There were some really interesting developments from SEBI’s board meeting held on 28th September 2021. Here are some highlights:
Introduction of Silver Exchange Traded Funds in India
“Is there a Silver ETF?” is among the most frequent questions we had seen in the last 1-2 years given the performance. Silver ETFs were approved due to regulatory reasons. Finally, SEBI approved an amendment to SEBI (Mutual Funds) Regulations, to enable the introduction of Silver Exchange Traded Funds with certain safeguards in line with the existing regulatory mechanism for Gold ETFs.
You can expect the AMCs to file for silver ETFs and funds soon. Given that it takes between 3-6 months for funds to be approved, we might see the first silver ETF in the next year
Framework for Gold Exchange and SEBI (Vault Managers)
In the recent budget, the finance minister had announced that a gold exchange would be set up under the purview of SEBI and a consultation paper was floated. Given that India is the 2nd largest consumer of gold, we didn’t have a spot exchange and standardisation.
SEBI has now approved the setting up of gold exchanges. A new instrument called Electronic Gold Receipt’ (EGR) will be created.
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The instrument representing gold will be called ‘Electronic Gold Receipt’ (EGR) and it will be notified as securities.
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EGRs will have the trading, clearing, and settlement features akin to any other securities, and any recognized stock exchange, existing as well as new, can launch trading in EGRs in a separate segment. While the trades executed will be settled by the Clearing Corporation.
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The denomination for the trading of EGR and conversion of EGR into gold can be decided by the recognized stock exchanges, with the approval of SEBI.
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The EGR holder can continue to hold the EGRs for as long as intended since EGRs will have perpetual validity. The EGR holder can also withdraw the underlying gold from the vaults, upon surrender of the EGRs.
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To lower the costs associated with the withdrawal of gold from the vaults, EGRs will be made “fungible” and interoperability between Vault Managers will be allowed.
Features of SEBI Vault Managers:
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The Vault Manager should be a body corporate incorporated in India and have a net worth of at least Rs. 50 crores.
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The Vault Manager will be registered and regulated as a SEBI intermediary, for providing vaulting services meant for gold deposited to create EGRs.
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The obligations of the Vault Manager will include accepting deposits, storage and safekeeping of gold, creation of EGR, withdrawal of gold, grievance redressal, and periodic reconciliation of physical gold with the records of the depository.
Framework for Social Stock Exchange
The Board approved the creation of the Social Stock Exchange (SSE) for fundraising by social enterprises (SE). The framework for the SSE has been developed on the basis of the recommendations of a working group and a technical group constituted by SEBI.
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SSE should be a separate segment of the existing stock exchanges.
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Social Enterprises eligible to participate in SSE, should be entities (Non-Profit Organization - NPO and For-Profit Social Enterprise - FPE) having social intent and impact as their primary goals. Social Enterprises will have to engage in a social activity out of the list of 15 broad eligible social activities approved by SEBI.
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Eligible NPOs can raise funds through equity, Zero Coupon Zero Principal (ZCZP) bonds, Mutual Funds, Social Impact Funds, and Development Impact Bonds. NPOs willing to raise funds on SSE shall be required to be registered with SSE.
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Social Venture Funds under SEBI’s AIF regulations will be renamed Social Impact Funds (SIFs). The corpus requirements for these funds will be reduced from Rs. 20 crores to Rs. 5 crores.
Along with this the board also made changes to the delisting framework making it easy for acquirers to delist target companies after acquisition. Changes in certain provisions related to Supervisor Voting Right Shares. Changes in regulations related party transactions (RPTs), amongst others. You can check all the decisions taken by the board here.
