360 Degree View- Watch around
360 Degree View may 2024
1. Portfolio Managers: facilitating ease in the digital on-boarding process for clients and enhancing transparency through disclosures
SEBI vide Circular SEBI/HO/IMD/IMD-PoD-1/P/CIR/2024/35 dated May 02, 2024, addressed key concerns regarding the digital onboarding process for clients and aims to enhance transparency through disclosures.
a. Ease in the digital on-boarding process for clients of Portfolio Managers– provision shall be applicable from October 01, 2024
While onboarding a client, the Portfolio Manager shall ensure that:
- the client has understood the structure for fees and charges.
- the new client has separately signed the annexure on fees and charges and added a note, that they have understood the structure for fees and charges, in the following manner:
- handwritten, in case the client is on-boarded through physical mode.
- typed using the keyboard or written electronically using fingers/a stylus pen, in case the client is on-boarded through digital mode.
b. Fee Calculation Tool
Portfolio Manager shall provide a fee calculation tool to all clients that highlights various fee options with multi-year fee calculations. The link to access the said tool shall be provided in advance to all new clients, on-boarded on or after October 01, 2024.
c. Additional fee disclosures
Additional fee disclosures will be integrated into the PMS-client agreement for new clients onboarded after October 1, 2024. These disclosures include one-year and multi-year fee illustrations covering different scenarios, such as changes in the portfolio value, aligned with the high watermark principle.
d. Periodic Report– provision shall be applicable from October 01, 2024
Periodic reports provided to clients shall now include an annexure detailing the fee calculation.
e. Most Important Terms and Conditions (MITC) document
To facilitate the ease of understanding of the critical aspects of the Portfolio Manager-Client relationship, the Portfolio Manager shall additionally provide to its client with an MITC document, which the client shall duly acknowledge. The Portfolio Manager shall ensure compliance with the same for new clients, on-boarded on or after October 01, 2024. For existing clients, the MITC shall be informed to the clients via email or any other suitable mode of communication (which can be preserved) by January 01, 2025.
The link to the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/may-2024/portfolio-managers-facilitating-ease-in-digital-on-boarding-process-for-clients-and-enhancing-transparency-through-disclosures_83147.html
2. Facilitating collective oversight of distributors for Portfolio Management Services (PMS) through the Association of Portfolio Managers in India (APMI)
SEBI vide Circular SEBI/HO/IMD/IMD-PoD-1/P/CIR/2024/32 dated May 02, 2024, to facilitate collective oversight of PMS distributors at the industry level, provided that any person or entity involved in the distribution of portfolio management services shall obtain registration with APMI. This circular shall be effective from January 01, 2025. APMI is required to issue the criteria for registration of distributors by July 01, 2024.
Portfolio Managers shall ensure that any person or entity engaged in the distribution of its services has obtained registration with APMI, in accordance with the criteria laid down by APMI.
The link to the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/may-2024/facilitating-collective-oversight-of-distributors-for-portfolio-management-services-pms-through-apmi_83146.html
3. Framework for administration and supervision of Research Analysts and Investment Advisers
SEBI vide Circular SEBI/HO/MIRSD/MIRSD-SEC-3/P/CIR/2024/34 dated May 02, 2024, announced the framework for administration and supervision of research analysts (RAs) and investment advisers (IAs) by the proposed new supervisory bodies. This circular shall be effective from July 25, 2024.
SEBI on April 26, 2024, notified that a recognized stock exchange may undertake the activities of administration and supervision over specified intermediaries. Accordingly, stock exchanges can now be recognized as Research Analyst Administration and Supervisory Body (RAASB) and Investment Adviser Administration and Supervisory Body (IAASB) for administration and supervision of RAs and IAs, respectively.
For recognition of RAASB and IAASB, an entity must have a minimum of 15 years of existence as a recognized stock exchange. Further, the stock exchange must have a minimum net worth of Rs 200 crore, have nationwide terminals, an investor grievance redressal mechanism including an Online Dispute Resolution Mechanism and capacity for investor service management gauged through the reach of Investor Service Centers in at least 20 cities.
The link to the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/may-2024/framework-for-administration-and-supervision-of-research-analysts-and-investment-advisers_83145.html
4. Entities allowed to use e-KYC Aadhaar Authentication services of UIDAI in Securities Market as sub-KUA
The Master Circular on Know Your Client (KYC) norms for the securities market dated October 12, 2023, inter alia has detailed the provision for the adaptation of the Aadhaar-based e-KYC process and e-KYC Authentication facility for Resident Investors under section 11A of the Prevention of Money Laundering Act, 2002 in the securities market as sub-KUA and onboarding process of sub-KUA by UIDAI.
Department of Revenue, Ministry of Finance (DoR-MoF) has from time to time issued gazette notifications notifying entities, to undertake the Aadhaar authentication service of UIDAI under Section 11A of the Prevention of Money Laundering Act, 2002.
In this regard, DoR-MoF, vide Gazette Notification S.O. 1863(E) dated April 30, 2024, notified one entity that is permitted to use the Aadhaar authentication services of UIDAI under section 11A of the Prevention of Money-laundering Act, 2002.
SEBI, vide Circular SEBI/HO/MIRSD/SECFATF/P/CIR/2024/36 dated May 06, 2024, prescribed that the above-mentioned entity shall follow the process as detailed in SEBI circular dated October 12, 2023, and as may be prescribed by UIDAI from time to time. The KUAs shall facilitate the onboarding of the entity as sub-KUA to provide services of Aadhaar authentication with respect to KYC.
The link to the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/may-2024/entities-allowed-to-use-e-kyc-aadhaar-authentication-services-of-uidai-in-securities-market-as-sub-kua_83178.html
5. Periodic reporting format for Investment Advisers
SEBI, vide Circular SEBI/HO/MIRSD/MIRSD-PoD-2/P/CIR/2024/38 dated May 07, 2024, issued a standardized format for periodic reporting for Investment Advisers (IAs). This Circular is applicable with immediate effect.
In terms of Regulation 15(12) of SEBI (Investment Advisers) Regulations, 2013 (“IA Regulations”), IAs are required to furnish to SEBI, information and reports as may be specified by SEBI from time to time. SEBI has recognized the Investment Advisers Administration and Supervisory Body (“IAASB”) for the administration and supervision of IAs under regulation 14 of the IA Regulations. At present, the IAASB has been seeking reports from IAs on an ad-hoc basis.
It is decided to specify a standardized format for periodic reporting for IAs. IAs shall submit periodic reports for half-yearly periods ending on September 30 and March 31 of every financial year.
IAs shall submit the periodic report for the half-yearly period ending on March 31, 2024, to IAASB within 15 days from the date of issuance of the circular by IAASB. For the subsequent half-yearly periods, IAs shall submit periodic reports within 7 working days from the end of the half-yearly period for which details are to be furnished.
The format of the report is provided as an Annexure to the Circular.
The link to the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/may-2024/periodic-reporting-format-for-investment-advisers_83230.html
6. Master Circular for Alternative Investment Funds (AIF)
SEBI vide Circular SEBI/HO/AFD-1/AFD-1-PoD/P/CIR/2024/39 dated May 07, 2024, issued a Master Circular related to Alternative Investment Funds (AIFs).
The provisions of all circulars issued until March 31, 2024, regarding the AIFs, have been incorporated in this Master Circular, which supersedes the Master Circular for AIFs dated July 31, 2023.
In addition to the requirements specified under this Master Circular, the AIFs shall be required to independently comply with the other requirements specified by SEBI for market intermediaries such as the ‘Levy of Goods & Services Tax (GST) on the fees payable to SEBI’, ‘Approach to securities market data access and terms of usage of data provided by data sources in Indian securities market’, ‘Digital mode of payment’, ‘Information regarding Grievance Redressal Mechanism’ and ‘Guidelines on Outsourcing of Activities by Intermediaries’, etc.
The link to the aforesaid Master Circular is as follows:
https://www.sebi.gov.in/legal/master-circulars/may-2024/master-circular-for-alternative-investment-funds-aifs-_83229.html
7. Master Circular for Registrar to an Issue and Share Transfer Agents
SEBI vide Circular SEBI/HO/MIRSD/PoD-1/CIR/2024/37 dated May 07, 2024, issued a Master Circular for Registrar to an Issue and Share Transfer Agents.
SEBI, from time to time, has been issuing various circulars/directions to the Registrar to an Issue and Share Transfer Agents. To enable the stakeholders to access the applicable circulars in one place, this Master Circular in respect of RTA is being issued.
This Master Circular supersedes the previous Master Circular for RTAs dated May 17, 2023, and subsequent circulars on the subject. The new Master Circular rescinds previous directives concerning RTAs.
The link to the aforesaid Master Circular is as follows:
https://www.sebi.gov.in/legal/master-circulars/may-2024/master-circular-for-registrars-to-an-issue-and-share-transfer-agents_83226.html
8. SEBI (Index Providers) Regulations, 2024
SEBI vide Notification SEBI/LAD-NRO/GN/2024/167 dated May 08, 2024, notified the SEBI (Index Providers) Regulations, 2024 which inter alia aim to foster transparency in the governance and administration of indices in the securities market.
These regulations shall apply specifically to Index Providers administering Significant Indices consisting of securities listed on a recognized Stock Exchange in India for use in the Indian securities market.
The new regulations include various definitions, applicability, provisions regarding the registration of Index Providers, governance and conflict of interest, Index Quality and Methodology, accountability and disclosures, provisions regarding special audits, action in case of default, and other miscellaneous provisions.
The link to the aforesaid Notification is as follows:
https://www.sebi.gov.in/legal/regulations/mar-2024/securities-and-exchange-board-of-india-index-providers-regulations-2024_82144.html
9. Consultation paper on measures towards Ease of Doing Business for Non-Convertible securities
SEBI on May 09, 2024, uploaded a consultation paper on its website seeking comments/suggestions from the public on the proposed measures towards Ease of Doing Business for Non-Convertible Securities.
This consultation paper is in alignment with the announcement made by the Finance Minister for FY 2023-24 to simplify, ease, and reduce the cost of compliance for participants in the financial sector through a consultative approach.
Various measures are proposed inter-alia comprising of:
- the deletion of disclosure regarding PAN and personal address of promoters of the issuers in the offer document;
- Disclosure in the offer document regarding time for key operational and financial parameters;
- Disclosure by way of QR code and web link regarding the details of branches or units of the issuer in the offer document;
- Alignment of disclosure requirement in the offer document regarding ‘project cost and means of financing’ with that in case of equity;
- Relaxation in the requirement of providing certain business and commercial details in case of purchase or acquisition of immovable property in the offer document;
- Providing flexibility in the signatories to provide attestation in the offer document; and
- Modification in the timeline for submission of status regarding payment obligations to the stock exchanges by entities that have listed commercial paper etc.
The link to the aforesaid Consultation Paper is as follows:
https://www.sebi.gov.in/reports-and-statistics/reports/may-2024/consultation-paper-on-measures-towards-ease-of-doing-business-for-non-convertible-securities_83286.html
10. Consultation Paper on enhancement of operational efficiency and Risk Reduction: Pay-out of securities directly to client demat account
SEBI on May 09, 2024, uploaded a draft circular on its website seeking comments from the public on the Enhancement of operational efficiency and Risk Reduction -Pay-out of securities directly to client demat account.
At present, the Clearing Corporation credits the pay-out of securities in the pool account of the broking firm, which then credits them to the respective client’s demat accounts. In a move to enhance operational efficiency and reduce the risk to clients’ securities, it is proposed to make the process of direct payout of securities to the client account mandatory.
The link to the aforesaid Consultation Paper is as follows:
https://www.sebi.gov.in/reports-and-statistics/reports/may-2024/enhancement-of-operational-efficiency-and-risk-reduction-pay-out-of-securities-directly-to-client-demat-account_83288.html
11. Consultation Paper on measures towards Ease of Doing Business for REITs and InvITs
SEBI on May 09, 2024, uploaded a consultation paper on its website seeking comments/suggestions from the public on the proposed measures towards Ease of Doing Business for REITs and InvITs.
This consultation paper is in alignment with the announcement made for FY 2023-24 to simplify, ease, and reduce the cost of compliance for participants in the financial sector through a consultative approach.
Various measures are proposed inter-alia comprising of:
A. Proposals for both REITs and InvITs
- Revision of timelines for distribution to 5 working days from the declaration.
- allowing unitholders to meet with shorter notice.
- Disclosure and Review of Statement of Investor Complaints.
- Disclosure of Statement of Deviation(s) Alongside Financial Results.
- Clarification on Voting Thresholds in terms of percentage, and providing electronic meeting and e-voting options to unitholders.
- Allowing maintenance of records in Electronic Form along with Backup And Disaster Recovery Norms for such records.
B. Proposals for both REITs and InvITs
- Reduction of a trading lot for privately placed InvITs.
- Aligning provision related to Change in Sponsor for InvIT Regulations with REIT Regulations.
The link to the aforesaid Consultation Paper is as follows:
https://www.sebi.gov.in/reports-and-statistics/reports/may-2024/consultation-paper-on-measures-towards-ease-of-doing-business-for-reits-and-invits_83287.html
12. SEBI (Depositories and Participants) (Amendment) Regulations, 2024
SEBI vide Notification SEBI/LAD-NRO/GN/2024/173 on May 10, 2024, amended the SEBI (Depositories and Participants) Regulations, 2018. The said amendment shall come into force from the date of its publication in the Official Gazette.
Regulation 9 about the payment of annual charges by a depository to the SEBI is substituted and states that a depository shall, within 15 days from the end of each month, pay as provided in the Schedule, a percentage of the annual custody charges received by it from the issuers during the month, to SEBI in the manner provided thereof.
The link to the aforesaid Notification is as follows:
https://egazette.gov.in/(S(yylfa02skw25v4icy4wom0ds))/ViewPDF.aspx
13. Master Circular for Custodians
SEBI vide Circular SEBI/HO/AFD/AFD–PoD-2/P/CIR/2024/40 dated May 10, 2024, issued a Master Circular for Custodians.
SEBI, from time to time, has been issuing various circulars/directions to Custodians. To enable the stakeholders to access the applicable requirements specified in these circulars in one place, the provisions of the said circulars have been consolidated in this Master Circular.
It is provided that in addition to the requirements specified under this Master Circular, the custodians shall be required to independently comply with the other requirements specified by SEBI for market intermediaries such as the ‘Levy of Goods & Services Tax (GST) on the fees payable to SEBI’, ‘Approach to securities market data access and terms of usage of data provided by data sources in Indian securities market’, ‘Digital mode of payment’, ‘Information regarding Grievance Redressal Mechanism’ and ‘Guidelines on Outsourcing of Activities by Intermediaries’, etc.
With respect to any other directions or guidance issued by SEBI, as specifically applicable to Custodians, the same shall continue to remain in force in addition to the provisions of this Master Circular or any other law for the time being in force.
The link to the aforesaid Master Circular is as follows:
https://www.sebi.gov.in/legal/master-circulars/may-2024/master-circular-for-custodians_83305.html
14. Effective Date for Enforcement of Norms w.r.t Eligibility Criteria for AIF Manager
SEBI vide Notification SEBI/LAD-NRO/GN/2024/175 dated May 10, 2024, notified the effective date for enforcement of regulation 3(III) of SEBI (AIF) Regulations, 2023. This regulation deals with provisions regarding eligibility criteria for AIF managers. It states that the key investment team of the AIF Manager must have at least one key personnel with relevant certification as specified by the Board. Also, a fresh certification must be obtained before the expiry of the validity of the existing certification to ensure continuity with these requirements.
The link to the aforesaid Notification is as follows:
https://www.sebi.gov.in/legal/gazette-notification/may-2024/commencement-notification-for-certain-provisions-of-the-securities-and-exchange-board-of-india-alternative-investment-funds-second-amendment-regulations-2023_83321.html
15. Certification requirement for key investment team of manager of AIF
SEBI vide Circular SEBI/HO/AFD-1/AFD-1-PoD/P/CIR/2024/42 dated May 13, 2024, issued certification requirements for the key investment team of Alternative Investment Funds (AIFs). This Circular shall come into force with immediate effect.
It mandates at least 1 key personnel amongst the associated persons functioning in the key investment team of the Manager of an AIF to obtain certification specified by SEBI. This regulation is effective from May 10, 2024.
Additionally, amendments to the SEBI (Certification of Associated Persons in the Securities Markets) Regulations, 2007 require key personnel in the AIF manager’s investment team to pass the NISM Series-XIX-C: Alternative Investment Fund Managers Certification Examination.
The circular shall be complied with on or before May 09, 2025, by all the existing AIFs and Schemes of AIFs whose application for the launch of the scheme is pending with SEBI as on May 10, 2024. Trustees/sponsors must ensure compliance and include it in the Compliance Test Report.
The link to the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/may-2024/certification-requirement-for-key-investment-team-of-manager-of-aif_83328.html
16. Master Circular for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs)
SEBI vide Circular SEBI/HO/DDHS-PoD-2/P/CIR/2024/43 dated May 15, 2024, issued a Master Circular for REITs and vide Circular SEBI/HO/DDHS-PoD-2/P/CIR/2024/44 dated May 15, 2024, issued a Master Circular for InvITs.
For effective regulation of REITs and InvITs, SEBI has been issuing various circulars from time to time. To enable the stakeholders to access all the applicable circulars in one place, the provisions of the circulars issued till May 15, 2024, are incorporated in this Master Circular for REITs and InvITs.
With respect to the directions or other guidance issued by SEBI, as specifically applicable to REITs and InvITs, the same shall continue to remain in force in addition to the provisions of any other law for the time being in force. Pursuant to the issuance of this Master Circular, the entities that are required to ensure compliance with various provisions shall submit necessary reports as envisaged in this Master Circular on a periodic/ continuous basis.
The link to the aforesaid Master Circular for REITs is as follows:
https://www.sebi.gov.in/legal/master-circulars/may-2024/master-circular-for-real-estate-investment-trusts-reits-_83375.html
The link to the aforesaid Master Circular for InvITs is as follows:
https://www.sebi.gov.in/legal/master-circulars/may-2024/master-circular-for-infrastructure-investment-trusts-invits-_83376.html
17. Master Circular for ESG Rating Providers (“ERPs”)
SEBI vide Circular SEBI/HO/DDHS/POD3/P/CIR/2024/45 dated May 16, 2024, issued a Master Circular for ESG rating Providers.
ESG Rating Providers are regulated under the provisions of SEBI (Credit Rating Agencies) Regulations, 1999 that inter-alia prescribes guidelines for the registration of ERPs, general obligations of ERPs, manner of inspection, and code of conduct applicable to ERPs.
While the broad framework for ERPs has been laid down in the CRA Regulations, the procedural/disclosure requirements and obligations are being specified through this master circular, which will enable the industry and other users to have access to all the applicable directions to ERPs in one place.
ERPs are directed to comply with the conditions laid down in this master circular and have the necessary systems and infrastructure in place for the implementation of this circular. The Board of Directors of the ERP shall be responsible for ensuring compliance with these provisions.
The link to the aforesaid Master Circular is as follows:
https://www.sebi.gov.in/legal/master-circulars/may-2024/master-circular-for-esg-rating-providers-erps-_83421.html
18. Master Circular for Debenture Trustees
SEBI vide Circular SEBI/HO/DDHS-PoD3/P/CIR/2024/46 dated May 16, 2024, issued a Master Circular for Debenture Trustees.
Debenture Trustees are regulated under the provisions of SEBI (Debenture Trustees) Regulations, 1993 (‘DT Regulations’). While the broad framework for Debenture Trustees has been laid down in the DT Regulations, over the years, procedural/ disclosure requirements and obligations have been specified by SEBI through circulars.
For effective regulation of the corporate bond market and to enable the Debenture Trustees and other market stakeholders to get access to all the applicable circulars in one place, this Master Circular has been prepared compiling the existing circulars as on May 16, 2024, with consequent changes.
The link to the aforesaid Master Circular is as follows:
https://www.sebi.gov.in/legal/master-circulars/may-2024/master-circular-for-debenture-trustees-dts-_83419.html
19. Informal Guidance in relation to Regulation 41A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2012
Jagatjit Industries Limited (JIL), a public company listed on BSE, sought interpretive guidance from SEBI on the following issue:
- Whether the existing DVR shares of the Company JIL shall continue to retain their distinct characteristics of differential voting rights or they will be treated as ordinary equity shares at par with the other equity shares of the Company.
- Whether the Company is required to comply with the conditions prescribed in Regulation 41A of SEBI LODR and compliance, if any is required to be made by the Company.
SEBI vide Informal Guidance CFD/PoD/OW/2024//7086/1 dated May 16, 2024, stated that before July 21, 2009, listed companies could issue differential right equity shares. However, a circular issued by SEBI on July 21, 2009, disallowed fresh issuances of “superior” rights equity shares. This circular did not address the treatment of already issued superior right equity shares.
In 2019, SEBI introduced an SR equity shares framework. This framework allowed companies that have issued SR equity shares to their promoters or founders to undertake an IPO of ordinary shares under certain conditions. Additionally, the SCRA was amended to require that these SR equity shares be listed along with the ordinary shares offered to the public. However, the SR framework does not address superior right equity shares already issued by listed companies.
As per the Companies (Share Capital and Debentures) Amendment Rules, 2014, DVR shares issued under the Companies Act, 1956, continue to be regulated under those provisions. In conclusion, Regulation 41A of SEBI LODR i.e., other provisions relating to outstanding SR equity shares, does not apply to JIL’s existing DVR shares.
The link to the aforesaid Informal Guidance is as follows:
KM_554e-20240517092239 (sebi.gov.in)
20. Master Circular for Credit Rating Agencies
SEBI vide Circular SEBI/HO/DDHS/DDHS-POD3/P/CIR/2024/47 dated May 16, 2024, issued a Master Circular for Credit Rating Agencies.
SEBI (Credit Rating Agencies) Regulations, 1999 (“CRA Regulations”) prescribes guidelines for the registration of Credit Rating Agencies (CRAs), general obligations of CRAs, manner of inspection and investigation, and code of conduct applicable to CRAs. Multiple circulars have been issued, over the years, covering the operational and procedural aspects thereof.
To enable the industry and other users to have access to all the applicable circulars/ directions in one place, a Master Circular for CRAs has been prepared compiling the existing circulars as on May 16, 2024, with consequent changes.
The link to the aforesaid Master Circular is as follows:
https://www.sebi.gov.in/legal/master-circulars/may-2024/master-circular-for-credit-rating-agencies-cras-_83417.html
21. Consultation Paper on facilitating investments by Indian Mutual Funds in such overseas funds that invest a certain portion of their assets in Indian Securities
SEBI on May 17, 2024, placed a consultation paper to seek comments from the public on the proposal of facilitating investments by Indian Mutual Funds in such Overseas Mutual Funds (‘MFs’)/ Unit Trusts (‘UTs’) that invest a certain portion of their assets in Indian securities.
As per the present regulatory framework, SEBI registered Mutual Funds are allowed to invest in eligible overseas securities for its overseas investment. However, the framework does not explicitly permit Indian Mutual Funds to invest in overseas MF/UTs with exposure to Indian securities. Therefore, many Mutual Funds in the industry avoid investing in such overseas MF/UTs that have any kind of exposure to Indian securities.
The link to the aforesaid Consultation Paper is as follows:
https://www.sebi.gov.in/legal/master-circulars/may-2024/master-circular-for-credit-rating-agencies-cras-_83417.html
22. SEBI (Prohibition of Insider Trading) (Amendment) Regulations, 2024
SEBI vide Notification SEBI/LAD-NRO/GN/2024/181 on May 17, 2024, amended the SEBI (Prohibition of Insider Trading) Regulations, 2015. The said amendment shall come into force from the date of its publication in the Official Gazette.
The definition of generally available information is now amended to not include unverified events or information reported in print or electronic media. The revised definition now reads as follows:
“Generally available information is information that is accessible to the public on a non-discriminatory basis and shall not include unverified events or information reported in print or electronic media”.
The link to the aforesaid Notification is as follows:
https://egazette.gov.in/(S(yylfa02skw25v4icy4wom0ds))/ViewPDF.aspx
23. SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2024
SEBI vide Notification SEBI/LAD-NRO/GN/2024/179 on May 17, 2024, amended the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2015. The said amendment shall come into force from the date of its publication in the Official Gazette.
The amendment states the exclusion of the effect on the price of equity shares of a target company due to material price movement and confirmation of reported events or information. This exclusion aligns with the framework specified under regulation 30(11) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 for determining the offer price and the price of such equity shares under the regulations.
The link to the aforesaid Notification is as follows:
https://egazette.gov.in/(S(no0apfhwour5zgsunlmddxao))/ViewPDF.aspx
24. SEBI (Buy-Back of Securities) (Amendment) Regulations, 2024
SEBI vide Notification SEBI/LAD-NRO/GN/2024/180 on May 17, 2024, amended the SEBI (Buy-Back of Securities) Regulations, 2015. The said amendment shall come into force from the date of its publication in the Official Gazette.
The amendment states the exclusion of the effect on the price of equity shares of a company due to material price movement and confirmation of reported events or information. This exclusion is as per the framework specified under regulation 30(11) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. The aim is to determine the volume-weighted average market price and lower end of the price range for buy-back of securities.
The link to the aforesaid Notification is as follows:
https://egazette.gov.in/(S(no0apfhwour5zgsunlmddxao))/ViewPDF.aspx
25. SEBI (Issue of Capital and Disclosure Requirements) (Amendment) Regulations, 2024
SEBI vide Notification SEBI/LAD-NRO/GN/2024/178 on May 17, 2024, amended the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018. The said amendment shall come into force from the date of its publication in the Official Gazette.
The amendments are briefly detailed below:
-
Minimum Promoters Contribution: Regulation 14: The 1st proviso to Sub-regulation (1)
is amended and now reads as follows:
In case the post-issue shareholding of the promoters is less than 20%, alternative investment funds or foreign venture capital investors, scheduled commercial banks, public financial institutions, insurance companies registered with the Insurance Regulatory and Development Authority of India or any non-individual public shareholder holding at 5% of the post-issue capital or any entity (individual or non-individual) forming part of promoter group other than the promoter(s) may contribute to meet the shortfall in minimum contribution as specified for the promoters, subject to a maximum of 10% of the post-issue capital without being identified as promoter(s).
Our Comments: The said amendment will now inter-alia permit promoter group entities other than the promoters and any non-individual shareholders holding more than 5% of the post-issue capital to contribute towards minimum promoters' contribution without being identified as a promoter, to meet any shortfall in the minimum promoters' contribution, subject to a maximum of 10% of the post-issue capital.
-
Securities Ineligible for Minimum Promoters Contribution Regulation 15:
a. The clause (b) of Sub-regulation (1) is amended and now reads as follows:
Specified securities acquired by the promoters and alternative investment funds or foreign venture capital investors or scheduled commercial banks or public financial institutions or insurance companies registered with Insurance Regulatory and Development Authority of India or any non-individual public shareholder holding at least five per cent. of the post-issue capital or any entity (individual or non-individual) forming part of promoter group other than the promoter(s) during the preceding one year at a price lower than the price at which specified securities are being offered to the public in the initial public offer.
Our Comments: The said amendment has now made the specified securities acquired inter-alia by promoter group entities other than the promoters and any non-individual public shareholder holding at least 5% of the post-issue capital acquired during the preceding one year at a price lower than the price at which specified securities are being offered to the public in the initial public offer, ineligible for contribution towards meeting any shortfall in the post-issue shareholding of the promoters.
b. The clause (i) of first proviso of clause (b) of Sub-regulation (1) is amended and now reads as follows:
If the promoters and alternative investment funds or foreign venture capital investors or scheduled commercial banks or public financial institutions or insurance companies registered with Insurance Regulatory and Development Authority of India or any non-individual public shareholder holding at least five per cent. of the post-issue capital or any entity (individual or non-individual) forming part of promoter group other than the promoter(s), as applicable, pay to the issuer the difference between the price at which the specified securities are offered in the initial public offer and the price at which the specified securities had been acquired.
Our Comments: The said amendment will allow the specified securities acquired inter-alia by promoter group entities other than the promoters and any non-individual public shareholder holding at least 5% of the post-issue capital acquired during the preceding one year at a price lower than the price at which specified securities are being offered to the public in the initial public offer, eligible for contribution towards meeting any shortfall in the post-issue shareholding of the promoters, if they pay to the issuer the difference between the price at which the specified securities are offered in the initial public offer and the price at which the specified securities had been acquired during the preceding one year.
c. New clause (iv) has been inserted after the clause (iii) of first proviso of clause (b) of Sub-regulation (1) which reads as follows:
“(iv) to equity shares arising from the conversion or exchange of fully paid-up compulsorily convertible securities, including depository receipts, that have been held by the promoters and alternative investment funds or foreign venture capital investors or scheduled commercial banks or public financial institutions or insurance companies registered with Insurance Regulatory and Development Authority of India or any non-individual public shareholder holding at least five per cent. of the post issue capital or any entity (individual or non-individual) forming part of promoter group other than the promoter(s), as applicable, for a period of at least one year prior to the filing of the draft offer document and such fully paid-up compulsorily convertible securities are converted or exchanged into equity shares prior to the filing of the offer document (i.e., red herring prospectus in case of a book built issue and prospectus in case of a fixed price issue), provided that full disclosures of the terms of conversion or exchange are made in such draft offer document;”
Our Comments: The said amendment will allow equity shares arising from the conversion or exchange of fully paid-up compulsorily convertible securities, including depository receipts, that have been held by the entities in the newly inserted clause (iv) above and have been held for a period of at least one year prior to the filing of the draft offer document and are converted or exchanged into equity shares prior to the filing of the offer document (i.e., red herring prospectus in case of a book built issue and prospectus in case of a fixed price issue), if full disclosures of the terms of conversion or exchange are made in such draft offer document.
d. The clause (c) of Sub-regulation (1) is amended and now reads as follows:
Specified securities allotted to the promoters and alternative investment funds or foreign venture capital investors or scheduled commercial banks or public financial institutions or insurance companies registered with Insurance Regulatory and Development Authority of India or any non-individual public shareholder holding at least five per cent. of the post-issue capital or any entity (individual or non-individual) forming part of promoter group other than the promoter(s) during the preceding one year at a price less than the issue price, against funds brought in by them during that period, in case of an issuer formed by conversion of one or more partnership firms or limited liability partnerships, where the partners of the erstwhile partnership firms or limited liability partnerships are the promoters of the issuer and there is no change in the management:
Our Comments: The said amendment has now made the specified securities allotted by issuer formed by conversion of one or more partnership firms or limited liability partnerships, inter-alia to promoter group entities other than the promoters and any non-individual public shareholder holding at least 5% of the post-issue capital during the preceding one year at a price less than the issue price, ineligible for contribution towards meeting any shortfall in the post-issue shareholding of the promoters.
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Lock-in of specified securities held by the promoters Regulation 16:>
The clause (a) of Sub-regulation (1) is amended and now reads as follows:
Minimum promoters’ contribution including contribution made by alternative investment funds or foreign venture capital investors or scheduled commercial banks or public financial institutions or insurance companies registered with Insurance Regulatory and Development Authority of India or any non-individual public shareholder holding at least five per cent. of the post-issue capital or any entity (individual or non-individual) forming part of promoter group other than the promoter(s) referred to in proviso to sub-regulation (1) of regulation 14, shall be locked-in for a period of eighteen months from the date of allotment in the initial public offer:
Our Comments: The said amendment requires the contribution made to minimum promoters’ contribution under Regulation 14(1), inter-alia by promoter group entities other than the promoters and any non-individual public shareholder holding at least 5% of the post-issue capital to be locked in for a period of 18 months from the date of allotment in the initial public offer.
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Security Deposit Regulation 38:
Regulation 38 regarding Security Deposit in case of Initial Public Offer on the Main Board has been omitted thereby removing the requirement of depositing an amount calculated at the rate of one per cent. of the issue size available for subscription to the public before the opening of the subscription list.
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Period of Subscription in case of Initial Public Offer on Main Board Regulation 46:
The Sub-regulation (3) is amended and now reads as follows:
(3) In case of force majeure, banking strike or unforeseen circumstances, the issuer may, for reasons to be recorded in writing, extend the bidding (issue) period disclosed in the red herring prospectus (in case of a book-built issue) or the issue period disclosed in the prospectus (in case of a fixed price issue), for a minimum period of one working day, subject to the provisions of sub-regulation (1).
Our Comments: The said amendment provides that in case of force majeure, banking strike or unforeseen circumstances, the issuer may extend the bidding (issue) period disclosed in the red herring prospectus or prospectus, as the case may be, for a minimum period of three working days, subject to the total bidding (issue) period not exceeding ten working days.
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Security Deposit Regulation 80:
Regulation 80 regarding Security Deposit in case of Rights Issue has been omitted thereby removing the requirement of depositing an amount calculated at the rate of one per cent. of the issue size available for subscription to the public before the opening of the subscription list.
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Security Deposit Regulation 135
Regulation 135 regarding Security Deposit in case of Further Public offer has been omitted thereby removing the requirement of depositing an amount calculated at the rate of one per cent. of the issue size available for subscription to the public before the opening of the subscription list.
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Period of Subscription in case of Further Public Offer Regulation 142:
The Sub-regulation (3) is amended and now reads as follows:
(3) In case of force majeure, banking strike or unforeseen circumstances, the issuer may, for reasons to be recorded in writing, extend the bidding (issue) period disclosed in the red herring prospectus (in case of a book-built issue) or the issue period disclosed in the prospectus (in case of a fixed price issue), for a minimum period of one working day, subject to the provisions of sub-regulation (1).
Our Comments: The said amendment has widened the scope by substituting the words “similar circumstances” with “unforeseen circumstances” of the instances where the issuer can extend the bidding period and has reduced the period for which the issuer can extend the bidding period in case of unforeseen circumstances to 1 (one) working day from 3 (three) working days.
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Adjustments in pricing - Frequently and Infrequently traded shares Regulation 166:
The existing regulation under Regulation 166 has been re-numbered as Sub-regulation (1) and new Sub-regulation (2) has been inserted which reads as follows:
“(2) The effect on the price of the equity shares of the issuer due to material price movement and confirmation of reported event or information may be excluded as per the framework specified under sub-regulation (11) of regulation 30 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 for determination of the price for a preferential issue in accordance with regulations 164, 164A, 164B or 165 of these regulations.”
Our Comments: The said amendment specifies that the unaffected price may be considered for the transaction under regulations 164, 164A, 164B or 165. In other words the effect on the price of the equity shares of the issuer due to material price movement and confirmation of reported event or information as per the framework specified under sub-regulation (11) of regulation 30 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 may be disregarded.
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Regulation 176:
New Sub-regulation (5) after Sub-regulation (4) has been inserted which reads as follows:
“(5) The effect on the price of the equity shares of the issuer due to material price movement and confirmation of reported event or information may be excluded as per the framework specified under sub-regulation (11) of regulation 30 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 for calculation of the issue price under this regulation.”
Our Comments: The said amendment specifies that the unaffected price may be considered for the transaction under regulation 176. In other words the effect on the price of the equity shares of the issuer due to material price movement and confirmation of reported event or information as per the framework specified under sub-regulation (11) of regulation 30 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 may be disregarded.
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Security Deposit Regulation 197:
Regulation 197 regarding Security Deposit in case of Initial Public Offer of Indian Depository Receipts has been omitted thereby removing the requirement of depositing an amount calculated at the rate of one per cent. of the issue size available for subscription to the public before the opening of the subscription list.
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Period of Subscription in case of Initial Public Offer of Indian Depository Receipts Regulation
203:
The Sub-regulation (3) is amended and now reads as follows:
(3) In case of force majeure, banking strike or unforeseen circumstances, the issuer may, for reasons to be recorded in writing, extend the bidding (issue) period disclosed in the red herring prospectus (in case of a book-built issue) or the issue period disclosed in the prospectus (in case of a fixed price issue), for a minimum period of one working day, subject to the provisions of sub-regulation (1).
Our Comments: The said amendment has widened the scope by substituting the words “similar circumstances” with “unforeseen circumstances” of the instances where the issuer can extend the bidding period and has reduced the period for which the issuer can extend the bidding period in case of unforeseen circumstances to 1 (one) working day from 3 (three) working days.
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Minimum Promoters Contribution: Regulation 236: The 1st proviso to Sub-regulation (1) is
amended and now reads as follows:
In case the post-issue shareholding of the promoters is less than 20%, alternative investment funds or foreign venture capital investors, scheduled commercial banks, public financial institutions, insurance companies registered with the Insurance Regulatory and Development Authority of India or any non-individual public shareholder holding at 5% of the post-issue capital or any entity (individual or non-individual) forming part of promoter group other than the promoter(s) may contribute to meet the shortfall in minimum contribution as specified for the promoters, subject to a maximum of 10% of the post-issue capital without being identified as promoter(s).
Our Comments: The said amendment will now inter-alia permit promoter group entities other than the promoters and any non-individual shareholders holding more than 5% of the post-issue capital to contribute towards minimum promoters' contribution without being identified as a promoter, to meet any shortfall in the minimum promoters' contribution, subject to a maximum of 10% of the post-issue capital.
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Securities Ineligible for Minimum Promoters Contribution Regulation 237:
a. The clause (b) of Sub-regulation (1) is amended and now reads as follows: Specified securities acquired by the promoters and alternative investment funds or foreign venture capital investors or scheduled commercial banks or public financial institutions or insurance companies registered with Insurance Regulatory and Development Authority of India or any non-individual public shareholder holding at least five per cent. of the post-issue capital or any entity (individual or non-individual) forming part of promoter group other than the promoter(s) during the preceding one year at a price lower than the price at which specified securities are being offered to the public in the initial public offer.
Our Comments: The said amendment has now made the specified securities acquired inter-alia by promoter group entities other than the promoters and any non-individual public shareholder holding at least 5% of the post-issue capital acquired during the preceding one year at a price lower than the price at which specified securities are being offered to the public in the initial public offer, ineligible for contribution towards meeting any shortfall in the post-issue shareholding of the promoters.
b. New clause (iv) has been inserted after the clause (iii) of first proviso of clause (b) of Sub-regulation (1) which reads as follows:
“(iv) to equity shares arising from the conversion or exchange of fully paid-up compulsorily convertible securities, including depository receipts, that have been held by the promoters and alternative investment funds or foreign venture capital investors or scheduled commercial banks or public financial institutions or insurance companies registered with Insurance Regulatory and Development Authority of India or any nonindividual public shareholder holding at least five per cent. of the post issue capital or any entity (individual or non-individual) forming part of promoter group other than the promoter(s), as applicable, for a period of at least one year prior to the filing of the draft offer document and such fully paid-up compulsorily convertible securities are converted or exchanged into equity shares prior to the filing of the offer document (i.e., red herring prospectus in case of a book built issue and prospectus in case of a fixed price issue), provided that full disclosures of the terms of conversion or exchange are made in such draft offer document;”
Our Comments: The said amendment will allow equity shares arising from the conversion or exchange of fully paid-up compulsorily convertible securities, including depository receipts, that have been held by the entities in the newly inserted clause (iv) above and have been held for a period of at least one year prior to the filing of the draft offer document and are converted or exchanged into equity shares prior to the filing of the offer document (i.e., red herring prospectus in case of a book built issue and prospectus in case of a fixed price issue), if full disclosures of the terms of conversion or exchange are made in such draft offer document.
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Lock-in of specified securities held by the promoters Regulation 238:
The clause (a) is amended and now reads as follows:minimum promoters’ contribution including contribution made by alternative investment funds or foreign venture capital investors or scheduled commercial banks or public financial institutions or insurance companies registered with Insurance Regulatory and Development Authority of India or any non-individual public shareholder holding at least five per cent. of the post-issue capital or any entity (individual or non-individual) forming part of promoter group other than the promoter(s) as applicable, shall be locked-in for a period of three years from the date of commencement of commercial production or date of allotment in the initial public offer, whichever is later;
Our Comments: The said amendment requires the contribution made to minimum promoters’ contribution under Regulation 14(1), inter-alia by promoter group entities other than the promoters and any non-individual public shareholder holding at least 5% of the post-issue capital to be locked in for a period of 3 years from the date of commencement of commercial production or date of allotment in the initial public offer, whichever is later.
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Security Deposit Regulation 259:
Regulation 259 regarding Security Deposit in case of Initial Public Offer by Small and medium Enterprises has been omitted thereby removing the requirement of depositing an amount calculated at the rate of one per cent. of the issue size available for subscription to the public before the opening of the subscription list.
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Period of Subscription in case of Initial Public Offer by Small and Medium Enterprises Regulation
266:
The Sub-regulation (3) is amended and now reads as follows:(3) In case of force majeure, banking strike or unforeseen circumstances, the issuer may, for reasons to be recorded in writing, extend the bidding (issue) period disclosed in the red herring prospectus (in case of a book-built issue) or the issue period disclosed in the prospectus (in case of a fixed price issue), for a minimum period of one working day, subject to the provisions of sub-regulation (1).
Our Comments: The said amendment has widened the scope by substituting the words “similar circumstances” with “unforeseen circumstances” of the instances where the issuer can extend the bidding period and has reduced the period for which the issuer can extend the bidding period in case of unforeseen circumstances to 1 (one) working day from 3 (three) working days.
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Granting companies listed on the Innovators Growth Platform pursuant to an initial public
offer, an option to trade under the regular category of the main board of the stock exchange:
Regulation 292:
a. Minimum Promoters Contribution Sub-regulation (4): The 1st has been amended and now reads as follows:Provided that in case the total capital held by the promoters is less than twenty per cent, alternative investment funds or foreign venture capital investors or scheduled commercial banks or public financial institutions or insurance companies registered with Insurance Regulatory and Development Authority of India or any non-individual public shareholder holding at least five per cent. of the post-issue capital or any entity (individual or non-individual) forming part of promoter group other than the promoter(s) may contribute to meet the shortfall in minimum contribution as specified, subject to a maximum of ten per cent of the total capital without being identified as promoter(s):
Our Comments: The said amendment will now inter-alia permit promoter group entities other than the promoters and any non-individual shareholders holding more than 5% of the post-issue capital to contribute towards minimum promoters' contribution without being identified as a promoter, to meet any shortfall in the minimum promoters' contribution, subject to a maximum of 10% of the total capital.
Lock-in period Sub-regulation (5): Clause (a) has been amended and now reads as follows:
(a) The minimum promoters’ contribution including contribution made by alternative investment funds or foreign venture capital investors or scheduled commercial banks or public financial institutions or insurance companies registered with the Insurance Regulatory and Development Authority of India or any non-individual public shareholder holding at least five per cent. of the post-issue capital or any entity (individual or non-individual) forming part of promoter group other than the promoter(s), shall be locked in for a period of three years from the date on which trading approval in regular category of main board is granted, and any excess over and above the 20% of promoter’s holding shall be locked-in for a period of one year.Our Comments: The said amendment requires the contribution made to minimum promoters’ contribution under Regulation 4, inter-alia by promoter group entities other than the promoters and any non-individual public shareholder holding at least 5% of the post-issue capital to be locked in for a period of 3 years from the date on which trading approval in regular category of main board is granted, and any excess over and above the 20% of promoter’s holding shall be locked-in for a period of 1 year.
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Extension of Issue Period Paragraph 9 of Schedule XIII:
The Sub-paragraph (ii) is amended and now reads as follows:(ii) in case of force majeure, banking strike or unforeseen circumstances, the issuer may, for reasons to be recorded in writing, extend the bidding/issue period for a minimum period of one working day, subject to the total bidding/issue period not exceeding ten working days.
Our Comments: The said amendment has widened the scope by substituting the words “similar circumstances” with “unforeseen circumstances” of the instances where the issuer can extend the bidding period and has reduced the period for which the issuer can extend the bidding period in case of unforeseen circumstances to 1 (one) working day from 3 (three) working days.
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Nature of Changes in the Offer Document requiring filing of Updated Offer Document Schedule
XVI:
The item (i) in Sub-paragraph (f) of Paragraph (1) is amended and now reads as follows:“In case of a fresh issue: any increase or decrease in estimated issue size (in Rupee value) by more than twenty per cent. or”
The item (ii) in Sub-paragraph (f) of Paragraph (1) is amended and now reads as follows:
“In case of an offer for sale: any increase or decrease in either the number of shares offered for sale or the estimated issue size (in Rupee value) whichever is disclosed in the draft offer document, by more than fifty per cent.; or”
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Nature of Changes in the Offer Document requiring filing of Updated Offer Document Schedule
XVIA:
The item (vi) in Sub-paragraph (a) of Paragraph (1) is amended and now reads as follows:““In case of a fresh issue, any increase or decrease in the estimated issue size by more than fifty percent. (in Rupee value)”
The item (vii) in Sub-paragraph (a) of Paragraph (1) is amended and now reads as follows:
“In case of an offer for sale, any increase or decrease in the number of shares offered for sale or the estimated issue size (in Rupee value) whichever is disclosed in the draft offer document, by more than fifty percent.”
The link to the aforesaid Notification is as follows:https://egazette.gov.in/(S(no0apfhwour5zgsunlmddxao))/ViewPDF.aspx