured parameters under BRSR Core.
The following measures shall be introduced in order to address the risk of mis-selling and greenwashing, to enhance stewardship reporting requirements and to promote ESG investing:
Mandating ESG schemes to invest at least 65% of AUM in listed entities, where assurance on BRSR Core is undertaken
Mandating third party assurance and certification by Board of AMCs on compliance with objective of the ESG scheme.
Establishing a regulatory framework for ESG Rating Providers in Securities Market by introducing a new chapter in the SEBI (Credit Rating Agencies) Regulations, 1999.
The Board approved the proposals on introduction of a regulatory framework for ESG rating providers (âERPsâ) in the Indian securities market, and related proposals on:
enhanced transparency in ESG rating rationales,
Measures to mitigate conflict of interest by ERPs,
facilitating augmentation of transition finance in India, and
facilitating ESG ratings based on assured data.
Amendments to SEBI (Listing Obligations and Disclosure Requirements) Regulations to facilitate more comprehensive and timely disclosure
Disclosure of material events or information by listed entities:
Introduction of a quantitative threshold for determining âmaterialityâ of events / information
Stricter timeline for disclosure of material events / information for which decision has been taken in the meeting of the board of directors (within 30 minutes) and which are emanating from within the listed entity (within 12 hours).
Market rumours to be verified and confirmed, denied or clarified, as the case may be, by top 100 listed entities by market capitalization effective from October 1, 2023 and by top 250 listed entities with effect from April 1, 2024.
Timeline to fill up vacancy of Directors and other officials of listed entities:
Listed entities shall be required to fill up the vacancy of Directors, Compliance Officer, CEO and CFO within a period of three months from the date of such vacancy, to ensure that such critical positions are not kept vacant.
Extension of âComply or Explainâ period for Large Corporates (LCs) to meet their financing needs from debt market through issuance of debt securities to the extent of 25% of their incremental borrowings in a financial year
The period of compliance for Large Corporates to meet their financing needs from debt markets through issuance of debt securities to the extent of 25% of their incremental borrowings in a contiguous block of two financial years will be extended to the contiguous block of three years.
You can read the full SEBIâs press release here