SEBI Board Meeting Updates: SEBI Enhances Requirements For Portfolio Managers, Issues New Default Disclosures Norms  
SEBI building exterior. (Photographer: Sajeet Manghat/ BloombergQuint)

SEBI Board Meeting Updates: SEBI Enhances Requirements For Portfolio Managers, Issues New Default Disclosures Norms  

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SEBI Board Decisions: Higher PMS Requirements, Shorter Rights Issues And New Default Disclosure

The Securities and Exchange Board of India today made a host of announcements pertaining to portfolio managers, rights issues and default disclosures.

The market regulator has enhanced the requirements for portfolio managers. They now have to have a minimum networth requirement of Rs 5 crore instead of Rs 2 crore earlier. Even the minimum limit of new investments by clients has been increased to Rs 50 lakh from Rs 25 lakh earlier.

Another significant announcement was the new loan disclosure norms for listed companies. In case of default beyond 30 days, listed companies will have to disclose the failure to repay within 24 hours of the 30th day.

These provisions will be applicable from Jan. 1, 2020.

The SEBI board has approved a proposal to reduce the time taken to complete a rights issue to about 31 days from about 55 days currently.

Watch SEBI Chairman Ajay Tyagi’s full press conference and BloombergQuint’s show analysing the impact of the decisions.

Indian Banks' Association CEO Welcomes New Disclosure Norms

Indian Banks’ Association chief executive officer VG Kannan said that the new disclosure norms are welcome even if they may spark “undue” concerns of volatility in banking.

  • Bankers are not uncomfortable with this. They always welcomed it.
  • Don't think banks would be unduly worried.
  • SEBI's move more or less coincides with the review period of the RBI too.
  • Both regulators seem to be working together.

Enhanced PMS Requirements Shrink Available Pool Of Investors: ASK Investment's Prateek Agrawal.

ASK Investment Managers’ Prateek Agrawal said that the increase in signing up amounts for new investors from Rs 25 lakh to Rs 50 lakh will reduce the pool of investors available for the portfolio management industry.

“This pool of investors was already narrow, about 3-4 lakh people qualified at the Rs 25 lakh limit,” Agrawal, the chief investment officer at ASK, said. “With the limit at Rs 50 lakh, the pool really shrinks.”

The increased networth criteria for portfolio managers will, however, have little impact.

“The networth criteria implies that more serious players come in rather than fly-by-night operators. This has little impact on people managing Rs 500 crore and more. For smaller guys, they've been given three years so it should be okay for them as well.”

New Norms For Default Disclosures

The SEBI has also decided that in case of any default in repayment of loans from banks or financial institution beyond 30 days of the pre-agreed payment date, listed companies will have to disclose the default within 24 hours of the 30th day.

These provisions will be applicable from Jan. 1, 2020.

“The philosophy is that more and more information is in the public domain which can then guide investors as to what is happening,” SEBI chairman Ajay Tyagi said.

Right now there is no disclosure requirement at all. It is a betterment on that. For bonds, defaults are reported within a single day. For banks it is not reported. So it is an improvement on that.
Ajay Tyagi, Chairman, SEBI

Extension Of Business Responsibility Reporting

The top 1,000 listed companies by market capitalisation will be required to include business responsibility reporting as part of their annual reports. Earlier, this was only applicable to the top-500 listed firms.

Reduced Time For Rights Issue

The SEBI board has approved a proposal to reduce the time taken to complete a rights issue to about 31 days from about 55 days currently.

The key proposals are:

  • Reduction in the timeline for completion of the right issue from ~T+55 days to ~T+31 days.
  • Introduction of dematerialised Rights Entitlements and trading of these on stock exchanges.
  • Shareholders holding shares in physical form wil be required to provide details of demat account for credit of Rights Entitlements.
  • ASBA facility made mandatory for all investors applying to rights issue. The Applications Supported by Blocked Amount is a process in which the applicant's account doesn't get debited till securities are alloted.
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