Amendments in the Securities Regulations
SEBI Updates September 2023
1. New format of Abridged Prospectus for public issues of Non-Convertible Debt Securities and/or Non-convertible Redeemable Preference Shares.
On September 04, 2023, SEBI vide Circular SEBI/HO/DDHS/PoD1/CIR/P/2023/150, revised the format for disclosures in the abridged prospectus for public issues of non-convertible debt securities and/or non-convertible redeemable preference Shares. This Circular shall be applicable for all public issues opening on or after October 1, 2023.
As per Regulation 2(1)(a) of SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (“NCS Regulations”), an “abridged prospectus” means a memorandum accompanying the application form for a public issue containing such salient features of a prospectus as specified by the Board.
To further simplify, provide greater clarity and consistency in the disclosures across various documents, and to provide additional but critical information in the abridged Prospectus, the format for disclosures in the abridged Prospectus has been revised and is placed as Annex-I of this Circular. Further, the Circular also provides instructions required by investors for completing the application form.
Accordingly, for public issues that open on or after October 1, 2023, the format of an Abridged Prospectus shall be as per the format provided in this Circular instead of Part B of Schedule I of the NCS Regulations.
The Issuer Entity/ Merchant Banker is required to insert a Quick Response (QR) code on the last page of the Abridged Prospectus and the front page of other documents such as the front outside cover page, advertisement, etc. The scan of such QR code on the Abridged prospectus would lead to the Prospectus and QR code on other documents would lead to the prospectus or abridged prospectus as applicable.
The Issuer /Merchant Bankers shall ensure that the disclosures in the Abridged Prospectus are adequate, accurate and do not contain any misleading or misstatement. The Issuer/ Merchant Bankers shall ensure that the qualitative statements in the Abridged Prospectus shall be substantiated with quantitative factors. Also, no qualitative statement shall be made which cannot be substantiated by quantitative factors.
The link for the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/sep-2023/new-format-of-abridged-prospectus-for-public-issues-of-non-convertible-debt-securities-and-or-non-convertible-redeemable-preference-shares_76430.html
2. Change in Mode of Payment w.r.t. SEBI Investor Protection and Education Fund Bank A/c.
On September 04, 2023, SEBI vide Circular SEBI/HO/GSD/TAD/P/CIR/2023/149, amended the mode of payment concerning SEBI Investor Protection and Education Fund Bank Account (SEBI IPEF).
SEBI had earlier prescribed that the amounts shall be credited to SEBI IPEF through online mode or a demand draft drawn in favor of SEBI IPEF. Vide this circular, SEBI has modified the mode of payment. Henceforth, remittances to the SEBI IPEF shall be made only through the link specified at the SEBI website (www.sebi.gov.in) under the head “Click here to make payment to SEBI IPEF”. The link enables the remitter to make payment in any of the following manner: –
- Net banking
- NEFT/RTGS
- Debit Cards
- UPI
While making the remittances online, through the above link, remitters shall furnish the requisite information like the name of the payer, PAN, mobile number, email ID, the purpose for which payment is made, the amount to be paid, etc.
The link of the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/sep-2023/change-in-mode-of-payment-w-r-t-sebi-investor-protection-and-education-fund-bank-a-c_76474.html
3. Mechanism for Sharing of Information by Credit Rating Agencies (CRAs) to Debenture Trustees (DTs)
On September 04, 2023, SEBI vide Circular SEBI/HO/DDHS/DDHS-POD2/P/CIR/2023/ 151, issued a mechanism for sharing information by Credit Rating Agencies (CRAs) to Debenture Trustees (DTs). This circular shall be applicable with effect from October 01, 2023, and CRAs shall report on their compliance with this circular to SEBI within one quarter from the date of applicability of this circular.
SEBI (Credit Rating Agencies) Regulations, 1999 (“CRA Regulations”) and circulars issued thereunder require the sharing of certain information from CRAs to Debenture Trustees (DTs). Due to the large quantum of information submitted daily by CRAs to DTs, as well as the short timelines mandated for disclosure of this information by DTs, the data shared by CRAs must be structured and submitted in a specified format for easier accessibility and analysis of the submitted data. Accordingly, an Excel template is placed as an Annexure to this Circular. CRAs shall use the same template for their daily submissions of rating revisions to DTs.
Such submissions shall be sent by CRAs to DTs on the same day as the day of rating revisions, on either the generic email ID being used for regulatory purposes, or email IDs/URLs as may be communicated for this purpose by DTs.
Monitoring of this circular shall be done in terms of the half-yearly internal audit for CRAs, mandated under the CRA Regulations and circulars issued thereunder.
The link of the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/sep-2023/mechanism-for-sharing-of-information-by-credit-rating-agencies-cras-to-debenture-trustees-dts-_76476.html
4. Clarification regarding investment of Mutual Fund schemes in units of Corporate Debt Market Development Fund
On September 06, 2023, SEBI vide Circular SEBI/HO/IMD/PoD2/P/CIR/2023/152, issued a clarification concerning the investment of Mutual Fund schemes in units of Corporate Debt Market Development Fund (CDMDF). The provisions of this circular shall come into force with immediate effect.
The Association of Mutual Funds in India (AMFI) has requested that for the calculation of asset allocation limits, the base should be considered as a net asset excluding investment in units of CDMDF.
SEBI therefore clarified that for the calculation of asset allocation limits of mutual fund schemes in terms of the Master Circular for Mutual Funds dated May 19, 2023, investment in units of CDMDF shall be excluded from the base of net assets.
The link of the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/sep-2023/clarification-regarding-investment-of-mutual-fund-schemes-in-units-of-corporate-debt-market-development-fund_76511.html
5. Board nomination rights to unitholders of Infrastructure Investment Trusts (InvITs)
On September 11, 2023, SEBI vide Circular SEBI/HO/DDHS-PoD-2/P/CIR/2023/153, issued a framework for Eligible Unitholder(s) of InvITs to exercise board nomination rights. This circular shall come into force with immediate effect.
As per SEBI (Infrastructure Investment Trusts) Regulations, 2014 (“InvIT Regulations”), unitholder(s) holding not less than 10% of the total outstanding units of the InvIT, either individually or collectively, shall be entitled to nominate 1 director on the board of directors of the Investment Manager, in the manner as may be specified by the Board. Accordingly, the framework to exercise the nomination rights by the Eligible Unitholder(s) has been specified in this Circular.
The Investment Manager of the InvIT shall, within 10 days from the end of each calendar month, review whether the Eligible Unitholder(s) who have exercised the board nomination right, continue to have/hold the required number of units of InvIT and make a report of the same. The Investment Manager of the InvIT shall submit such report to the Trustee of the InvIT.
The Framework defines Eligible Unitholder(s) and Unitholder Nominee Director and provides for:
- Conditions for Nomination of a Unitholder Nominee Director
- First-time Nomination (after the issuance of this circular).
- Subsequent Nomination by unitholders on an annual basis.
- Review of Unitholding of Eligible Unitholders by the Investment Manager.
- Change in Unitholder Nominee Director or Withdrawal of nomination.
- Vacating of office of a Unitholder Nominee Director.
- Amendment of Trust Deed and Investment Management Agreement.
- Eligibility criteria for Unitholder Nominee Directors.
The link of the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/sep-2023/board-nomination-rights-to-unitholders-of-infrastructure-investment-trusts-invits-_76708.html
6. Board nomination rights to unitholders of Real Estate Investment Trusts (REITs)
On September 11, 2023, SEBI vide Circular SEBI/HO/DDHS-PoD-2/P/CIR/2023/154, issued a framework to exercise board nomination rights by the Eligible Unitholder(s) of REITs. This circular shall come into force with immediate effect.
As per SEBI (Real Estate Investment Trusts) Regulations, 2014 (“REIT Regulations”), unitholder(s) holding not less than 10% of the total outstanding units of the REIT (Eligible Unitholders), either individually or collectively, shall be entitled to nominate 1 director on the board of directors of the Manager. Accordingly, the framework to exercise the nomination rights by the Eligible Unitholder(s) has been specified in this Circular.
The Manager of the REIT shall, within 10 days from the end of each calendar month, review whether the Eligible Unitholder(s) who have exercised the board nomination right, continue to have/hold the required number of units of REIT and make a report of the same. The Manager of the REIT shall submit such report to the Trustee of the REIT.
The Framework defines Eligible unitholder(s) and Unitholder Nominee Director and provides for:
- Conditions for Nomination of a Unitholder Nominee Director
- First-time Nomination (after the issuance of this circular).
- Subsequent Nomination by unitholders on an annual basis.
- Review of Unitholding of Eligible Unitholders by the Investment Manager.
- Change in Unitholder Nominee Director or Withdrawal of nomination.
- Vacating of office of a Unitholder Nominee Director.
- Amendment of Trust Deed and Investment Management Agreement.
- Eligibility criteria for Unitholder Nominee Directors.
The link of the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/sep-2023/board-nomination-rights-to-unitholders-of-real-estate-investment-trusts-reits-_76709.html
7. Regulatory Reporting by Alternative Investment Funds (AIFs)
On September 11, 2023, SEBI vide Circular SEBI/HO/AFD/SEC-1/P/CIR/2023/0155 revised reporting format by AIFs.
SEBI has revised the quarterly reporting format for AIFs in consultation with industry associations. The goal is to establish uniform compliance standards, simplify compliance reporting, and support regulatory and developmental objectives.
The revised reporting format shall be hosted by the AIF associations on their website within 2 working days of issuance of this circular. The association shall assist AIFs in understanding the reporting requirements and in clarifying/ resolving and addressing any reporting-related issues.
AIFs are required to submit quarterly reports online through the SEBI Intermediary Portal (SI Portal) within 15 calendar days from the end of each quarter as per the revised format. The reporting format will be periodically reviewed by the association or an AIF Standard Setting Forum in consultation with SEBI. Any revisions to the format will be published on association websites at least 1 month before the end of the quarter.
Starting with the June 2023 quarter, AIFs are encouraged to submit a trial run of the quarterly report in the revised format by October 15, 2023. The report for the quarter ending September 30, 2023, should be submitted by AIF in the revised format by November 15, 2023. Beginning with the quarter ending December 31, 2023, AIFs must submit quarterly reports in the revised format as outlined.
The link of the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/sep-2023/regulatory-reporting-by-aifs_76908.html
8. Redressal of investor grievances through the SEBI Complaint Redressal (SCORES) Platform and linking it to the Online Dispute Resolution platform
On September 20, 2023, SEBI Vide Circular SEBI/HO/OIAE/IGRD/CIR/P/2023/156, issued a Revised Framework for handling and monitoring complaints received through the SCORES platform.
SEBI Complaint Redressal System (SCORES) is a centralized web-based complaint redressal facilitation platform for the benefit of the aggrieved investors, whose grievances remain unresolved against:
- a Listed Company,
- a Registered intermediary, or
- Market Infrastructure institution.
To strengthen the existing investor grievance handling mechanism through SCORES by making the entire redressal process of grievances in the securities market comprehensive by providing a solution that makes the process more efficient by reducing timelines and by introducing auto-routing and auto-escalation of complaints, SEBI notified the Securities and Exchange Board of India (Facilitation of Grievance Redressal Mechanism) (Amendment) Regulations, 2023.
The Revised Framework requires the entities who receive complaints from investors on SCORES, to resolve the complaint and submit an Action Taken Report (ATR) on SCORES within 21 calendar days of receipt of such complaint. The Complaint shall also be simultaneously forwarded to the concerned Designated Bodies who are responsible for ensuring of submission of ATR by the entities.
The Revised Framework for handling and monitoring the complaints received through the SCORES platform is specified in the Annexure of this circular. A List of Designated Bodies has been specified in this circular.
The link of the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/sep-2023/redressal-of-investor-grievances-through-the-sebi-complaint-redressal-scores-platform-and-linking-it-to-online-dispute-resolution-platform_77159.html
9. SEBI Board Meeting dated September 21, 2023
On September 21, 2023, SEBI issued a Press Release No. 21/2023, informing the stakeholders of its Board Meeting in which the following decisions were approved:
a) Flexibility in the framework for Large Corporates (LCs) for meeting incremental financing needs through the issuance of debt securities
The following proposal in the existing LC framework was approved by SEBI to provide flexibility in the framework for LCs to meet their financing needs from the debt market:
- A higher monetary threshold has been specified for defining LCs, thereby reducing the number of entities qualifying as LCs.
- Removal of penalty on LCs that are not able to raise a certain percentage of incremental borrowing from the debt market; and
- Introduction of incentives and moderated disincentives
With the view to facilitate ease of doing business and compliance, SEBI has decided to retain the requirement that compliance with the framework will be met over a contiguous block of 3 years. Further, it has been decided to dispense with the requirement for LCs to file a statement identifying itself as an LC and a statement regarding compliance with the framework.
b) Streamlining the Framework for credit of unclaimed amounts of investors in listed entities other than companies, REITS, and InvITs to the Investor Protection and Education Fund (IPEF) and process of refund from the IPEF
The proposal for transfer of unclaimed amounts lying in escrow account for more than 7 years, to the IPEF for debt-listed entities other than companies under LODR Regulations was approved by the SEBI Board in its meeting held on September 30, 2022. Similarly, the proposal to transfer the unclaimed or unpaid amounts to investors in REITs and InvITs to IPEF was approved by the SEBI Board in its meeting held on December 20, 2022. Accordingly, changes were made in the REITs Regulations and InvIT Regulations.
To streamline the credit of unclaimed amounts and provide for claims of such unclaimed amounts, SEBI has approved amendments to the IPEF Regulations, LODR Regulations, REIT Regulations, and InvIT Regulations with the objective of:
- prescribing a uniform process of claim for such amounts in a streamlined manner for the ease and convenience of investors. Investors may approach the debt-listed entity/ REIT/ InvIT to claim their unclaimed amounts, thereby ensuring minimal disruptions in the claim process for investors.
- creating a regulatory framework for segregation of unclaimed amounts of investors in the IPEF, to facilitate utilization and processing of such amounts in the manner prescribed by the Board.
c) SEBI extends timeline for compliance with enhanced qualification and experience requirements for Investment Advisers
SEBI (Investment Advisers) (Amendment) Regulations, 2020, require individual investment advisers, principal officers of non-individual investment advisers, and persons who are with the investment advisers and associated with investment advice to comply with enhanced qualification and experience requirements by September 30, 2023.
Based on representations received from various stakeholders and given the emerging landscape of the domain of investment advice, it has been decided to allow time up to September 30, 2025, to comply with these requirements.
The link of the aforesaid Press Release is as follows:
https://www.sebi.gov.in/media-and-notifications/press-releases/sep-2023/sebi-board-meeting_77207.html
10. Extension of timelines (i) for nomination in eligible demat accounts and (ii) for submission of PAN, Nomination, and KYC details by physical security holders; and voluntary nomination for trading accounts
On September 26, 2023, SEBI vide Circular SEBI/HO/MIRSD/POD-1/P/CIR/2023/158 extended the timeline for the nomination of eligible demat accounts, submission of details by physical security holders and voluntary nomination for trading accounts.
For trading and demat accounts
SEBI, vide Circular SEBI/HO/MIRSD/RTAMB/CIR/P/2021/601 dated July 23, 2021, stated that trading accounts and demat account which do not have ‘choice of nomination’ shall be frozen by September 30, 2023. Based on the representations received from various other stakeholders, the following has been decided:
- Submission of ‘choice of nomination’ for trading accounts has been made voluntary as a step towards ease of doing business;
- With respect to demat accounts, it has been decided to extend the last date for submission of ‘choice of nomination’ to December 31, 2023.
For physical security holders
With respect to physical securities, SEBI, vide circular SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2023/37 dated March 16, 2023, stated that the folios of physical security holders shall be frozen if PAN, Nomination, Contact details, Bank A/c details and Specimen signature are not submitted by the holders by September 30, 2023.
Based on the representations received from investors, Registrars Association of India and various other stakeholders, it has been decided to extend the last date for submission of PAN, Nomination, Contact details, Bank A/c details and Specimen signature for their corresponding folio numbers to December 31, 2023.
This circular shall come into effect immediately in supersession of relevant provisions contained in various circulars issued by SEBI including Master Circulars issued for Stock Brokers and Registrars to an Issue and Share Transfer Agents dated May 17, 2023.
The link of the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/sep-2023/extension-of-timelines-i-for-nomination-in-eligible-demat-accounts-and-ii-for-submission-of-pan-nomination-and-kyc-details-by-physical-security-holders-and-voluntary-nomination-for-trading-accou-_77320.html
11. Master Circular for Merchant Bankers Registered with SEBI
On September 26, 2023, SEBI vide Circular SEBI/HO/MIRSD/POD-1/P/CIR/2023/158 issued a Master Circular for Merchant Bankers registered with SEBI.
In order to enable the stakeholders to have access to all circulars with respect to Merchant Bankers in one place, a Master Circular has been prepared by SEBI. With the issuance of this Master Circular, all directions/instructions contained in the circulars listed in the Appendix to this Master Circular shall stand rescinded to the extent they relate to the Merchant Bankers.
The link of the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/master-circulars/sep-2023/master-circular-for-merchant-bankers_77368.html
12. Nomination for Mutual Fund Unit Holders – Extension of timelines
Earlier SEBI vide its circular dated June 15, 2022 read with circulars dated July 29, 2022 and March 28, 2023 had prescribed the requirement for nomination/ opting out of nomination for all the existing individual unit holder(s) holding mutual fund units either solely or jointly, by September 30, 2023, failing which the folios shall be frozen for debits.
However, basis the representations received from the market participants, SEBI on September 27, 2023, vide Circular SEBI/HO/IMD/IMD-I POD1/P/CIR/2023/160, extended the effective date of provision for freezing of folios from September 30, 2023 to January 01, 2024.
AMCs and RTAs shall encourage the unit holder(s) to fulfil the requirement for nomination/ opting out of nomination by sending a communication on fortnightly basis by way of emails and SMS to all such unit holder(s) who are not in compliance with the requirement of nomination. The communication shall provide guidance by which the unit holder(s) can provide nomination or opt out of nomination.
The link of the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/sep-2023/nomination-for-mutual-fund-unit-holders-extension-of-timelines_77453.html
13. Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Fourth Amendment) Regulations, 2023 (SEBI (LODR)(Fourth Amendment) Regulations, 2023)
On September 19, 2023, SEBI vide Notification No. SEBI/LAD-NRO/GN/2023/151 notified the SEBI (LODR)(Fourth Amendment) Regulations, 2023 (“Amendment Regulations”), and amended the SEBI (LODR) Regulations, 2015 (“the Regulations”).
The effective date of the amendments shall be September 19, 2023.
SEBI vide the Amendment Regulations inserted new Regulation 62A in the Regulations.
The Regulation 62A provides for Listing of subsequent issuances of non-convertible debt securities (NCDs) by listed entities whose NCDs are listed as below:
(a) A listed entity whose NCDs are listed shall mandatorily list all NCDs proposed to be issued on or after January 01, 2024 on the stock exchange(s).
(b) A listed entity whose subsequent issues of Unlisted NCDs made on or before December 31, 2023 and outstanding as on December 31, 2023 may list the said Unlisted NCDs on the stock exchange(s);
(c) A listed entity that proposes to list any of its NCDs on the stock exchange(s) on or after January 1, 2024, shall list all outstanding Unlisted NCDs previously issued on or after January 1, 2024, on the stock exchange(s) within 3 months from the date of the listing of the NCDs proposed to be listed.
No listed entity shall be required to list the following securities:
(a) Bonds issued under section 54EC of the Income Tax Act, 1961;
(b) NCDs issued pursuant to an agreement entered into between the listed entity of such securities and multilateral institutions;
(c) NCDs issued pursuant to an order of any court or Tribunal or regulatory requirement as stipulated by a financial sector regulator namely, the Board, Reserve Bank of India, Insurance Regulatory and Development Authority of India or the Pension Fund and Regulatory Development Authority.
The securities issued by the listed entity under clauses (a) and (b) above) shall be locked in and held till maturity by the investors and shall be unencumbered.
A listed entity proposing to issue securities under clauses (a), (b) and (c) above shall disclose to the stock exchange(s) on which its NCDs are listed, all the key terms of such NCDs, including embedded options, security offered, interest rates, charges, commissions, premium (by any name called), period of maturity and such other details as may be required to be disclosed by SEBI from time to time.
The link of the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/regulations/sep-2023/securities-and-exchange-board-of-india-listing-obligations-and-disclosure-requirements-fourth-amendment-regulations