SEBI Board Decisions: SEBI Approves Regulatory Sandbox Framework, Amends MF, InvIT And Investment Adviser Regulations

SEBI decided to tighten its eligibility norms for investment advisers and decided to introduce an upper limit for their fees.

SEBI also barred the use of titles like independent "financial advisers" or "wealth advisers" by those dealing in the distribution of securities, unless they are registered as investment advisers also.

Announcing a slew of amendments to its regulations for investment advisers, approved by SEBI's board, the regulator said an individual adviser cannot provide distribution services, while firms would need to segregate advisory and distribution activities at the client level.

The new rules framed, after considering four consultation papers and public comments, are also aimed at bringing clarity in payment of fees and introduction of an upper limit on fees charged to investors, SEBI said. The last consultation paper was floated for public comments in January.

The market regulator will soon come out with a circular to ensure “Karvy-like incidents” don't take place or are contained, said Chairman Ajay Tyagi. Karvy has told the National Stock Exchange that it will pay the fund shortfall of Rs 678 crore by March by selling stake in a company. “We will wait and see,” he said at his last press conference at the board’s chief.

Other Highlights:

• Only 50 percent of top 500 companies had segregated Chairman, MD roles. Implementation issues led to extending deadline.
• Actively looking at recategorisation of mutual funds, will come out with guidelines.
• There will always be challenges, it is a vibrant organisation; enforcement needs further improvement.

• Propose to amend MF regulations to provide for non-bank custodians for gold or gold-related instruments of gold ETFs.
• Sponsor or an AMC shall invest in close-ended schemes as well, in order to bring uniformity across schemes. Currently, the investment by the sponsor or an AMC is mandatory in all schemes except close-ended schemes.

• Approved amendments to InvIT and REIT regulations.
• To provide for fast-track rights issue of units by REITs and InvITs.
• Alternative criteria proposed for InvIT investment manager qualification requirements.
• InvIT investment manager’s directors/partners/employees should have 30 years of combined relevant experience

The SEBI board approved the insertion of a "suitable explanation to Regulation 79 (Manner of creating pledge in Depository) under SEBI (Depositories and Participants) regulations, 2018, that the word pledge shall include re-pledge of securities for margin and/or settlement obligations of the client or such other purposes specified by the board from time to time."

With an aim to facilitate use of latest fintech innovations in capital markets, SEBI on Monday decided to allow live testing of new products, services and business models by market players on select customers.

Initially, all SEBI-registered entities will be eligible to participate in such a 'regulatory sandbox', a live testing environment where new products processes, services and business models can be deployed on a limited set of eligible customers for a specified period of time with certain relaxations in rules and guidelines, the regulator said.

• A proposal to amend its investment manager eligibility norms for Infrastructure Investment Trusts.
• Permit fast -track issuance of units to existing investors in REITs and InvITs, they added.
• Proposal to change the eligibility criteria for appointing internal as well as external executive directors of SEBI.

(Source: PTI)

The board is likely to consider a measure around the fallout of Karvy Stock Broking Ltd. where it will bar the use of pool accounts for routing mutual fund transactions, according to a LiveMint report. The regulator will now permit only direct credit and debit of investor bank accounts for mutual fund transactions, the report said, in a move to make mutual fund transactions safer.

It will also finalise norms to address conflicts of interest and ensure the independence of proxy advisory firms, making recommendations on key company resolutions, and address issues of accountability of global proxy firms when they give opinions on Indian companies.

SEBI’s board is likely to have discussed a proposal to allow live testing of new products, services, and business models for selected customers by providing various relaxations and exemptions.

The move is aimed at facilitating the use of the latest financial technology innovations in capital markets, officials told PTI. Initially, all SEBI-registered entities will be eligible to participate in such a ‘regulatory sandbox’ (a live-testing environment), while fintech startups and other entities that are not regulated by SEBI may also be allowed at a later stage, but no exemptions would be granted from the existing investor protection framework, KYC and anti-money laundering rules.

The market regulator will contemplate proposals to attach a ‘difficult to recover’ tag for individual defaulters who are untraceable, according to a PTI report quoting SEBI officials.

According to the proposal, SEBI plans to attach a ‘difficult to recover’ tag for individual defaulters who are found to be ‘untraceable’ as also for cases facing parallel proceedings by other agencies or in various courts and tribunals. This separate ‘difficult to recover’ category is for cases where recovery of penalties and other dues from defaulters proves to be virtually impossible and the amount involved is not found to be worth an attempt beyond a point.

However, SEBI can initiate or continue its prosecution proceedings against the defaulters even after such a segregation and recovery procedure can be reopened in case there is any change in the prevailing parameters regarding the defaulter.

Read More

The Securities Exchange Board of India — currently in a board meeting — is set to announce its decisions at a press conference at 4:30 p.m. This will likely be Ajay Tyagi’s last board meeting as chairman of the market regulator.

Tyagi, a 1984 batch IAS officer of Himachal Pradesh cadre, was appointed as SEBI chairman on March 1, 2017, for a period of three years. In a public notice dated Jan. 24, the government invited applications from eligible candidates for the top position, signalling an extension for Tyagi was unlikely.