Amendments in the Securities law
SEBI Updates August 2024
1. Amendment to Circular for mandating additional disclosures by FPIs that fulfill certain objective criteria
SEBI vide Circular SEBI/HO/AFD/AFD-POD-2/P/CIR/2024/104 dated August 01, 2024, introduced amendments to the disclosure requirements for Foreign Portfolio Investors (FPIs). The modification aims to streamline compliance for certain categories of FPIs, specifically university funds and related endowments. This Circular shall be effective immediately. The recent circular introduces notable amendments regarding disclosure requirements:
A. University Funds and University-related Endowments that are registered or eligible as Category-I FPIs are now exempt from certain additional disclosure requirements, subject to fulfillment of the following conditions:
a. Indian equity AUM being less than 25% of global AUM
b. Global AUM being more than INR 10,000 crore equivalent
c. Appropriate return/filing to the respective tax authorities in their home jurisdiction to evidence the nature of a non-profit organization exempt from tax.
B. The eligible jurisdictions for the exemption granted to University Funds and University-related Endowments shall be as specified by SEBI from time to time, in consultation with the pilot Custodians and DDP Standards Setting Forum, through the Standard Operating Procedure.
The link to the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/aug-2024/amendment-to-circular-for-mandating-additional-disclosures-by-fpis-that-fulfil-certain-objective-criteria_85371.html
2. SEBI (Mutual Funds) (Second Amendment) Regulations, 2024
SEBI vide Notification SEBI/LAD-NRO/GN/2024/197 dated August 1, 2024, issued SEBI (Mutual Funds) (Second Amendment) Regulations, 2024, modifying the SEBI (Mutual Funds) Regulations, 1996.
A new definition is inserted which states that market abuse includes manipulative, fraudulent, and unfair trade practices that may contravene Section 12A of the SEBI Act or any of the provisions of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 or SEBI (Prohibition of Insider Trading) Regulations, 2015.
Asset Management Companies (AMCs) are required to establish an institutional mechanism for the identification and deterrence of potential market abuse including front-running and fraudulent transactions in securities. Additionally, the Chief Executive Officer, Managing Director, or equivalent, along with the Chief Compliance Officer, will be responsible and accountable for these compliance measures. AMCs must also establish, implement, and maintain a documented whistleblower policy providing confidential reporting channels for employees, directors, trustees, and other stakeholders to raise concerns about suspected fraudulent, unfair, or unethical practices, violations of regulatory or legal requirements, or governance vulnerability and protection for whistleblowers.
Furthermore, these regulations specify that face-to-face communications including out-of-office interactions need not be recorded.
The link to the aforesaid Notification is as follows:
https://egazette.gov.in/(S(oq2yvuqnqqvodhoiziwcuoo2))/ViewPDF.aspx
3. SEBI (Alternative Investment Funds) (Fourth Amendment) Regulations, 2024of Arrangements
SEBI vide Notification SEBI/LAD-NRO/GN/2024/198 dated August 05, 2024, issued the Fourth Amendment to the SEBI (Alternative Investment Funds) Regulations, 2012.
The requirement for funds to meet day-to-day operational needs as stated in regulation 3(4)(b) concerning registration of AIF is omitted.
Large value funds for accredited investors can extend their tenure up to 5 years with approval from 2/3rd of the unit holders, under Regulation 13 concerning tenure. However, the extension in tenure of any existing scheme of a large value fund for accredited investors shall be subject to such conditions as may be specified by the SEBI from time to time.
Regulation 16(1)(c) with respect to conditions of Category I AIFs is substituted and now states that Category I AIFs cannot borrow funds directly or indirectly or engage in any leverage to make investments or otherwise, except for borrowing funds to meet temporary funding requirements and day-to-day operational requirements for up to 30 days, on not more than four occasions in a year and not more than 10% of the investable funds and subject to such conditions as may be specified by the SEBI from time to time. Category I AIF can create an encumbrance on equity of the investee company, which is in the business of development, operation, or management of projects in any of the infrastructure, only for borrowing by such investee company.
Regulation 17(1)(c) with respect to conditions of Category II AIFs is substituted and now states that Category II AIFs cannot borrow funds directly or indirectly or engage in any leverage to make investments or otherwise, except for borrowing funds to meet temporary funding requirements and day-to-day operational requirements for up to 30 days, on not more than four occasions in a year and not more than 10% of the investable funds and subject to such conditions as may be specified by the SEBI from time to time. Category II AIF can create an encumbrance on equity of the investee company, which is in the business of development, operation, or management of projects in any of the infrastructure, only for borrowing by such investee company.
The link to the aforesaid Notification is as follows:
https://egazette.gov.in/(S(oq2yvuqnqqvodhoiziwcuoo2))/ViewPDF.aspx
4. Institutional mechanism by Asset Management Companies for identification and deterrence of potential market abuse including front-running and fraudulent transactions in securities
SEBI vide Circular SEBI/HO/IMD/IMD-PoD-1/P/CIR/2024/107 dated August 05, 2024, directed all Asset Management Companies (AMCs) to establish an institutional mechanism to detect and deter market abuse, including front-running and fraudulent transactions in securities.
Following consultations with stakeholders, including the Mutual Funds’ Advisory Committee and a public consultation, the SEBI (Mutual Funds) Regulations, 1996 were amended to mandate this requirement. AMCs are required to implement enhanced surveillance systems, internal control procedures, and escalation processes to monitor and address misconduct.
The mechanism shall ensure the following:
a. Accountability
b. Alert-based surveillance mechanism
c. Processing of alerts
d. Standard operating procedure
e. Action on suspicious alerts
f. Escalation process
g. Whistleblower policy
h. Periodic review
For the effective functioning of institutional mechanisms, the stock exchanges and depositories shall develop systems, in consultation with AMFI, to enable data sharing with AMCs. AMCs shall report all examined alerts to SEBI along with action taken, in the Compliance Test Report (‘CTR’) and the Half-yearly Trustee Report (‘HYTR’).
To ensure uniform implementation of the abovementioned institutional mechanism across the industry, AMFI in consultation with SEBI, shall prescribe the detailed implementation standards within 15 days from the date of this circular. The detailed implementation standards issued by AMFI shall mandatorily be followed by all AMCs.
The link to the aforesaid Circular is as follows:
SEBI | Institutional mechanism by Asset Management Companies for identification and deterrence of potential market abuse including front-running and fraudulent transactions in securities
5. Consultation Paper on Streamlining the process and reduction in timelines of Bonus Issue
SEBI issued a Consultation Paper proposing to streamline and reduce timelines of bonus issues enabling T+2 trading of shares post record date (T Day).
The existing provision SEBI (Issue of Capital and disclosure requirement) Regulation 2018, states that a bonus issue must be implemented within 15 days from board approval. If shareholders’ approval is needed, the bonus issue must be implemented within 2 months from the board meeting decision. This means that ICDR regulations have prescribed a timeline for the implementation of the bonus issue.
However, the ICDR Regulations do not specify timelines for crediting bonus shares and making them available for trading after the record date, leading to non-uniformity w.r.t. timelines in which shares are credited and made available for trading in bonus issue.
Hence it is proposed to prescribe specific timelines for trading of such bonus shares i.e. T+2 which means shares will be available for trading 2 days after the record date. SEBI aims to standardize the process across all issuers, ensuring that all bonus shares are credited and made available for trading within the same timeframe. The consultation paper also proposes operational procedures with regard to bonus issues.
The link to the aforesaid Consultation Paper is as follows:
https://www.sebi.gov.in/reports-and-statistics/reports/aug-2024/consultation-paper-on-streamlining-the-process-and-reduction-in-timelines-of-bonus-issue-enabling-t-2-trading-of-shares-post-record-date-where-t-being-record-date-_85466.html
6. Valuation of Additional Tier 1 Bonds (“AT-1 Bonds”)
SEBI vide Circular SEBI/HO/IMD/PoD1/CIR/P/2024/106 dated August 05, 2024, addressed the valuation of Additional Tier 1 (AT-1) bonds by mutual funds.
Following a report from the National Financial Reporting Authority (NFRA), which observed that AT-1 bonds typically trade at prices closer to their Yield-to-call (YTC) basis, SEBI has decided to align with NFRA’s recommendation for market-based measurement under Ind AS 113. Henceforth, mutual funds must value AT-1 bonds based on YTC, adjusted for appropriate risk spreads. NFRA’s recommendation specifically addresses the valuation under Ind AS 113, without extending to the issue of deemed maturity dates for other purposes.
The link to the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/aug-2024/valuation-of-additional-tier-1-bonds_85470.html
7. Amendment to Master Circular for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) dated May 15, 2024 – Board nomination rights to unitholders of REITs and InvITs
SEBI vide Circular SEBI/HO/DDHS/DDHS-PoD-2/P/CIR/2024/108 and SEBI/HO/DDHS/DDHS-PoD-2/P/CIR/2024/109 dated August 06, 2024 amended the Master Circular for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), originally dated May 15, 2024, to provide clarity on the board nomination rights of REIT and InvIT unitholders.
According to Paragraph 18.2.2(b) of Chapter 18, eligible unitholders can nominate one Unitholder Nominee Director if their unitholding exceeds a specified threshold. However, if an entity already has the right to nominate a director as a shareholder or lender to the Manager or the REIT, they cannot nominate a director as a unitholder.
According to Paragraph 22.3.1(b) of Chapter 22, eligible unitholders can nominate one Unitholder Nominee Director if their unitholding exceeds a specified threshold. However, if an entity already has the right to nominate a director as a shareholder or lender to the Investment Manager or the InvIt, they cannot nominate a director as a unitholder.
Market participants requested clarification on the overlap of nomination rights for unitholders who are also lenders. To address this, SEBI, based on industry feedback and the Hybrid Securities Advisory Committee (HySAC) recommendation, added a proviso stating that the restriction does not apply if the nomination right is available under Regulation 15(1)(e) of the SEBI (Debenture Trustees) Regulations, 1993.
The link to the aforesaid Circular for REIT is as follows:
https://www.sebi.gov.in/legal/circulars/aug-2024/amendment-to-master-circular-for-real-estate-investment-trusts-reits-dated-may-15-2024-board-nomination-rights-to-unitholders-of-reits_85493.html
The link to the aforesaid Circular for InvIT is as follows:
https://www.sebi.gov.in/legal/circulars/aug-2024/amendment-to-master-circular-for-infrastructure-investment-trusts-invits-dated-may-15-2024-board-nomination-rights-to-unitholders-of-invits_85491.html
8. Consultation Paper on Review of Regulatory Framework for Investment Advisers and Research Analysts
SEBI issued a consultation paper to review and propose changes to the regulatory framework governing Investment Advisers (IAs) and Research Analysts (RAs). The objective is to simplify and reduce the registration and compliance costs for IAs and RAs, aligning with the evolving market landscape. Key proposals include relaxing minimum qualification requirements, eliminating experience prerequisites, and removing net worth requirements in favor of a deposit system.
The paper also suggests allowing dual registration as both IA and RA and proposes a new category for part-time IAs/RAs. These changes aim to increase the number of registered professionals, enhance service availability, and maintain investor confidence. The review process is part of a broader effort to reduce regulatory burdens and improve the investment advisory and research sectors.
The link to the aforesaid Consultation Paper is as follows:
https://www.sebi.gov.in/reports-and-statistics/reports/aug-2024/consultation-paper-on-review-of-regulatory-framework-for-investment-advisers-and-research-analysts_85509.html
9. Consultation Paper on investment by Foreign Investors through Segregated Portfolios/ P-notes/ Offshore Derivative Instruments
SEBI released a consultation paper seeking public comments on proposed regulations for investments made by foreign investors via Offshore Derivative Instruments (ODIs) and segregated portfolios of Foreign Portfolio Investors (FPIs).
The paper aims to address regulatory gaps and arbitrage opportunities under the current SEBI (Foreign Portfolio Investors) Regulations, 2019. It proposes applying additional disclosure requirements directly to ODI subscribers and FPIs with segregated portfolios to enhance transparency and compliance.
The consultation paper proposes new monitoring mechanisms to ensure disclosure and position limits compliance, particularly in cases where ODI issuers or FPIs with segregated portfolios might circumvent existing regulations. The objective is to mitigate potential misuse of the FPI route to avoid regulatory obligations such as substantial acquisition disclosures and maintaining minimum public shareholding in listed companies.
The link to the aforesaid Consultation Paper is as follows:
https://www.sebi.gov.in/reports-and-statistics/reports/aug-2024/consultation-paper-on-investment-by-foreign-investors-through-segregated-portfolios-p-notes-offshore-derivative-instruments_85510.html
10. Consultation Paper on Draft Circular for “Reporting by Foreign Venture Capital Investors (FVCI)”
SEBI released a consultation paper proposing revisions to the reporting format for Foreign Venture Capital Investors (FVCIs). As per Regulation 13(1) of the FVCI Regulations, 2000, FVCIs must provide quarterly reports to SEBI in the format specified with respect to their venture capital activities. The format of the report was specified vide SEBI circular dated January 12, 2010.
The current reporting format, established by a 2010 SEBI circular, is being revised in light of recent amendments to the FVCI Regulations. The consultation paper invites public feedback on the draft by August 29, 2024, and provides detailed instructions for submission through SEBI’s online form. Key changes include a revised reporting format, mandatory online submission via the SEBI intermediary portal (SI Portal), and an emphasis on timely and accurate reporting. The new format will apply to reports for the quarter ending September 30, 2024, and beyond.
The link to the aforesaid Consultation Paper is as follows:
https://www.sebi.gov.in/reports-and-statistics/reports/aug-2024/consultation-paper-on-draft-circular-for-reporting-by-foreign-venture-capital-investors_85551.html
11. Public Consultation on Draft Circular on Periodic Reporting Format for Research Analysts and Proxy Advisers
SEBI issued a consultation paper for public comments, proposing a standardized periodic reporting format for Research Analysts (RAs) and Proxy Advisers (PAs).
As per Regulation 24(4) of the SEBI (Research Analysts) Regulations, 2014, RAs are required to submit information and reports to SEBI as specified. SEBI has recognized the Research Analyst Administration and Supervisory Body (RAASB) to oversee the administration and supervision of these entities. Since PAs are also registered under the same regulations, they are subject to similar reporting requirements.
The draft circular outlines a half-yearly reporting format for RAs and PAs, covering periods ending on September 30 and March 31 of each financial year. RAASB is tasked with implementing this reporting system and ensuring compliance. The circular, once finalized, will be applicable immediately to ensure the protection of investor interests and the proper regulation of the securities market.
The link to the aforesaid Consultation Paper is as follows:
https://www.sebi.gov.in/reports-and-statistics/reports/aug-2024/public-consultation-on-draft-circular-on-periodic-reporting-format-for-research-analysts-and-proxy-advisers_85603.html
12. Master Circular for Stock Brokers
SEBI vide Circular SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2024/110 dated August 09, 2024, issued a Master Circular for Stock Brokers.
SEBI, from time to time, has been issuing various circulars/directions to Stock Brokers. To enable the users to have access to the provisions of the applicable circulars in one place, SEBI has issued this Master Circular to include all relevant circulars that were issued till date i.e., August 09, 2024. The instant Master Circular supersedes the Master Circular for Stock Brokers dated May 22, 2024.
The link to the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/master-circulars/aug-2024/master-circular-for-stock-brokers_85605.html
13. Consultation Paper on expanding the scope of Sustainable Finance Framework in the Indian Securities Market
SEBI issued a consultation paper to seek comments from the public on the proposals related to expanding the scope of sustainable finance framework in the Indian securities market.
It is proposed that for raising sustainable finance, in addition to existing green debt securities, issuers may also raise funds through the issuance of social bonds, sustainable bonds, and sustainability-linked bonds (together with green debt securities will be termed ESG Debt Securities), and will be in accordance with such international frameworks as adapted or adjusted to suit Indian requirements that are specified by SEBI from time to time. To give effect to this proposal suitable amendments would be made to the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021.
Further, it is proposed to suitably amend the SEBI (Issue and Listing of Securitised Debt Instruments and Security Receipts) Regulations, 2008 to introduce the framework for “Sustainable Securitised Debt Instruments” i.e. instruments which have sustainable finance credit facilities as the underlying debt, and satisfies such international frameworks (as adapted or adjusted to suit Indian requirements) that are specified by SEBI from time to time.
The link to the aforesaid Consultation Paper is as follows:
https://www.sebi.gov.in/reports-and-statistics/reports/aug-2024/consultation-paper-on-expanding-the-scope-of-sustainable-finance-framework-in-the-indian-securities-market_85691.html
14. Consultation Paper on the introduction of a Liquidity Window Facility for Investors in debt securities through the Stock Exchange Mechanism
SEBI issued a consultation paper to solicit comments from the public on the draft circular titled “Introduction of a Liquidity Window Facility for Investors in debt securities through Stock Exchange Mechanism” placed in Annexure – A to the Circular.
The link to the aforesaid Consultation Paper is as follows:
https://www.sebi.gov.in/reports-and-statistics/reports/aug-2024/introduction-of-liquidity-window-facility-for-investors-in-debt-securities-through-stock-exchange-mechanism_85689.html
15. Consultation paper on measures towards Ease of Doing Business and streamlining compliance requirements for Non-Convertible securities – review of LODR Regulations
SEBI issued a consultation paper to seek comments from the public on the proposals related to the Ease of Doing Business (EoDB) for non-convertible securities.
The following is proposed:
a. Alignment of the provision regarding approval and authentication of financial results for entities having listed non-convertible securities with that for equity-listed entities.
b. Alignment of the provision regarding disclosure of fraud/default in respect of price-sensitive information for entities having listed non-convertible securities with that of equity-listed entities under Schedule III.
c. Reduction in the timeline for intimation of a record date to Stock Exchanges by an entity having listed non-convertible securities to at least 3 working days from at least 7 working days.
d. Filing of all disclosures by a listed entity (having listed nonconvertible securities) with Stock Exchanges to be in XBRL format in line with the provision specified for equity-listed entities.
e. Relaxation from the ISIN restriction limit for unlisted ISINs (outstanding as on December 31, 2023) in case such ISINs are listed.
The link to the aforesaid Consultation Paper is as follows:
https://www.sebi.gov.in/reports-and-statistics/reports/aug-2024/consultation-paper-on-measures-towards-ease-of-doing-business-and-streamlining-compliance-requirements-for-non-convertible-securities-review-of-lodr-regulations_85690.html
16. Consultation paper on streamlining disclosure in respect of appointment of Debenture Trustee (DT) in the offer document
SEBI issued a consultation paper to seek comments from the public on the suggestions of the Working Group for Ease of Doing Business (EoDB) for DTs.
It is proposed to replace the term ‘consent letter’ with the term ‘Debenture Trustee Agreement’ (DTA) in clause 3.3.32 of Schedule I of Issue and Listing of Non-Convertible Securities Regulations, 2021. The said debenture trustee agreement (DTA) is to be made accessible to investors using the ‘QR code’ in the offer document.
The link to the aforesaid Consultation Paper is as follows:
https://www.sebi.gov.in/reports-and-statistics/reports/aug-2024/consultation-paper-on-streamlining-disclosure-in-respect-of-appointment-of-debenture-trustee-dt-in-the-offer-document_85692.html
17. SEBI (Research Analysts) (Second Amendment) Regulations, 2024
SEBI vide Notification SEBI/LAD-NRO/GN/2024/199 dated August 19, 2024, introduced amendments to the SEBI (Research Analysts) Regulations, 2014, under its notification dated August 19, 2024. These changes, known as the SEBI (Research Analysts) (Second Amendment) Regulations, 2024, are effective from the date of their publication in the Official Gazette.
Rule 15A has been inserted which states that the Research Analyst is now entitled to charge fees for providing research services from a client including an accredited investor in the manner specified by SEBI.
The link to the aforesaid Notification is as follows:
https://egazette.gov.in/(S(oq2yvuqnqqvodhoiziwcuoo2))/ViewPDF.aspx
18. Modalities for migration of Venture Capital Funds registered under erstwhile SEBI (Venture Capital Funds) Regulations, 1996 to SEBI (Alternative Investment Funds) Regulations, 2012
SEBI vide Circular SEBI/HO/AFD/AFD-POD-1/P/CIR/2024/112 dated August 19, 2024, outlined the migration process for Venture Capital Funds (VCFs) registered under the erstwhile SEBI (Venture Capital Funds) Regulations, 1996, to the SEBI (Alternative Investment Funds) Regulations, 2012.
This Circular allows these funds to transition to AIF Regulations, providing flexibility for managing unliquidated investments post-tenure. VCFs seeking migration must submit their original registration certificate and required information by July 19, 2025. The circular details conditions for schemes with both expired and unexpired liquidation periods. VCFs with unresolved investor complaints are ineligible for migration. Additionally, VCFs that choose not to migrate will face enhanced regulatory reporting or potential regulatory action. SEBI has also mandated the surrender of registration by March 31, 2025, for VCFs that have wound up all schemes or made no new investments. The circular emphasizes compliance responsibilities for VCF managers and trustees, ensuring adherence to SEBI regulations. This move aims to streamline the regulatory framework for investment funds and protect investor interests.
The link to the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/aug-2024/modalities-for-migration-of-venture-capital-funds-registered-under-erstwhile-sebi-venture-capital-funds-regulations-1996-to-sebi-alternative-investment-funds-regulations-2012_85914.html
19. Guidelines for borrowing by Category I and Category II AIFs and maximum permissible limit for extension of tenure by LVFs
SEBI vide circular SEBI/HO/AFD/AFD-POD-1/P/CIR/2024/112 dated August 19, 2024, detailed new guidelines for Category I and II Alternative Investment Funds (AIFs) regarding borrowing and tenure extension for Large Value Funds (LVFs).
To facilitate ease of doing business and provide operational flexibility, Category I and Category II AIFs are allowed to borrow to meet the temporary shortfall in the amount called from investors for making investments in investee companies (drawdown amount). Conditions are provided subject to which Category I and II Alternative Investment Funds (AIFs) can borrow to meet the shortfall in drawdown amount.
All Category I and Category II AIFs to maintain 30 30-day cooling-off period between 2 periods of borrowing as permissible under AIF Regulations. The cooling-off period of 30 days shall be calculated from the date of repayment of the previous borrowing.
SEBI has also revised the maximum tenure extension for LVFs to 5 years, with the consent of 2/3rd of unit holders by value. Existing LVF schemes must align with these new rules by November 18, 2024.
The link to the aforesaid Circular is as follows;
SEBI | Guidelines for borrowing by Category I and Category II AIFs and maximum permissible limit for extension of tenure by LVFs
20. Consultation Paper on Faster Rights Issues with the flexibility of allotment to Selective Investor(s)
SEBI issued a consultation paper to seek comments from the public and other stakeholders on various proposals for enabling faster Rights Issues with the flexibility of allotment to selective investors.
The summary of the proposals recommended by the Primary Market Advisory Committee (PMAC) is as under:
a. Doing away with the current requirement of filing a Draft Letter of Offer (DLoF) with SEBI for issuance of observation.
b. Rationalising the content of the Letter of Offer (LoF) by reducing the current disclosures to contain some of the relevant information regarding the Rights Issue such as the object of the issue, price, record date, entitlement ratio, etc.
c. Reviewing the role of intermediaries involved in the Rights Issue Process.
d. Reducing the timelines involved in the Rights Issue Process.
e. Enabling Allotment to Selective Investors in Rights Issue.
f. Laying down adequate checks and balances.
The link to the aforesaid Consultation Paper is as follows:
https://www.sebi.gov.in/reports-and-statistics/reports/aug-2024/consultation-paper-on-faster-rights-issue-with-flexibility-of-allotment-to-selective-investor-s-_85960.html
21. Cybersecurity and Cyber Resilience Framework (CSCRF) for SEBI Regulated Entities (REs)
SEBI vide circular SEBI/HO/ ITD-1/ITD_CSC_EXT/P/CIR/2024/113 dated August 20, 2024, issued Cybersecurity and Cyber Resilience Framework (CSCRF).
To strengthen the cybersecurity measures in the Indian securities market, and to ensure adequate cyber resiliency against cybersecurity incidents/ attacks, the Cybersecurity and Cyber Resilience Framework (CSCRF) for SEBI REs has been formulated in consultation with the stakeholders.
The CSCRF aims to provide standards and guidelines for strengthening cyber resilience and maintaining robust cybersecurity of SEBI REs. This framework shall supersede existing SEBI cybersecurity circulars, guidelines, advisories, and letters.
The framework provides a structured methodology to implement various solutions for cybersecurity and cyber resiliency. CSCRF highlights the importance of governance and supply chain risk Management and at the same time, it focuses on evolving security guidelines such as data classification and localization, Application Programming Interface (API) security, Security Operations Centre (SOC), and measuring its efficacy, Software Bill of Materials (SBOM), etc.
CSCRF mandates that all REs are required to establish appropriate security monitoring mechanisms through the Security Operation Centre (SOC) and contains provisions concerning various areas such as requirements of IT services, Software as a Service (SaaS) solutions, hosted services, classification of data, audit for software solutions/ applications/ products used by REs, etc.
The link to the aforesaid Circular is as follows:
SEBI | Cybersecurity and Cyber Resilience Framework (CSCRF) for SEBI Regulated Entities (REs)
22. Consultation paper on clarification on the term “pecuniary relationship” of Debenture Trustee (DT) with the issuer as per Regulation 13A of the DT Regulations
SEBI issued a consultation paper to seek comments from the public on the suggestions of the Working Group for Ease of Doing Business (EoDB) for Debenture Trustees (DTs).
Currently, there exists a restriction on the appointment of an entity as a DT who has any pecuniary relationship with the issuer amounting to 2% or more of its gross turnover or total income or ₹50 lakh (or such higher amount as may be prescribed), whichever is lower, during the 2 immediately preceding financial years or during the current financial year.
It is proposed that the pecuniary relationship should exclude remuneration payable to DTs. Further, it is proposed that the issuer shall disclose in the offer document the remuneration/ revenue received by the DT from the issuer in respect of debenture trusteeship services as a percentage of the total remuneration/ revenue received by DT from the said issuer in respect of all services (including services other than the debenture trusteeship services), over the last three financial years.
The link to the aforesaid Consultation Paper is as follows:
https://www.sebi.gov.in/reports-and-statistics/reports/aug-2024/consultation-paper-on-clarification-on-the-term-pecuniary-relationship-of-debenture-trustee-dt-with-the-issuer-as-per-regulation-13a-of-the-dt-regulations_85989.html
23. Amendment to Master Circular for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) dated May 15, 2024 - Review of statement of investor complaints and timeline for disclosure of statement of deviation(s)
SEBI vide Circular SEBI/HO/DDHS/DDHS-PoD-2/P/CIR/2024/115 and SEBI/HO/DDHS/DDHS-PoD-2/P/CIR/2024/114 dated August 22, 2024, amended its Master Circular for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) dated May 15, 2024, to improve ease of doing business related to activities of InvITs and REITs and to align with the provisions of SEBI LODR Regulations.
It is prescribed that the Trustee and the Board of Directors/Governing Body of the Manager shall ensure that all investor complaints are redressed by the Manager on time and statements shall be placed, every quarter, before the Board of Directors/Governing Body of the Manager and the Trustee for review. Further provided that statement of deviation shall also be placed before the Trustee and the Board of Directors/Governing Body of the Manager for review. Pursuant to such review, the statement shall be submitted to the stock exchange. Such submission to the Stock Exchange shall be made along with the submission of financial results.
The link to the aforesaid Circular for REIT is as follows:
SEBI | Amendment to Master Circular for Real Estate Investment Trusts (REITs) dated May 15, 2024 – Review of statement of investor complaints and timeline for disclosure of statement of deviation(s)
The link to the aforesaid Circular for InvIT is as follows:
SEBI | Amendment to Master Circular for Infrastructure Investment Trusts (InvITs) dated May 15, 2024 – Review of statement of investor complaints and timeline for disclosure of statement of deviation(s)
24. SEBI (Depositories and Participants) (Second Amendment) Regulations, 2024
SEBI vide Notification SEBI/LAD-NRO/GN/2024/200 dated August 26, 2024, amended the SEBI (Depositories and Participants) Regulations, 2018. Vide this amendment a new Chapter VIIA is introduced concerning Restriction in dealing with Other Entities.
It states that no depository or its agent shall have any direct or indirect association, with another person who:
a. provide advice or any recommendation, directly or indirectly, in respect of or related to a security or securities, unless the person is registered with or otherwise permitted by SEBI to provide such advice or recommendation; or
b. makes any claim, of returns or performance expressly or impliedly, in respect of or related to a security or securities, unless SEBI has permitted the person to make such a claim.
Association shall mean:
(a) a transaction involving money or money’s worth;
(b) referral of a client;
(c) interaction of information technology systems;
(d) any other association of a similar nature or character.
This sub-regulation shall not apply to an association through a specified digital platform specified by SEBI which has a mechanism in place to take preventive as well as curative action, to the satisfaction of SEBI, to ensure that such a platform is not used for indulging in any activity as referred above.
The link to the aforesaid Notification is as follows:
https://egazette.gov.in/(S(oq2yvuqnqqvodhoiziwcuoo2))/ViewPDF.aspx
25. SEBI Issues Advisory on SME Investments
SEBI on August 28, 2024, issued an advisory to investors, cautioning them against investing in certain Small and Medium Enterprises (SMEs) listed on the SME segment of stock exchanges. In a statement, SEBI noted that some SME companies, after listing, tend to project an unrealistic picture of their operations through public announcements.
These announcements are often followed by corporate actions such as bonus issues, stock splits, and preferential allotments, which can induce investors to purchase these securities. Simultaneously, this provides an opportunity for promoters to offload their holdings at elevated prices. Highlighting the modus operandi of these entities, SEBI has stated that it has passed orders against such companies, which are available on SEBI’s website. The statement urges investors to be cautious and vigilant, advising them not to rely on unverified social media posts or invest based on tips and rumors.
The link to the aforesaid Press Release is as follows:
https://www.sebi.gov.in/media-and-notifications/press-releases/aug-2024/advisory-regarding-investment-in-securities-of-the-companies-listed-on-the-sme-segment-of-stock-exchanges_86205.html
26. Consultation Paper on provisions about the appointment of Public Interest Directors
SEBI issued a consultation paper to seek public comments on various proposals connected with the process adopted by SEBI for the appointment of Public Interest Directors (PIDs) on Stock exchanges, Clearing Corporations, and Depositories (collectively herein referred to as “Market Infrastructure Institutions”), and for improving the ease of doing business for PIDs.
The suggestion relating to the appointment process aims to achieve better shareholder participation in the appointment process of PIDs. For improving ease of doing business for PIDs, the proposals include easing documentation requirements when being considered for PID appointment, allowing payment of fixed stipend to PIDs in addition to sitting fees, and reducing the cooling off period for appointment of PIDs.
The link to the aforesaid Consultation Paper is as follows:
https://www.sebi.gov.in/reports-and-statistics/reports/aug-2024/consultation-paper-on-provisions-pertaining-to-appointment-of-public-interest-directors-_86313.html
27. Consultation Paper on “The facility for Trading in the Secondary Market using UPI Block Mechanism to be mandatorily offered by Qualified Stock Brokers (QSBs) to their clients (ASBA - like facility for secondary market) and other incidental matters”
SEBI issued a consultation paper seeking public feedback on whether the facility of Trading supported by Blocked Amount in the secondary market using a UPI block mechanism (ASBA-like facility) should be mandatorily offered by Qualified Stock Brokers (QSBs) to their clients, viz. individuals and HUFs. This is currently a non-mandatory facility provided by Trading Members.
The proposal also considers whether QSBs should offer a “3-in-1 trading account” as an alternative to the above proposed mandatory offering of an ASBA-like facility. This consultation paper is after a series of discussions held with multiple stakeholders, including Clearing Corporations (CCs), National Payment Corporation of India (NPCI), QSBs, and Banks, with respect to the challenges being faced in the operationalization of the said ASBA-like facility.
The link to the aforesaid Consultation Paper is as follows:
https://www.sebi.gov.in/reports-and-statistics/reports/aug-2024/consultation-paper-on-the-facility-for-trading-in-the-secondary-market-using-upi-block-mechanism-to-be-mandatorily-offered-by-qualified-stock-brokers-qsbs-to-their-clients-asba-like-facility-for-_86226.html
28. Consultation Paper on maintenance of record of mandatory communication by regulated entities
SEBI issued a consultation paper to seek comments from the public and relevant stakeholders on the requirement for the maintenance of records of mandatory communication by the entities regulated by SEBI.
Under the current regulatory regime, the regulated entities of SEBI are mandated to communicate various types of information to numerous stakeholders. This enables a regular and timely disbursal of information to the relevant stakeholders. However, the record of such mandatory communication is required to be maintained only for a limited class of communication.
The link to the aforesaid Consultation Paper is as follows:
https://www.sebi.gov.in/reports-and-statistics/reports/aug-2024/consultation-paper-on-maintenance-of-record-of-mandatory-communication-by-regulated-entities_86309.html
29. Consultation Paper on review of Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992
SEBI issued a consultation paper to seek comments/views/suggestions from the public and other stakeholders on the proposal to amend the Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992 (“MB Regulations”).
The link to the aforesaid Consultation Paper is as follows:
https://www.sebi.gov.in/reports-and-statistics/reports/aug-2024/review-of-securities-and-exchange-board-of-india-merchant-bankers-regulations-1992_86222.html
30. Consultation Paper on the review of the SEBI (Informal Guidance) Scheme, 2003
SEBI issued a Consultation Paper to seek comments from the public on the review of the SEBI (Informal Guidance) Scheme, 2003. This consultation paper proposes changes concerning expanding the scope of the scheme, enhancing the fee levied, and rationalizing various processes.
The link to the aforesaid Consultation Paper is as follows:
https://www.sebi.gov.in/reports-and-statistics/reports/aug-2024/consultation-paper-on-review-of-the-securities-and-exchange-board-of-india-informal-guidance-scheme-2003_86350.html
31. SEBI (Intermediaries) (Amendment) Regulations, 2024
SEBI vide Notification SEBI/LAD-NRO/GN/2024/201 dated August 26, 2024, amended the SEBI (Intermediaries) Regulations, 2008. Vide this amendment a new Chapter IIIA is introduced concerning Restriction in dealing with Other Entities.
It states that no person regulated by the Board or the agent of such a person shall have any direct or indirect association, with another person who:
a. provide advice or any recommendation, directly or indirectly, in respect of or related to a security or securities, unless the person is registered with or otherwise permitted by SEBI to provide such advice or recommendation; or
b. makes any claim, of returns or performance expressly or impliedly, in respect of or related to a security or securities, unless SEBI has permitted the person to make such a claim.
A person regulated by the Board shall mean:
(a) a person registered with SEBI under section 12 of the Act;
(b) an asset management company of a mutual fund registered with SEBI;
(c) the investment manager of an alternative investment fund or infrastructure investment trust registered with SEBI;
(d) manager of a real estate investment trust registered with SEBI.
Association shall mean:
(a) a transaction involving money or money’s worth;
(b) referral of a client;
(c) interaction of information technology systems;
(d) any other association of a similar nature or character.
This sub-regulation shall not apply to an association through a specified digital platform specified by SEBI which has a mechanism in place to take preventive as well as curative action, to the satisfaction of SEBI, to ensure that such a platform is not used for indulging in any activity as referred above.
The link to the aforesaid Notification is as follows:
https://egazette.gov.in/(S(oq2yvuqnqqvodhoiziwcuoo2))/ViewPDF.aspx
32. SEBI Contracts (Regulation) (Stock Exchanges and Clearing Corporations) (Fourth Amendment) Regulations, 2024
SEBI vide Notification SEBI/LAD-NRO/GN/2024/202 dated August 26, 2024, amended the SEBI Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018. Vide this amendment a new Chapter VIA is introduced concerning Restriction in dealing with Unregulated Entities.
It states that no recognized stock exchange or recognized clearing corporation or their agent shall have any direct or indirect association, with another person who:
a. provide advice or any recommendation, directly or indirectly, in respect of or related to a security or securities, unless the person is registered with or otherwise permitted by SEBI to provide such advice or recommendation; or
b. makes any claim, of returns or performance expressly or impliedly, in respect of or related to a security or securities, unless SEBI has permitted the person to make such a claim.
Association shall mean:
(a) a transaction involving money or money’s worth;
(b) referral of a client;
(c) interaction of information technology systems;
(d) any other association of a similar nature or character.
This sub-regulation shall not apply to an association through a specified digital platform specified by SEBI which has a mechanism in place to take preventive as well as curative action, to the satisfaction of SEBI, to ensure that such a platform is not used for indulging in any activity as referred above.
The link to the aforesaid Notification is as follows:
https://egazette.gov.in/(S(hq4vptt1zyqqq3wdraqbinmg))/ViewPDF.aspx
33. Introduction of additional eligibility criteria for listing on NSE EMERGE.
NSE vide Circular Ref. No: 03 /2024 dated August 22, 2024, addressed to participants provided that SMEs desirous of listing its securities on NSE Emerge are required to fulfil the below additional eligibility criteria to be considered for in-principal approval by the Exchange.
Starting from September 1st, 2024, The Companies filing Draft Red Herring Prospectuses (DRHPs) must have positive Free Cash Flow to Equity (FCFE) for at least 2 out of the last 3 financial years. This requirement will apply to all DRHPs filed from that date, with figures taken from audited balance sheets. All other criteria remain unchanged. The methodology for calculating FCFE is detailed in the below mentioned Annexure.
Annexure
Methodology for computing FCFE
FCFE = Cash flow from Operations – Purchase of Fixed Assets + Net Borrowings – Interest x (1-T)
Wherein
Cash flow from operations will be determined as
Cash Generated from Operating Activities – Income Tax paid (if any) i.e. Net Cash flow from Operating Activities.
Purchase of Fixed Assets will be determined as
Purchase of Property, plant, and equipment (PPE) (including Capital Work in Progress (CWIP)) – Sale proceeds of PPE, CWIP (if any) + Capital Advances (if any).
Net Borrowings will be determined as
Proceeds from Long-Term Borrowings – Repayments of Long-Term Borrowings + Proceeds from Short-Term Borrowings – Repayments of Short-term Borrowings.
Interest x (1-T) will be determined as
Interest Expense on Total (ie. Long term as well as short term) borrowings x (1 – T#)
# T being Effective Tax Rate for the company
Effective Tax Rate calculated as [1-(PAT/PBT)]
The link to the aforesaid Notification is as follows:
https://nsearchives.nseindia.com/content/circulars/SME63532.pdf
34. Exemption under Rule 19A of Securities Contract (Regulation) Rules. 1957.
BSE vide Notice No. 20240801-51 dated August 01, 2024, addressed to Public Listed entities that as per the directive from the Ministry of Finance, dated July 19, 2024, provides that every listed public sector company with public shareholding below 25% is granted an exemption until August 1, 2026. This exemption allows these companies time to comply with the requirement to increase their public shareholding to at least 25%, as stipulated in Rule 19A of the Securities Contract (Regulation) Rules, 1957 (SCRR, 1957).
The link to the aforesaid Circular is as follows:
https://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page=20240801-51