T+3 listing for IPOs: Highlights from the latest SEBI Board meeting

SEBI in its board meeting held on 28th June,2023 made a slew of changes. Especially reducing the timeline for listing of shares to T+3 days from T+6 days. Here are some of the key highlights from the board meeting.

Reduction of timeline for listing of shares in Public Issue from existing T+6 days to T+3 days

  • After performing stress testing to confirm the transition, The Board approved the proposal for reducing the time period for listing of shares in Public Issue from existing 6 days to 3 days, from the date of issue closure (T Day)

  • The revised timeline of T+3 days shall be made applicable in two phases i.e. voluntary for all public issues opening on or after September 01, 2023 and mandatory on or after December 01, 2023

Introduction of provisions in respect of 1. listing of non- convertible debt securities and 2. voluntary delisting of non-convertible debt securities

  • Starting from 1st January, 2024, Listed entities having outstanding listed NCDs (as on December 31, 2023) to list their subsequent issuances of NCDs at the stock exchange(s).

This is aimed at:

  • Facilitating transparency in price discovery of non-convertible debt securities
  • Better disclosures to investors and the market &
  • Avoiding ISIN level confusion and possible mis-selling of unlisted Bonds

Enablement of direct participation by participants (clients) in the Limited Purpose Clearing Corporation (LPCC)

With the objective of development of the corporate bond market, the SEBI Board in its meeting held on September 29, 2020, approved a proposal to facilitate the setting up of a Limited Purpose Clearing Corporation for clearing and settling repo transactions in corporate debt securities.

Since timely availability of funds and securities is critical in a repo market, direct participation of both borrowers and lenders can widen the market.

Accordingly, the Board has approved the proposal to additionally facilitate participation by entities desiring direct participation( not through a clearing member) in repo transactions in corporate bonds of the LPCC

Revision of minimum unitholding requirement for Sponsor(s) And introduction of provision for Self-Sponsored Investment Manager of InvITs/ REITs

Generally, the Sponsor who sets up the InvIT/ REIT, monetizes its assets by transferring them to the InvIT/REIT and exerts control over the decisions of the InvIT/ REIT through significant shareholding in the Investment Manager/ Manager.

In order to keep the interests of the Sponsor remain aligned with the interests of investors during the life of these investment vehicles:

Presently, SEBI Regulations mandate the Sponsor to hold a minimum of 15% units for a period of at least three years from the date of listing of units.

In order to ensure continued alignment of interests during the life of the investment vehicle, the Board has approved that Sponsor of InvIT/ REIT be required to hold a certain minimum unit-holding on a reducing scale for
the entire life of the InvIT/ REIT.

Further, the mandatory minimum unit-holding shall be locked-in and be unencumbered (without any obligation attached to it)

Introduction of board nomination rights to unit-holders of InvITs and REITs

Over the years, As retail investor interest in InvITs and REITs has been Increasing:

  • Any unitholders holding 10% or more of the total outstanding units of the InvIT/REIT, either individually or collectively can be on the board of directors of the Investment Manager / Manager thereby ensuring pro-rata rights to all unitholders

Introduction of provisions for additional disclosures from Foreign Portfolio Investors (FPIs) that fulfill certain objective criteria

With an objective to guard against (i) possible circumvention of regulations and possible misuse of the FPI route to circumvent the requirements of Press Note 3 (“PN3”):

SEBI’s Board approved the amendment to SEBI (Foreign Portfolio Investors) Regulations, 2019, for implementation of the following proposal:

The following set of FPIs will be required to furnish additional granular level disclosures regarding ownership, economic interest, and control:

  • FPIs holding more than 50% of their Indian equity AUM in a single Indian corporate group; (or)

  • FPIs that individually, or along with their investor group,hold more than INR 25,000 crore of equity AUM in the Indian markets.

Strengthening of investor grievance handling mechanism through SCORES and linking the new platform with the Online Dispute Resolution Mechanism

In order to strengthen the redressal process of grievances of the investors in the securities market:

  • Reducing timelines, introducing auto-routing of the complaint to concerned regulated entities and auto-escalation of complaints in case of non-adherence to the prescribed timelines by the regulated entity,

  • Providing two levels of review, first review by the designated body if investor is dissatisfied with resolution provided by concerned regulated entity. Second review by SEBI if the investor is still dissatisfied after first review.

  • Linking SCORES with Online Dispute resolution (ODR) platform, thereby providing an additional option for investors of all regulated entities.

  • Creation of a new portal for collection of market intelligence inputs.