SEBI June 2024 - AmitaDesai

Amendments in Securities Law

Amendments by SEBI in June 2024

1. Master Circular for Bankers to an Issue registered with SEBI

SEBI vide Circular SEBI/HO/CFD/PoD-1/P/CIR/2024/072 dated June 03, 2024, issued a Master Circular to enable the stakeholders to have access to all circulars with respect to the Bankers to an Issue registered with SEBI in one place.

The link to the aforesaid Circular is as follows:
SEBI | Master Circular for Bankers to an Issue

2. SEBI’s Mobile App on Personal Finance for investors

SEBI on June 03, 2024, launched the “Saa₹ thi 2.0” mobile app at SEBI Bhavan, Mumbai.

The updated “Saa₹ thi” app introduces a user-friendly interface with comprehensive tools aimed at simplifying complex financial concepts. It includes financial calculators and has modules that introduce and explain KYC procedures, mutual funds, ETFs, buying and selling shares on stock exchanges, investor grievances redressal mechanism, and the Online Dispute Resolution (ODR) platform.

Additionally, the app features a range of videos designed to assist investors in their personal finance planning.

The link to the aforesaid Press Release is as follows:
https://www.sebi.gov.in/media-and-notifications/press-releases/jun-2024/launch-of-saa-thi-2-0-sebi-s-mobile-app-on-personal-finance-for-investors_83836.html

3. Disclosures of Material Changes and Other Obligations for Foreign Portfolio Investors (FPIs)

SEBI vide Circular SEBI/HO/AFD/AFD-POD-2/P/CIR/2024/76 dated June 05, 2024, detailed the timelines for intimation of the material changes and submission of supporting documents for different types of material changes by FPIs.

SEBI vide “Master Circular for Foreign Portfolio Investors, Designated Depository Participants and Eligible Foreign Investors” No. SEBI/HO/AFD/AFD-PoD-2/P/CIR/P/2024/70 dated May 30, 2024, specified the timelines for disclosure of certain material changes/events.

The following modifications are made with respect to changes in material information. “If there is any change in the material information previously furnished by the FPI to the DDP and/or SEBI, which has a bearing on the certificate granted by the DDP on behalf of the Board, it shall inform the DDP and/or the Board in writing, in the following manner:

a “Type I” material changes shall be informed by FPIs as soon as possible and within 7 working days of the occurrence of the change and the supporting documents (if any) shall be provided within 30 days of such change. This category shall include critical material changes that

render the FPI ineligible for registration
require FPI to seek fresh registration
render FPI ineligible to make fresh purchases of securities
impact any privileges (e.g. QIB) available or granted to the FPI under the extant regulatory framework
impact any exemptions available or granted to the FPI under the extant regulatory framework

b “Type II” material changes, i.e., any material changes other than those considered as ‘Type I’ material changes, shall be informed, and supporting documents (if any) shall be provided by FPIs as soon as possible and within 30 days of such change.

A list of material changes categorized as Type I is as follows:

Change of Jurisdiction
Name change on account of acquisition, merger, demerger, restructuring, change of ownership/control
Acquisition/merger/demerger resulting in cessation of existence of FPI
Restructuring of legal form/sub-category (e.g. Corporate to trust)
Change in the regulatory status of the FPI (e.g. regulated to unregulated fund)
Change in the compliance status of the jurisdiction of FPI/BO in terms of Regulation 4(d), 4(e), or 4(f) of the FPI Regulations, 2019
Reclassification of the FPI from Category I to Category II
Addition of FPI(s) to any existing/new investor group(s)
FPIs obtaining registration under Category-I on the support of an Investment Manager (IM) and such IM being either removed (temporarily/permanently) or losing its Category I eligibility
Breach of the prescribed threshold for the aggregate contribution of NRIs, OCIs, and Ris
Any information or particulars previously submitted to the Board or DDP are found to be false or misleading, in any material respect
Any penalty, pending litigation or proceedings, findings of inspections or investigations for which action may have been taken or is in the process of being taken by an overseas regulator
Changes that impact any exemption granted in terms of SEBI Circular dated August 24, 2023
Breach of any of the eligibility criteria as specified under Regulation 4 of FPI Regulations, 2019 unless the FPI has been exempted from complying with the said criteria

The DDP shall examine all material changes informed by the FPIs and re-assess the eligibility of the FPI including requiring FPIs to seek fresh registration. However, the DDP shall mandatorily require the FPI to seek fresh registration in case of ‘Type I’ material changes listed at sr. no. i to vi above.

If there is a delay in intimation of material change by the FPI to the DDP, the DDP shall, as soon as possible but not later than 2 working days, inform all such cases to SEBI for appropriate action, if any, along with the reason for delay.

Clarification is also provided that any deletion of sub-fund/share classes/equivalent structure that invests in India will be considered a ‘Type II’ material change.

The link to the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/jun-2024/disclosures-of-material-changes-and-other-obligations-for-foreign-portfolio-investors_83939.html

4. Enhancement of operational efficiency and Risk Reduction - Pay-out of securities directly to client demat account

SEBI vide Circular SEBI/HO/MIRSD/MIRSD-PoD1/P/CIR/2024/75 dated June 05, 2024, mandated the process of securities payout directly to the client account. The provisions of this circular shall come into force with effect from October 14, 2024.

SEBI, vide Master Circular for Stock Brokers dated May 22, 2024, specified various processes for handling clients’ securities with regard to pay-in and pay-out of securities to protect clients’ securities and ensure that the stock broker segregates securities of the client or clients so that they are not vulnerable to misuse.

The matter related to the funds of the clients is addressed through upstreaming and downstreaming of the funds. The matter related to the flow of securities also needs to be addressed for the payout of securities. Currently, the securities received in payout are pooled by the broker and then credited to the respective client demat accounts.

SEBI vide Circular SMDRP/Policy/Cir-05/2001 dated February 01, 2001, has already facilitated direct payout to the client account voluntarily. Now the process of securities payout directly to the client account has become mandatory.

The following is mandated vide this Circular:

The securities for pay-out shall be credited directly to the respective client’s demat account by the Clearing Corporations (CCs).
CCs shall provide a mechanism for Trading Member (TM)/Clearing Members (CM) to identify the unpaid securities and funded stocks under the margin trading facility.
Funded stocks held by the TM/CM under the margin trading facility shall be held by the TM/CM only by way of pledge. The TM/CM shall be required to open a separate demat account tagged ‘Client Securities under Margin Funding Account’ in which only funded stocks in respect of margin funding shall be kept/ transferred, and no other transactions shall be permitted. Such funded stocks shall be transferred to the respective client’s demat account followed by the creation of an auto-pledge with suitable reason, in favor of ‘Client Securities under Margin Funding Account.
In case of any shortages arising due to inter se netting of positions between clients i.e., internal shortages, TM/CM shall handle such shortages through the process of the auction as specified by CCs. In such cases, the brokers shall not levy any charges on the client over and above the charges levied by the CCs.

The above process does not apply to clients having arrangements with custodians registered with SEBI for clearing and settlement of trades.

The link to the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/jun-2024/enhancement-of-operational-efficiency-and-risk-reduction-pay-out-of-securities-directly-to-client-demat-account_83930.html

5. Framework for providing flexibility to Foreign Portfolio Investors in dealing with the securities post-expiry of their registration

SEBI vide Circular SEBI/HO/AFD/AFD-PoD-2/P/CIR/2024/77 dated June 05, 2024, issued a framework for providing flexibility to Foreign Portfolio Investors in dealing with their securities post-expiry of their registration.

This circular was issued in light of recent amendments to the SEBI (Foreign Portfolio Investors) Regulations, 2019, aimed at facilitating smoother processes for FPIs dealing with their securities.

In view of the amendments to the SEBI (Foreign Portfolio Investment) Regulations, 2019, the FPI Master Circular stands modified with respect to the following:

Para 4 of Part with respect to Continuance of Registration is modified
Para 13 of Part A with respect to Reclassification is modified
Para 15 of Part A with respect to Change in Status of a Compliant Jurisdiction is modified
Para 17 of Part A is inserted for Dealing with securities that may be held by FPIs after the expiry of their registration and/or elapse of the time period for disposal of securities
Para 18 of Part A is inserted for Dealing with securities held by FPIs whose registration has expired
Para 19 of Part C is inserted for dealing with securities written off by the FPIs/Deemed to have been written off by the FPIs
Reporting format is modified to include Monthly Report
The provisions of this circular shall be effective immediately. However, provisions relating to Para 19 above shall come into effect after 60 days from the date of this circular.

Recognized Stock Exchanges are advised to formulate and operationalize a mechanism for dealing with written-off securities by their empanelled broker within 60 days from the date of this circular.

The link to the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/jun-2024/framework-for-providing-flexibility-to-foreign-portfolio-investors-in-dealing-with-their-securities-post-expiry-of-their-registration_83940.html

6. Review of Facility for Basic Services Demat Account (BSDA) for Financial Inclusion and Ease of Investing

SEBI released a draft circular for public comments regarding the review of the Facility for Basic Services Demat Account (BSDA), aiming to enhance financial inclusion and reduce the cost of maintaining securities in demat accounts for retail individual investors.

At present, an individual can hold debt securities up to Rs. 2 lakhs and other than debt securities up to Rs. 2 lakhs in a single demat account to become eligible for BSDA.

To enhance the participation of retail investors in the securities market including the participation of investors holding securities in physical form, the facility for BSDA is reviewed and it is proposed to enhance the limit for a demat account to be categorized as BSDA.

Comments have been sought on the following:

Increase the maximum value of securities allowed in a Demat account to be categorized as BSDA to Rs. 10 lakhs for both debt and non-debt securities combined.
Whether separate limits should be retained for debt and non-debt securities
Annual Maintenance Charges (AMC) should be revised based on the value of holdings

The link to the aforesaid Draft Circular is as follows:
https://www.sebi.gov.in/reports-and-statistics/reports/jun-2024/consultation-paper-on-review-of-facility-for-basic-services-demat-account-bsda-for-financial-inclusion-and-ease-of-investing_83932.html

7. Framework of “Financial Disincentives for Surveillance-Related Lapses” (FDSRL) at Market Infrastructure Institutions (MII)

SEBI vide Circular SEBI/HO/ISD/ISD-PoD-1/P/CIR/2024/73 dated June 06, 2024, issued a framework for “Financial Disincentives for Surveillance-Related Lapses” at Market Infrastructure Institutions.

This circular shall come into effect from July 1, 2024, and the framework of FDSRL at MIIs shall be applicable for any surveillance-related lapse occurring on or after the said date.

Market Infrastructure Institutions (MII), including Stock Exchanges, Clearing Corporations, and Depositories, are important institutions for developing and functioning the securities market. Given the substantial increase in trading activity and the adoption of sophisticated trading strategies, the role of MIIs in surveillance has become even more critical.

MIIs are required to be well-equipped to detect market abuse and to take suitable, prompt, effective, and preventive action against such activities.

The general objective of surveillance by MIIs is to monitor the market to detect and deter manipulation or abusive trading that affects the integrity of the market and to provide information that supports the Regulator’s enforcement actions. The market surveillance by MIIs includes, but is not limited to the following broad activities as may be applicable from time to time:

Monitoring the daily activities in the markets including trading/ margining/ settlement/ demat transactions/ holdings.
Monitoring the conduct of market intermediaries through generation and processing of alerts, seeking trading rationale, carrying out snap analysis/ preliminary examination, and if required, detailed analysis/ examination and timely submission of Report to SEBI.
Reporting of abnormal/ suspicious activities as per the framework that is to be communicated by SEBI.
Promptly implementing the decisions taken in the surveillance meetings.
Endeavouring to take pre-emptive surveillance measures as per any framework that may be communicated by SEBI.

A Framework of Financial Disincentives for Surveillance Related Lapses (SRL) at MIIs has been introduced.

1. Definition of Surveillance Related Lapses (SRL):

SRL shall mean and include the following:

Any lapse observed in the implementation of decisions taken during the Surveillance Meetings including any non-implementation or partial implementation or delayed implementation of any decision or communication of SEBI relating to surveillance as per agreed scope and timelines;
Any lapse observed in the discharge of surveillance activities as per agreed scope and timelines; and
Any inadequate reporting or non-reporting of surveillance-related activity as per agreed timelines.

2. Amount of Financial Disincentives:

The framework introduces financial penalties for MIIs based on the severity and frequency of surveillance lapses. These penalties are structured according to the total annual revenue of the MII and the number of lapses detected within a financial year:

Financial Disincentive (INR)
Total Annual Revenue (INR) of MII	>1000cr	1000cr – 300cr	< 300cr
No. of Instances of SRL in FY	>1000cr	1000cr – 300cr	< 300cr
FIRST instance	25 Lakhs	5 Lakhs	1 Lakh
SECOND instance	50 Lakhs	10 Lakhs	2 Lakhs
THIRD instance onwards – for each instance during the FY	1 Crore	20 Lakhs	4 Lakhs

3. Procedure upon identification of Surveillance Related Lapses (SRL)

Upon identification of SRL at MIIs or upon receipt of information of any such instances, SEBI shall provide an opportunity to the concerned MII to make its submissions, in respect of the SRL. The submissions made by the concerned MII shall be considered by SEBI before imposing any “Financial Disincentive” on the concerned MII as per the framework. The “Financial Disincentive(s)” under the framework, if imposed, shall be credited by the MII concerned within 15 working days, to the Investor Protection and Education Fund (“SEBI–IPEF”) established under the SEBI Act, 1992 and a confirmation of payment in this regard shall be forwarded to SEBI. MIIs shall disclose on their websites the details about financial disincentive(s) if any, credited to the SEBI– IPEF under the framework. Listed MIIs are required to make appropriate disclosures in terms of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, regarding any financial disincentive(s) imposed by SEBI under this circular.

4. Applicability of Financial Disincentives for Surveillance-Related Lapses (FDSRL)

The framework of FDSRL at MIIs shall not apply to matters/instances wherein it:

has market-wide impact, or
caused losses to a large number of investors, or
affected the integrity of the market, and
any such matter shall be subject to appropriate proceedings under the SCRA/ SEBI Act, 1992/ Depositories Act, 1996.

The framework of FDSRL at MIIs shall not be applicable for matters/instances that are procedural, including the following:

Minor delays like 1-2 working days in providing information sought by SEBI, or
Minor errors in the information provided which are corrected in a short time, or
Minor errors in the submissions which are corrected on their own, or
Minor extension sought for submissions, or
Extension sought due to factors beyond the control of the MII,
and any delay/ error/ lapse that is considered minor by SEBI may be subject to administrative proceedings like warnings etc.

The link to the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/jun-2024/framework-of-financial-disincentives-for-surveillance-related-lapses-at-market-infrastructure-institutions_83984.html

8. Guidelines on Anti-Money Laundering (AML) Standards and Combating the Financing of Terrorism (CFT) /Obligations of Securities Market Intermediaries under the Prevention of Money Laundering Act, 2002, and Rules framed there under

SEBI vide Circular SEBI/HO/MIRSD/MIRSDSECFATF/P/CIR/2024/78 dated June 06, 2024, issued guidelines on Anti-Money laundering Standards and Combating the Financing Terrorism under the Prevention of Money Laundering Act, 2002.

The Prevention of Money Laundering Act, 2002 (“PMLA”) and the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005 (PML Rules), mandate every Reporting Entity, to adhere to client account opening procedures, maintain records, and report such transactions as prescribed therein to the relevant authorities.

The PML Rules empower SEBI to specify the information required to be maintained by the intermediaries and the procedure, manner, and form in which such information is to be maintained.

It also mandates the Reporting Entities to evolve an internal mechanism having regard to any guidelines issued by the regulator for detecting the transactions specified in the PML Rules and for furnishing information thereof, in such form as may be directed by the regulator.

SEBI has from time to time issued circulars/directives concerning Know Your Client (KYC), Client Due Diligence (CDD), Anti-Money Laundering (AML), and Combating the Financing of Terrorism (CFT) specifying the minimum requirements. It is emphasized that the registered intermediaries may, according to their requirements, specify additional disclosures to be made by clients to address the concerns of money laundering and suspicious transactions undertaken by clients.

The guidelines issued by SEBI stipulate the essential principles for combating Money Laundering (ML) and Terrorist Financing (TF) and provide detailed procedures and obligations to be followed and complied with by all Registered Intermediaries.

These guidelines shall apply to the branches of the Stock Exchanges, Registered Intermediaries, and their Subsidiaries situated abroad, especially, in countries that do not apply or insufficiently apply the recommendations made by the Financial Action Task Force (FATF), to the extent local laws and regulations permit. When the local applicable laws and regulations prohibit the implementation of these requirements, the same shall be brought to the notice of SEBI.

The link to the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/master-circulars/jun-2024/guidelines-on-anti-money-laundering-aml-standards-and-combating-the-financing-of-terrorism-cft-obligations-of-securities-market-intermediaries-under-the-prevention-of-money-laundering-act-2002-a-_83942.html

9. Uploading of KYC information by KYC Registration Agencies (KRAs) to Central KYC Records Registry (CKYCRR)

SEBI vide Circular SEBI/HO/MIRSD/SEC FATF/P/CIR/2024/ 79 dated June 06, 2024, notified amendment in ‘Master Circular on KYC Norms’ with respect to Uploading of KYC information by KYC Registration Agencies (KRAs) to Central KYC Records Registry (CKYCRR).

The intermediaries performing Client Due Diligence are required to upload the KYC record of a client on the system of KRAs as per the provisions of SEBI KRA Regulations, 2011. Additionally, the intermediaries upload the KYC information on CKYCRR as per the SEBI master circular SEBI/HO/MIRSD/SECFATF/P/CIR/2023/169 on KYC norms in the securities market dated October 12, 2023.

Based on the feedback received from stakeholders in the securities market and to Enable Ease of Doing Business, the following are notified to streamline the KYC process:

Registered intermediaries shall continue to upload/ download/ modify the KYC information with proper authentication on the systems of KRA, as per the provisions of SEBI KRA Regulations, 2011.
KRAs shall upload the verified/ validated KYC information onto the system of CKYCRR within 7 days of receiving the same from intermediaries or any other timeline as notified under PML Rules. The KRAs shall integrate their systems with CKYCRR and commence the uploading of KYC records on CKYCRR from August 01, 2024.
KRAs shall ensure that existing KYC records of legal entities and individual clients are uploaded to CKYCRR within 6 months from August 01, 2024.

The link to the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/jun-2024/uploading-of-kyc-information-by-kyc-registration-agencies-kras-to-central-kyc-records-registry-ckycrr-_84006.html

10. Consultation Paper on Flexibility in Participation by Mutual Funds in Credit Default Swaps (CDS)

SEBI on June 07, 2024, issued a consultation paper to seek comments on the proposal for allowing and enhancing greater flexibility in participation by Mutual Funds in Credit Default Swaps (CDS).

CDS means a Credit Derivative Contract in which one counterparty (protection seller) commits to pay to the other counterparty (protection buyer) in the case of a credit event with respect to a reference entity and in return, the protection buyer makes periodic payments (premium) to the protection seller until the maturity of the contract or the credit event, whichever is earlier.

Under the current regulatory framework, Mutual Funds in India are permitted to participate in CDS transactions only as users i.e., to buy credit protection only to hedge the credit risk on corporate bonds held by them. The aforesaid transaction can be undertaken by Mutual Funds only in the portfolio of Fixed Maturity Plans (FMP) schemes having a tenor of more than 1 year.

In this consultation paper, comments are sought for the proposal to allow the participation of Mutual Funds in CDS buying (for all schemes), CDS selling (for all schemes except Overnight and Liquid), and the detailed framework in this regard.

Due to the revised RBI guidelines which include Mutual Funds under CDS sellers and based on detailed consultation with the stakeholders, the proposal is made to allow greater flexibility to Mutual Funds to both buy and sell CDS under a standard framework to ensure adequate risk management. It shall serve as an additional investment product for Mutual Funds and also aid in increasing liquidity in the corporate bond market.

The link for the aforesaid Consultation Paper is as follows:
https://www.sebi.gov.in/reports-and-statistics/reports/jun-2024/consultation-paper-on-flexibility-in-participation-by-mutual-funds-in-credit-default-swaps-cds-_84021.html

11. Master Circular for Portfolio Managers

SEBI vide Circular SEBI/HO/IMD/IMD-POD-1/P/CIR/2024/80 dated June 07, 2024, issued a revised Master Circular on Portfolio Managers consolidating all the relevant circulars, guidelines and directions issued by SEBI till March 31, 2024.

This updated Master Circular aims to provide comprehensive access to applicable circulars, guidelines, and directions in a single document for Portfolio Managers.

The link for the aforesaid Master Circular is as follows:
https://www.sebi.gov.in/legal/master-circulars/jun-2024/master-circular-for-portfolio-managers_84026.html

12. Consultation Paper on Review of Eligibility Criteria of Stock Derivatives in line with the market growth

SEBI on June 08, 2024, issued a consultation paper to seek comments from all stakeholders on updating the selection criteria for entry and exit of stocks in the derivatives market.

Derivative markets enhance price discovery and market liquidity. However, without sufficient depth in the underlying cash market and appropriate position limits around leveraged derivatives, there is a higher risk of market manipulation, increased volatility, and compromised investor protection.

Derivatives contracts on stocks can be traded on recognized stock exchanges only if the underlying stocks satisfy certain objective criteria. Such criteria were last reviewed in 2018.

The eligibility criteria for the introduction of stocks in the derivatives segment are as under:

The stock shall be chosen from amongst the top 500 stocksin terms of Average Daily Market Capitalization and Average Daily Traded Value (ADTV) on a rolling basis,
The stock’s Median Quarter-Sigma Order Size(MQSOS) over the last six months, on a rolling basis, shall not be less than₹25 Lakh,
The Market Wide Position Limit(MWPL) in the stock shall not be less than ₹500 crore on a rolling basis, and
Average Daily Delivery Value(ADDV) in the cash market shall not be less than ₹10 crore on a rolling basis. (Note that on expiry, unlike index derivatives that are cash settled, single stock derivatives are physically settled).
The above criteria need to be met for a continuous period of 6 months.

If a stock fails to meet the abovementioned criteria for 3 months consecutively, then such stock shall exit from the derivatives segment. However, existing unexpired contracts are permitted to trade till expiry and new strikes may also be introduced in the existing contract months. Such criteria have been put in place to ensure that only stocks meeting certain size and liquidity criteria in the underlying scrip are eligible for the introduction of derivatives contracts.

Public comments are sought on the following:

Whether SEBI should review the eligibility criteria in line with the growth of broad market parameters reflecting the size and liquidity of the cash market
Whether the proposed revision in criterion related to MQSOS is appropriate
Whether the proposed revision in criterion related to MWPL is appropriate
Whether the proposed revision in criterion related to ADDV is appropriate
Whether SEBI should extend the product success framework to stock derivatives

The link for the aforesaid Consultation Paper is as follows:
https://www.sebi.gov.in/reports-and-statistics/reports/jun-2024/consultation-paper-on-review-of-eligibility-criteria-of-stock-derivatives-in-line-with-the-market-growth_84032.html

13. Ease of Doing Investments- Non-submission of ‘Choice of Nomination’

SEBI, vide circular no. SEBI/HO/MIRSD/POD-1/CIR/2023/193 dated December 27, 2023, extended the last date for submission of ‘choice of nomination’ for Demat Accounts and Mutual Fund folios to June 30, 2024, failing which demat accounts/folios shall be frozen for debits.

Further, as provided in the Master Circular for RTAs dated May 07, 2024, the security holders holding securities in physical form whose folio(s) do not have PAN, Choice of Nomination, Contact Details, Bank Account Details, and Specimen Signature updated, shall be eligible:

to lodge a grievance or avail any service request from the RTA only after furnishing PAN, KYC details, and Nomination.
for any payment including dividend, interest, or redemption payment in respect of such folios, only through electronic mode with effect from April 01, 2024. An intimation shall be sent by the Listed Company to the security holder that such payment is due and shall be made electronically only upon complying with the above requirements.

For ease of compliance and investor convenience, and based on representations received from the market participants, SEBI vide Circular SEBI/HO/MIRSD/POD-1/P/CIR/2024/81 dated June 10, 2024, decided the following for existing investors/ unitholders:

Non-submission of ‘choice of nomination’ shall not result in freezing of Demat Accounts as well as Mutual Fund Folios.
Securityholders holding securities in physical form shall be eligible for receipt of any payment including dividend, interest, or redemption payment as well as to lodge a grievance or avail any service request from the RTA even if ‘choice of nomination’ is not submitted by these securityholders.
Payments including dividend, interest, or redemption payment withheld presently by the Listed Companies/RTAs, only for want of ‘choice of nomination’ shall be processed accordingly.
All new investors/unitholders are mandatorily required to provide the ‘Choice of Nomination’ for demat accounts/ MF Folios (except for jointly held Demat Accounts and Mutual Fund Folios) to ensure smooth transmission of securities held by them as well as to prevent accumulation of unclaimed assets in the securities market.

All existing investors/ unitholders are encouraged to provide a ‘choice of nomination’ to ensure a smooth transmission of securities held by them and to prevent the accumulation of unclaimed assets in the securities market.

In the case of demat accounts, Depository Participants, and in case of mutual fund folios, AMCs, and RTAs encourage the demat account holders/ mutual fund unit holders to update their ‘choice of nomination’ by sending a communication on a fortnightly basis by way of emails and SMS to all such demat account holders/ mutual fund unit holders who have not provided the ‘choice of nomination’.

Further, to encourage the existing investors to provide a ‘choice of nomination’, a pop-up shall be provided on the web/mobile application/platform to the investors by Depositories and Depository Participants while logging into the Demat Account and by AMCs (including MF RTAs, other platforms providing online execution services) while logging into their MF account. This pop-up may be shown only to those clients whose MF Folios/demat account(s) do not have a ‘choice of nomination’. This provision shall be applicable from October 01, 2024.

All the other provisions of this Circular shall be effective immediately.

The link for the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/jun-2024/-a-ease-of-doing-investments-non-submission-of-choice-of-nomination-_84053.html

14. Modification in Framework for Offer for Sale (OFS) of Shares to Employees through Stock Exchange Mechanism

SEBI vide Master Circular dated October 16, 2023, specified the comprehensive framework on Offer for Sale (OFS) of shares through the stock exchange mechanism.

Further, SEBI vide Circular dated January 23, 2024, issued a Framework for Offer for Sale (OFS) of Shares to Employees through Stock Exchange Mechanism.

Paragraph 5 of the SEBI Circular dated January 23, 2024, prescribed the procedure for offering shares to the employees in OFS through stock exchanges.

Paragraphs 5 (i) and (vi) of the said circular states as under:

“5. (i) OFS to employees shall be on T+1 day along with the retail category under a new category called “Employee”.

(vi) Employees shall place bids only at the cut-off price of T+1 day. The allotment price shall be based on the Cut-off of the retail category, subject to discount, if any.”

SEBI vide Circular SEBI/HO/MRD/MRD-PoD-3/P/CIR/2024/82 dated June 14, 2024, decided that employees shall place bids on T+1 day at a cut-off price of T-day. Accordingly, paragraph 5(vi) of the SEBI Circular dated January 23, 2024, is modified as below:

“5. (vi) Employees shall place bids only at the cut-off price of T-day. The allotment price shall be based on the Cut-off of the T-day, subject to discount, if any.”

The provisions of this circular shall come into effect from the 30^th day of issuance of this circular.

The link for the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/jun-2024/modification-in-framework-for-offer-for-sale-ofs-of-shares-to-employees-through-stock-exchange-mechanism_84170.html

15. Modification in duration for Call Auction in pre-open session for Initial Public Offer (IPO) and Relisted scrips

SEBI vide Circular SEBI/HO/MRD/MRD-PoD-3/P/CIR/2024/85 dated June 20, 2024, modified the current provisions related to call auction sessions for IPO & relisted scrips and introduced additional surveillance measures at stock exchanges, to curb the misuse of the call auction session. The provisions of this circular shall be applicable from the 90^th day of issuance of the circular.

It was observed that during the call auction in the pre-open session for certain IPO and relisted scrips, orders were placed at a higher price in large volumes and a significant portion of such orders were cancelled just before the closure of the call auction session. This creates false demand and supply and possibly manipulates the price of the scrips to the detriment of common investors. Modifications are made as under:

1. Duration of Session:

The session shall be open for 60 minutes i.e. from 9:00 a.m. to 10:00 a.m., out of which — 45 minutes shall be allowed for order entry, order modification, and order cancellation, – 10 minutes for order matching and trade confirmation,- 5 minutes shall be the buffer period to facilitate the transition from pre-open session to the normal trading session.

The session shall close randomly during the last 10 minutes of order entry i.e. anytime between the 35^thand 45^th minute of the order entry window and such random closure shall be system-driven.

2. Stock Exchange to have additional surveillance mechanisms for pre-open call auction sessions for IPO or relisted scrips to avoid any kind of manipulation.

3. Stock Exchange shall generate alertsbased on the following indicative parameters:

The cancelled quantity for a particular client exceeds 5% of the total cancelled quantity across the market during the pre-open session.
The value of the cancelled quantity for a particular client exceeds 5% of the total value of the cancelled quantity across the market during the pre-open session.
cancelled quantity for a particular client exceeds 50% of the total quantity placed by that client during the pre-open session.
The value of the cancelled quantity for a particular client exceeds 50% of the total value of the quantity placed by that client during the pre-open session.
Modification of prices significantly away from previously placed order(s).
Stock exchanges can have additional parameters for generating alerts.

For the alerts generated based on the above parameters, stock exchanges shall provide a report to SEBI by the End of the Day (EOD). Further, based on analysis, stock exchanges shall seek explanations from the clients for the cancellations or modifications done by them during the pre-open session.

4. To enhance transparency in the pre-open call auction session, details of the number and quantity of cancelled orders shall also be displayed on the website of the stock exchange and terminals of Trading Members on a real-time basis for investors to make informed decisions on the pricing of such stocks.

The link for the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/jun-2024/modification-in-duration-for-call-auction-in-pre-open-session-for-initial-public-offer-ipo-and-relisted-scrips_84317.html

16. Introduction of a special call auction mechanism for price discovery of scrips of Listed Investment Companies (ICs) and Listed Investment Holding Companies (IHCs)

SEBI vide Circular SEBI/HO/MRD/MRD-PoD-3/P/CIR/2024/86 dated June 20, 2024, introduced a framework for “special call auction with no price bands” for effective price discovery of scrips of ICs and IHCs.

It is observed that scrips of a few listed ICs and IHCs are being traded infrequently and at a price that is significantly lower than the book value disclosed by these companies in their latest audited financial statements. Moreover, these companies generally have no day-to-day operations and hold investments in different asset classes including in scrips of other listed companies. The variance in the market price and book value of such ICs and IHCs is adversely affecting liquidity, fair price discovery, and the overall interest of investors in scrips of such companies.

a. Criteria for identification of ICs or IHCs eligible for special call-auction

The ICs or IHCs shall be identified based on the uniform industry classifications provided by stock exchanges.
The scrip of ICs or IHCs should have been listed and available for trading for at least 1 year and the said scrips are not suspended for trading.
Total assets of the company invested in scrips of other listed companies shall be at least 50%.
The 6-month Volume Weighted Average Price (VWAP) of the scrip shall be less than 50% of the book value per share of such company based on the present value of their investments in shares of other listed companies. In case the scrips of such ICs or IHCs are not traded during the previous 6 months, the 6-month VWAP of the scrip shall be taken as 0.

b. Procedure for Special Call Auction Mechanism:

Stock exchanges shall initiate the process for special call-auction with no price bands for eligible ICs or IHCs with a 14-day advance notice to the market. In case the company is listed on multiple stock exchanges, stock exchanges shall co-ordinate amongst themselves and the date of the special call auction session shall be uniform across the exchanges.
The notice shall be disclosed by the stock exchanges on their websites and appropriately brought to the knowledge of the investors. It shall include detailed information regarding the last traded price, the latest available overall book value of the company, book value based on the investments in scrips of other listed companies, the proportion of assets invested in other listed companies, price of the latest buy-back or delisting, if any, offered by the company, etc.
The special call auction session shall be treated as successful if price discovery is based on orders from at least 5 Permanent Account Number (PAN) based unique buyers and sellers. In case the scrip is listed on multiple stock exchanges and the call auction is successful on any one stock exchange, the price discovered at that stock exchange will form the base for trading at other stock exchanges.
If the call auction is not a success on day 1, it shall continue on the next day and till such time the price is discovered.
The special call auction mechanism shall be provided only once a year.

The provisions for other operational details regarding the duration of the session, market orders, matched and unmatched orders, equilibrium price, risk management, and surveillance mechanisms for the special call auction session will be the same as applicable to relisted scrips as mentioned in the Master Circular dated October 16, 2023, for “Stock Exchanges and Clearing Corporations” and modifications therein.

The first special call auction shall be conducted in October 2024 by stock exchanges based on the latest available audited financial statements of the companies. The subsequent special call auctions shall be done as and when the annual audited financial statements are published by the companies.

The link for the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/jun-2024/introduction-of-a-special-call-auction-mechanism-for-price-discovery-of-scrips-of-listed-investment-companies-ics-and-listed-investment-holding-companies-ihcs-_84319.html

17. System Audit of Professional Clearing Members (PCMs)

SEBI vide Circular SEBI/HO/MRD/TPD/P/CIR/2024/84 dated June 20, 2024, devised the framework for system audit of Professional Clearing Members (PCMs). The provisions of the Circular shall come into force with immediate effect. The first audit shall be conducted for FY 2023-24.

PCMs are required to conduct a System Audit as per the framework enclosed as Annexure 1 to the Circular and Terms of Reference (TOR) enclosed as Annexure 2 to the Circular. PCMs are also required to maintain a list of all the relevant SEBI and CCs circulars/ directions/ advice, etc. about technology and compliance thereof, as per the format enclosed as Annexure 3 of the Circular and the same shall be included under the scope of System Audit.

PCMs are also required to submit information about exceptional major Non-Compliances (NCs)/ minor NCs observed in the System Audit as per the format enclosed as Annexure 4 to the Circular and are required to categorically highlight those observations/NCs/suggestions pointed out in the System Audit (current and previous) which remain open.

The Systems Audit Report including compliance with SEBI/Clearing Corporations (CCs) circulars/guidelines and exceptional observation format along with compliance status of previous year observations shall be placed before the Governing Board of the PCM and then the report along with the comments of the Management of the PCM shall be communicated to CCs within 1 month of completion of the audit.

The link for the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/jun-2024/system-audit-of-professional-clearing-members-pcms-_84321.html

18. Master Circular for Electronic Gold Receipts (EGRs)

SEBI vide Circular SEBI/HO/MRD/MRD-PoD-1/P/CIR/2024/87 dated June 24, 2024, issued a Master Circular for Electronic Gold Receipts (EGRs).

SEBI has been issuing various Circulars from time to time for specifying the framework of EGRs, its risk management, Standard Operating Guidelines for Vault Managers & Depositories, etc.

To enable the stakeholders to have access to all the provisions mentioned in these circulars in one place, the provisions of the said circulars are incorporated in this Master Circular for EGRs. SEBI Master Circular No. SEBI/HO/MRD/MRD-PoD1/P/CIR/2023/82 dated June 1, 2023, on Electronic Gold Receipts (EGR) was a compilation of relevant circulars issued by SEBI till March 31, 2023.

This Master Circular incorporates all subsequent circulars issued on EGRs till May 31, 2024, and supersedes the Master Circular dated June 1, 2023, on EGRs. This Master Circular shall come into force from the date of its issue.

The link for the aforesaid Master Circular is as follows:
https://www.sebi.gov.in/legal/master-circulars/jun-2024/master-circular-for-electronic-gold-receipts-egrs-_84369.html

19. SEBI (Prohibition of Insider Trading) (Second Amendment) Regulations, 2024

SEBI vide Notification SEBI/LAD-NRO/GN/2024/184 dated June 25, 2024, issued SEBI (Prohibition of Insider Trading) (Second Amendment) Regulations, 2024 effective from 90^th day from the date of its publication in the Official Gazette i.e. September 23, 2024.

Amendments have been made in Regulation 5 relating to Trading Plan as follows:

A) In Regulation 5 (2)

a. Cooling Off Period: Clause (i) has been amended as follows:

The trading plan shall not entail commencement of trading on behalf of the insider earlier than 120 calendar days (earlier it was for 6 months) from the public disclosure of the plan.

To get the benefit of a trading plan, a cool-off period of 120 days is necessary. Companies declare their results quarterly and there exists a trading restriction, in terms of these Regulations, from quarter end to 2 days after the declaration of quarterly results, which, it is seen, is generally a period of around 1 month for most companies.

Thus, a 120-calendar day period is considered reasonably long for unpublished price-sensitive information that is in possession of the insider when formulating the trading plan, to become generally available.

It is also considered to be a reasonable period for a time lag in which new unpublished price-sensitive information may come into being without adversely affecting the trading plan formulated earlier. In any case, it should be remembered that this is only a statutory cool-off period and would not grant immunity from the action if the insider were to be in possession of the same unpublished price-sensitive information both at the time of formulation of the plan and implementation of the same.

b. Omission: Clause (ii) with respect to the trading plan not entailing to trade for the period between the 20^th trading day prior to the last day of any financial period for which results are required to be announced by the issuer of the securities and the 2^nd trading day after the disclosure of such financial results is omitted

c. Omission: Clause (iii) with respect to a trading plan entailing trading for a period of not less than 12 months is omitted

d. Trading Plan Parameters Clause (v) specifies that the trading plan shall set out the following parameters for each trade to be executed:

1. Either the value of trade to be effected or the number of securities to be traded (Mandatory);
2. Nature of the trade (Mandatory);
3. Either a specific date or time period not exceeding five consecutive trading days (Mandatory);
4. Price limit (shall be rounded off to the nearest numeral) that is an upper price limit for a buy trade and a lower price limit for a sell trade subject to the range as specified below (Optional):

For a buy trade: the upper price limit shall be between the closing price on the day before submission of the trading plan and up to 20% higher than such closing price;

For a sell trade: the lower price limit shall be between the closing price on the day before submission of the trading plan and up to 20% lower than such closing price.

Explanation:
Adjustments to the number of securities and price limit may be made with the approval of the Compliance Officer in the event of Corporate Actions such as bonus issues and stock splits and the same shall be notified on the stock exchanges on which securities are listed.

B) Restriction on Contra Trade

The second proviso in Regulation 5 (3) is omitted and now the restrictions on contra-trade apply to trades executed under an approved trading plan.

C) Trading Plan is Irrevocable

Regulation 5(4) has been amended which now states that once a trading plan is approved, it is irrevocable, except due to permanent incapacity, bankruptcy, or operation of law, and two more exceptions as mentioned below:

Non-Implementation of the Trading Plan

Except further that the implementation of the Trading Plan shall not be commenced if any UPSI is in possession of the Insider at the time of formulation of the Trading Plan and has not become generally available at the time of the commencement of its implementation. Now, the Compliance Officer is not required to confirm that the commencement of the Trading Plan ought to be deferred until such UPSI becomes generally available information to avoid violation.

A new proviso has been inserted which gives a further exception in execution as per Trading Plan, that if the Insider has set a price limit for trade as per revised parameters of Trading Plan, then the Insider shall execute the trade only if the execution price of the security is within the limit. If the price of the security is outside the price limit set by the insider, the trade shall not be executed.

Explanation for following the procedure for non-implementation of the Trading Plan

In case of non-implementation (full/partial) of the Trading Plan due to reasons such as permanent incapacity, bankruptcy, or operation of law or failure of execution of trade due to inadequate liquidity in the scrip, the following procedure shall be adopted:

The Insider shall intimate non-implementation (full/partial) of a trading plan to the Compliance Officer within 2 trading daysof the end of the tenure of the trading plan with reasons thereof and supporting documents, if any.
Upon receipt of information from the insider, the Compliance Officer, shall place such information along with his recommendation to accept or reject the submissions of the insider, before the Audit Committeein the immediate next meeting. The Audit Committee shall decide whether such non-implementation (full/partial) was bona fide or not.
The decision of the Audit Committeeshall be notified by the compliance officer on the same day to the stock exchanges on which the securities are listed.
In case the Audit Committee does not acceptthe submissions made by the insider, then the compliance officer shall take action as per the Code of Conduct.

Note:

It is not fair or desirable to permit the Insider to deviate from the Trading Plan based on which others in the market have assessed their views on the securities, except in situations beyond the control of the Insider.

In the note, the second proviso is inserted; hence, the existing proviso is numbered as the first. The exceptional matters have been provided as per regulation that, despite the 120 calendar days (earlier 6 months) gap between the formulation of the trading plan and its commencement, the UPSI in possession of the Insider is still not generally available, in such a situation, the commencement of the Trading Plan would conflict with the overriding principle that trades should not be executed when in possession of such UPSI. If the very same UPSI is still in the possession of the insider, the execution of the trading plan should not be commenced.

The new 2^nd proviso is inserted as follows:

The second proviso is intended to address the scenario where the insider has set a price limit for a trade and due to adverse fluctuations in market prices, the price of the security is outside the price limit set by the insider, the trade shall not be executed. However, if the insider wishes to trade irrespective of the fluctuation in market price, he may not set any price limit at the time of formulation of the trading plan.

D) Sub-regulation (5) has been substituted and it now states that the Compliance Officershall approve or reject the trading plan within 2 trading days of receipt of the trading plan and notify the approved plan of the stock exchanges on which the securities are listed on the day of approval.

The link for the aforesaid Notification is as follows:
https://egazette.gov.in/(S(a1tuyg3jm1l1aqw0n4pntsgj))/ViewPDF.aspx

20. Consultation Paper on recommendations of the Expert Committee for facilitating ease of doing business and harmonization of the provisions of ICDR and LODR Regulations

SEBI released a Consultation Paper on June 26, 2024, to seek comments, views, and suggestions from the public and stakeholders regarding the recommendations of the Expert Committee with respect to enhancing the ease of doing business under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, and SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018.

A summary of recommendations for ease of doing business under the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 is as follows:

S.No	Subject	Existing Provisions	Recommendation
1.	Review of price band advertisement and other issue-related advertisements	The existing regulations require issuers that have not disclosed the floor price or the price band in the red herring prospectus (RHP), such floor price or the price band to be announced through a price band advertisement, in the same newspapers in which the pre-issue advertisement was published	The existing regulations require issuers that have not disclosed the floor price or the price band in the red herring prospectus (RHP), such floor price or the price band to be announced through a price band advertisement, in the same newspapers in which the pre-issue advertisement was published.
2.	Eligibility conditions for an IPO	Companies are not eligible to make an IPO if there are any outstanding convertible securities or any other right that would entitle any person with an option to receive equity shares of such issuer company. The above restriction would not apply to outstanding options under ESOP.	The proposed recommendation is allowing issuers with outstanding stock appreciation rights (SARs) to file DRHP where such SARs are granted to employees only and are fully exercised for equity shares prior to the filing of the RHP.
3.	Disclosure of pre-IPO transactions	Reporting of all transactions by promoter and members of the promoter group between the date of filing of the draft offer document and the closure of issuance to the stock exchanges, within 24 hours of such transactions.	Now, it is recommended that the issuer needs to disclose pre-IPO transactions after filing of DRHP and details pertaining to such transactions to stock exchange(s).
4.	Promoter lock-in period where issue proceeds are used for repayment of loans and such loans have been utilized for Capital Expenditure.	If the majority of the issue proceeds are used for the repayment of loans availed for any capital expenditure, the issuers are required to apply a lock-in period for promoters (three years for the minimum promoters’ contribution and one year for the promoters’ remaining shareholding)	In the explanation it is recommended to add that: “capital expenditure” for this regulation shall include civil work, miscellaneous fixed assets, purchase of land, building and plant and machinery, etc., and repayment of a loan taken for the purpose of such capital expenditure.

A summary of recommendations for ease of doing business under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is as follows:

S.No	Subject	Existing Provisions	Recommendation
1.	Single Filing System	Both BSE and NSE have their own filing platforms.	The filing done on one stock exchange to be automatically disseminated to other stock exchanges using an API-based integration.
2.	System driven disclosure	Shareholding Pattern to be disclosed by Listed Entity quarterly/ 1 day prior to the listing of securities/ 10 days of any capital restructuring. New rating(s) or revision in credit rating(s) shall be disclosed to stock exchanges.	Disclosure of shareholding pattern to be automated at the end of depositories and stock exchanges. *Frequency- Monthly basis* Disclosure of new or revision in credit ratings to be automated at the end of stock exchanges. *Frequency- Event based*
3.	Timeline to fill up vacancies in Board committees	No specific timelines have been provided in the Regulations to fill up vacancies in Board Committees arising as a result of vacancy in the office of a director.	Vacancies in the Board Committees are to be filled up < 3 months from the date of such vacancy.
4.	Obligations on promoter/promoter group/directors / KMP to disclose information to the listed entity	No specific obligation on the promoter(s), directors, or KMP to make a disclosure, i.e. the obligation was upon the listed entities	To introduce a provision that requires the promoter, promoter group, KMP, directors, or any other person dealing with the listed entity to disclose all information necessary for the listed entity to ensure compliance with LODR and other applicable laws.
5.	Approval of RPTs by the Audit Committee of the listed entity	Prior approval of the audit committee of the listed entity is required for all RPTs to which the listed entity is a party.	a) Remuneration & sitting fee to Directors/ KMP/ Senior Mgt. except who is part of the promoter or promoter group, may be exempted from the requirement of approval of the Audit Committee b) Post-facto ratification of RPTs by the Audit Committee within 3 months from the date of the transaction or the immediate next meeting of the audit committee, whichever is earlier subject to the following conditions: 1. Value of transaction with RPT in one F.Y. < 1 Cr 2. The transaction is not material 3. Rationale for inability to seek prior approval be placed before the Audit Committee. 4. The details of ratification are disclosed along with the half-yearly disclosures of RPTs. Failure to seek ratification of the Audit Committee shall render the transaction voidable at the option of the board of directors.
6.	Omnibus approval of RPTs by the audit committee	The provisions to grant omnibus approval for RPTs apply to listed entities.	The provisions of omnibus approval are to be made applicable to RPTs by subsidiary Companies as well
7.	Timeline for disclosure of material events or information	Disclosure of the Outcome of the Board Meeting is to be made within 30 minutes of the closure of the Board Meeting. Schedule III other information to be disclosed within 24 hours	The timeline for disclosure of events that are decided in the meeting of the Board may be as follows based on the time of closure of the board meeting: A) disclosure shall be made within 3 hours from the closure of BM in case: Board Meeting closes after the normal trading hours but more than 3 hours before the beginning of the next normal trading hours. (i.e. after 03:30 PM and till 06: 15 A.M) B) disclosure shall be made within 30 minutes from the closure of BM in case: Board Meeting closes during the normal trading hours or within 3 hours before the beginning of the normal trading hours. (i.e. 06: 15 A.M.- 03: 30 P.M.) In case of litigations or disputes wherein claims are made against the listed entity: revised timeline < 72 hours
8.	Disclosure of imposition of penalty	Disclosure of Action(s) taken or orders passed by any regulatory, statutory, enforcement authority or judicial body in case of non-disclosure of information timely	Monetary limit for disclosure of imposition of penalty: a) A lower threshold of Rs. 10,000 may be applicable for disclosure of penalties levied by sectoral regulators or enforcement agencies within 24 hours. The list of sectoral regulators and enforcement agencies may be specified in the Industry Standards. b) A higher threshold of Rs. 10 lacs may be applicable for disclosure of penalties levied by other authorities within 24 hours. c) Penalties levied which are lower than the monetary thresholds – may be disclosed every quarter, as part of the Integrated Filing (Governance).
9.	Record date	a) Time gap between intimation and actual record date- 7 working days. b) Minimum gap between two record dates- 30 days. c) Minimum gap between two book closures- 45 days.	a) 7 working days time reduced to 3 working days. b) 30-day time reduced to 5 working days. c) Omitted.
10.	Annual Reports	To send physical copies of the abridged Annual Report to shareholders whose email ID is not available. To dispatch Annual Reports to the holders of securities, not less than 21 days before the AGM. The copy of the Annual Report to be sent to shareholders not later than the day of commencement of dispatch to its shareholders.	Instead of sending the abridged Annual Report a letter to be sent to such shareholders indicating the link from which the annual report can be downloaded. Omitted The timeline revised to on or before the commencement of dispatch to shareholders.
11.	Postal Ballots	–	Postal ballots are to be substituted with remote e-voting. (Voting timeline 7 days)
12.	Virtual/electronic and hybrid shareholder meetings	–	To permit virtual general meetings and, hybrid general meetings permanently. Notice period for electronic/virtual meetings to be reduced to 7 days in place of 21 days. The requirement to send proxy forms for general meetings held virtually to be dispensed with.
13.	Secretarial Auditor	–	Provisions relating to the appointment, and reappointment of Secretarial Auditors be inserted in LODR Regulations in line with the provisions of Statutory Auditors provided under the Companies Act, 2013. Appointment related An individual may be appointed as a Secretarial Auditor for a term of 5 years and a Firm may be appointed for a maximum of two terms of 5 years each subject to approval of shareholders in a general meeting. Eligibility The Secretarial Auditor shall be a peer-reviewed Company Secretary/ Firm. Cooling Off period A cooling-off period of 5 years for re-appointment of an individual [after 1 term of 5 years]. A cooling-off period of 5 years for re-appointment of a firm [after 2 terms of 5 years]. Removal Provisions relating to the removal of the Secretarial Auditor may be inserted. * From April 1, 2025, appointment, re-appointment or continuation of the Secretarial Auditor shall comply with the aforesaid provisions. Also, w.e.f. 01.04.2025, the Secretarial Compliance Report submitted is to be signed only by the eligible Secretarial Auditor or by a Peer Reviewed Firm.
14.	Compensation/profit sharing agreements surviving after listing	–	Any pre-listing compensation or profit-sharing agreement that subsists after listing would require ratification of shareholders in the first general meeting held after listing.

The summary of the recommendations is as per the link below:
Expert Committee report on ICDR and LODR-new_p.pdf (sebi.gov.in)

The link for the aforesaid Consultation Paper is as follows:
https://www.sebi.gov.in/reports-and-statistics/reports/jun-2024/consultation-paper-on-recommendations-of-the-expert-committee-for-facilitating-ease-of-doing-business-and-harmonization-of-the-provisions-of-icdr-and-lodr-regulations_84421.html

21. Master Circular for Mutual Funds

To enable the stakeholders to have access to all the applicable regulatory requirements in one place, the provisions of the said circulars issued till March 31, 2024, are incorporated in this Master Circular for Mutual Funds issued vide Master Circular SEBI/HO/IMD/IMD-PoD-1/P/CIR/2024/90 dated June 27, 2024.

The instant Master Circular supersedes the Master Circular for Mutual Funds dated May 19, 2023.

The link for the aforesaid Master Circular is as follows:
https://www.sebi.gov.in/legal/master-circulars/jun-2024/master-circular-for-mutual-funds_84441.html

22. SEBI Board Meeting

The SEBI Board met on June 27, 2024, where it, inter alia, approved the following:

1. Unregulated Entities

Association of persons regulated by the SEBI with persons who directly or indirectly provide advice or recommendations without being registered with SEBI or make any implicit or explicit claim of return or performance in respect of or related to a security or securities. To address the concerns related to certain persons including unregulated entities inducing investors to deal in securities based on inappropriate claims, SEBI approved the proposal on the association of persons regulated by it and the agents of such persons with other specified persons.

2. Flexibility in Voluntary Delisting:

Amendment to SEBI (Delisting of Equity Shares) Regulations, 2021

To facilitate ease of doing business, protect the interest of investors, and provide flexibility in the Voluntary Delisting framework, the Board has approved the following:

Introduction of Fixed Price process as an alternative to Reverse Book Building (RBB) process for delisting of companies whose shares are frequently traded.
Introduction of an alternate delisting framework for listed Investment Holding Companies (IHC) through a scheme of arrangement by way of selective capital reduction.
Modification of Counter-Offer mechanism in case of Delisting of RBB process.
Introduction of Adjusted Book Value for determining floor price of frequently and infrequently traded shares under delisting framework except for the Public Sector Undertakings.
Modification of the reference date for computing floor price from the existing requirement of approval of the board to the date of initial public announcement for voluntary delisting as in the case of Takeover Regulations.

3. Proposal to facilitate ease of doing business with respect to the additional disclosure framework for FPIs

To facilitate ease of doing business for FPIs, SEBI approved the proposal to exempt University Funds and University-related Endowments, registered or eligible to be registered as Category I FPI, from additional disclosure requirements prescribed under SEBI Circular dated August 24, 2023, subject to certain conditions.

4. Flexibility in SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 for streamlining the public issue process for debt securities and Non-Convertible Redeemable Preference Shares (NCPRS)

1. Reduction in the period for seeking public comments on the draft offer documents from 7 working days to 1 day for issuers whose specified securities are already listed and 5 days for other issuers.
2. Reduction in the minimum subscription period to 2 working days from 3 working days.
3. Reduction in the listing timeline to T+3 working days from T+6 working days (as an option to issuers for one year and on a mandatory basis thereafter such that all listings occur on a T+3 basis).
4. Flexibility to issuers by providing discretion to issuers with regard to advertisement of public issues through electronic modes subject to a window advertisement (containing a QR Code and Link to full advertisement) in newspapers.
5. Mandatory UPI usage for individual investors for applying in public issues of Debt securities and NCRPS through Intermediaries in case of specified securities where the investment is upto Rs. 5 lakhs.

5. Measures towards Ease of Doing Business-

Amendments to SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 pertaining to rationalization of disclosure requirements in the offer document for non-convertible securities and modification in timeline of intimation to Stock Exchanges for listed Commercial Paper

Deletion of disclosure regarding Permanent Account Number (PAN) and personal address of promoters of the issuers in the offer document.
Clarification that the time period for key operational and financial parameters will be disclosed in line with the requirement for financial information.
Enabling disclosures regarding details of branches and details of vendors in case immovable property is purchased from issue proceeds to QR code and weblink.
Alignment of Disclosures regarding utilization of issue proceeds with ICDR Regulations.
Alignment of timeline for submission to Stock Exchanges regarding the status of payment obligations for listed commercial paper with listed debt securities.

6. Measures to facilitate Ease of Doing Business for Infrastructure Investment Trusts and Real Estate Investment Trusts (InvITs and REITs)

The Investment Manager of InvIT / Manager of REIT may convene a meeting of the unitholders by giving a notice shorter than 21 days subject to the prior consent of the unitholders.
The statement of investor complaints shall be placed, every quarter, before the Board of Directors of the Investment Manager of InvIT / Manager of REIT and the Trustee.
Alignment of timeline for disclosure of statement of deviation(s) or variation(s), in the use of proceeds from the stated objects, to the stock exchange(s) along with submission of financial results.
Clarification on voting thresholds in terms of percentage and providing an e-voting option and an option to attend meetings through electronic mode to all the unitholders, for all unitholders’ meetings.
Maintenance of records in electronic form along with backup-related norms and disaster recovery site.
Reduced Trading Lot for privately placed InvITs to Rs. 25 lakhs.
Change in sponsor or inducted sponsor in case of an InvIT shall mean any change due to the entry of a new sponsor or exit of an existing sponsor.
Revision of timelines for payment of distribution to 5 working days from the record date. The record date shall be the date which is 2 working days from the date of declaration of distribution, excluding the date of declaration and the record date.

7. for borrowing by Category I and II AIFs (facilitating ease of doing business) and specifying of maximum permissible limit for extension of tenure by Large Value Funds

To facilitate ease of doing business and provide operational flexibility to Alternative Investment Funds (AIFs), SEBI approved the proposal to permit Category I and II AIFs to borrow for a period of up to 30 days to meet the temporary shortfall in drawdown from investors, while making investments. To curtail any possible roll-over of borrowing, there shall be a cooling-off period of 30 days between two borrowings availed by Category I and II AIFs.

SEBI approved the proposal to limit any extension of LVF tenure to 5 years, subject to the approval of 2/3^rd of the unit holders by value for such extension. Thereafter, if the fund is still not liquidated, the LVF can opt for a further dissolution period as is the case for other AIFs.

Existing LVF schemes that have not specified a cap in the extensions in tenure in their PPMs or whose extension period is beyond the permissible 5 years, shall align the same with the aforesaid requirement, within 3 months from the date of issuance of circular in this regard.

8. Proposal to facilitate an optional mechanism for fee collection by SEBI registered Investment Advisers (IAs) and Research Analysts (RAs)

This optional fee collection mechanism shall facilitate investors for availing the services and making the payment of fees only to registered IAs and Ras, creating trust in the ecosystem. The mechanism shall give recognition to registered IAs and RAs and help investors differentiate them from unregistered entities acting as IAs and RAs. The mechanism has been kept optional based on public consultation.

9. Parameters for Independent ExternalEvaluation of Market Infrastructure Institutions

To provide basic minimum criteria for assessing the performance of stock exchanges, clearing corporations, and depositories in terms of the requirements as stipulated in the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 and SEBI (Depositories and Participants) Regulations, 2018, SEBI approved broad minimum parameters that should be considered by external evaluators.

SEBI also approved that such external evaluation shall take place once every 3 years with the first such assessment to be conducted within 12 months from the date of implementation of this mechanism.

10. Cybersecurity and Cyber Resilience Framework (CSCRF) for SEBI Regulated Entities (REs)

SEBI approved the Cybersecurity and Cyber Resilience Framework (CSCRF) for SEBI Regulated Entities (REs) which is a standard-based framework and broadly covers the five cyber resiliency goals, viz. Anticipate, Withstand, Contain, Recover, and Evolve which are adopted from CERT-In Cyber Crisis Management Plan (CCMP), for countering Cyber Attacks and Cyber Terrorism.

CSCRF follows a graded approach and classifies the REs into 5 categories based on their span of operations and certain thresholds including number of clients, trade volume, and asset under management.

Market Infrastructure Institutions (MIIs)
Qualified REs
Mid-size REs
Small-size REs
Self-certification REs

CSCRF framework provides a structured methodology to implement various solutions for cybersecurity and cyber resiliency.

11. Proposal to remove Financial Disincentive applicable to Managing Director and Chief Technology Officer of MIIs on account of Technical Glitch

SEBI proposes to remove the Financial Disincentive automatically imposed on MD and CTO of MIIs in the event of technical glitches like disaster, at MIIs.

12. Review of eligibility criteria for entry/exit of stocks in the derivatives segment

To ensure the continued development of a vibrant securities market ecosystem with appropriate regulation and investor protection, SEBI approved a revision in eligibility criteria for the entry and exit of stocks in the derivatives segment of exchanges.

The criteria for exit shall apply to only those stocks that have completed at least 6 months from the month of entry into the derivative segment. For existing stocks in the derivatives segment, the exit criteria based on performance would be applicable 3 months after the date of issuance of the circular.

A Product Success Framework (PSF) has been introduced in single stock futures and options, to ensure that the liquidity and participation witnessed in the derivative markets are supportive of market development, regulation, and investor protection. PSF shall apply 6 months from the date of issuance of the circular. The eligibility criteria for entry/ exit of stocks in/from the derivatives segment based upon the performance of stocks in the underlying cash market:

S. No.	Evaluation Metric	Revised Criteria
1	Average Daily Market Capitalization and Average Daily Traded value (ADTV) in the previous six months on a rolling basis	Amongst the top 500 stocks
2	The stock’s Median Quarter Sigma Order Size (MQSOS) over the last 6 months, on a rolling basis, shall not be less than	INR 75 Lakh
3	The stock’s market-wide position limit (MWPL) on a rolling basis shall not be less than	INR 1,500 crore
4	The stock’s Average daily delivery value (ADDV) in the cash market, in the previous 6 months on a rolling basis, shall not be less than	INR 35 crore

The link for the aforesaid Press Release is as follows:
https://www.sebi.gov.in/media-and-notifications/press-releases/jun-2024/sebi-board-meeting_84448.html

23. Consultation Paper on disclosure of Risk-Adjusted Return by Mutual Funds

SEBI released a Consultation Paper on June 28, 2024, to seek comments/views from the public on the proposal regarding the disclosure of Risk-Adjusted Return of the portfolio of a Mutual Fund scheme (MF Scheme), thereby enabling informed investment decisions by the investors.

Proposals are made on the following:

Mandatory disclosure of Risk-Adjusted Return (RAR) along with the return of an MF scheme
Methodology for calculation of Information Ratio (IR) for different categories of Mutual Fund schemes
The IR of MF schemes may be calculated and disclosed daily on the websites of respective AMCs, along with on the website of AMFI. The same may also be disclosed in the SID and KIM of a scheme along with all other platforms.
Currently, for schemes, that are in existence for less than 6 months, disclosure of past performance is not mandatory. Accordingly, for such schemes, disclosure of the IR may also not be required. Further, if a scheme has been in existence for more than 6 months but less than 1 year, IR based on the annualized return of the scheme for the past 6 months may be disclosed in line with the current guidelines along with disclosure of performance.
Format for disclosure of IR

The link for the aforesaid Consultation Paper is as follows:
https://www.sebi.gov.in/media-and-notifications/press-releases/jun-2024/sebi-board-meeting_84448.html

24.Facility for Basic Services Demat Account (BSDA) for Financial Inclusion and Ease of Investing

SEBI vide Circular SEBI/HO/MIRSD/MIRSD-PoD1/P/CIR/2024/91 dated June 28, 2024, launched a facility for Basic Services Demat Account (BSDA) for Financial Inclusion and Ease of Investing. This circular shall come into effect from September 01, 2024.

This facility, first introduced in 2012 and revised in 2019, aims to encourage more individuals to hold demat accounts and participate in the securities market. Key revisions have been made to boost participation and streamline processes.

A. Eligibility for BSDA

An individual shall be eligible to opt for BSDA subject to the following conditions:

The individual has or proposes to have only 1 demat account where he/she is the sole or first holder.
The individual shall have only 1 BSDA in his/her name across all depositories.
Value of securities held in the Demat account shall not exceed Rs. 10 Lakhs for debt and other than debt securities combined at any point in time.

B. Opening of BSDA and conversion of existing eligible demat accounts into BSDA

DPs are directed to open only BSDA for eligible accounts unless the Beneficial Owners (BOs) opt for a regular demat account. The DPs shall also reassess the eligibility of all the existing BOs with respect to BSDA within 2 months from the date of this circular coming into effect and shall convert all such eligible demat accounts into BSDA unless such BOs specifically provide their consent by way of email from their email-id registered with the DP to continue to avail the facility of a regular demat account. Later, this exercise shall be carried out by DPs at the end of every billing cycle.

C. Charges

Accounts with the value of holdings up to INR 4 lakhs will not incur any annual maintenance charges (AMC), while those with holdings between INR 4 lakhs and INR 10 lakhs will incur an AMC of INR 100. Accounts exceeding INR 10 lakhs are not eligible for BSDA and will be subject to regular AMC rates. Other services and charges for BSDAs will be on par with non-BSDA accounts.

The value of holding shall be determined by the DPs based on the daily closing price or NAV of the securities or units of mutual funds, as the case may be. Where such price is not available, the last traded price may be taken into account and for unlisted securities other than units of mutual funds, face value may be taken into account. The value of suspended securities may not be considered for determining the eligibility of a demat account as BSDA.

If the value of holding in such BSDA exceeds the prescribed criteria at any date, the DPs may levy charges as applicable to regular accounts (non-BSDA) from that date onwards.

D. Services for Basic Services Demat Accounts

Electronic statements will be provided free of cost. Physical statements may incur a fee of up to INR 25 per statement.

The link for the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/jun-2024/facility-for-basic-services-demat-account-bsda-for-financial-inclusion-and-ease-of-investing_84470.html

25. SEBI (Stock Brokers) (Amendment) Regulations, 2024

SEBI vide Notification SEBI/LAD-NRO/GN/2024/186 dated June 27, 2024, notified the SEBI (Stock Brokers) (Amendment) Regulations, 2024 amending the Original Regulation SEBI (Stock Brokers) Regulations, 1992. The Amendment Regulations shall be effective from the date of their publication in the Official Gazette.

A new Chapter IVA has been inserted relating to the Institutional Mechanism for the Prevention and Detection of Fraud or Market Abuse.

The link for the aforesaid Notification is as follows:
https://egazette.gov.in/(S(vtn1nxytdgptir2s21fs2hbs))/ViewPDF.aspx

26. SEBI (Foreign Portfolio Investors) (Second Amendment) Regulations, 2024

SEBI vide Notification SEBI/LAD-NRO/GN/2024/185 dated June 26, 2024, notified the SEBI (Foreign Portfolio Investors) (Second Amendment) Regulations, 2024 amending the Original Regulation SEBI (Foreign Portfolio Investors) Regulations, 2019. The Amendment Regulations shall be effective from the date of their publication in the Official Gazette.

Regulation 4(c) for the Eligibility criteria of Foreign Portfolio Investors has been amended to specify the conditions due to which Non-Resident Indians or Overseas Citizens of India or Resident Indian Individuals may be constituents of the applicant:

the contribution of a single non-resident Indian or overseas citizen of India or resident Indian individual shall be below 25% of the total contribution in the corpus of the applicant;
the aggregate contribution of non-resident Indians, overseas citizens of India, and resident Indian individuals in the corpus of the applicant shall be below 50% of the total contribution in the corpus of the applicant;
the contribution of resident Indian individuals shall be made through the Liberalised Remittance Scheme notified by RBI and shall be in global funds whose Indian exposure is less than 50%;
the non-resident Indians, overseas citizens of India, and resident Indian individuals shall not be in control of the applicant; and
any other conditions as may be specified by SEBI from time to time

A new proviso has been inserted which states that the provisions of sub-clause (ii) above shall not apply to an applicant, regulated by the International Financial Services Centres Authority and based in the International Financial Services Centres in India and subject to conditions as may be specified by SEBI.

Provided further that the existing exemptions specified by SEBI in relation to the conditions stated above as of the date of notification of the SEBI (Foreign Portfolio Investors) (Second Amendment) Regulations, 2024 shall continue to remain in force.

The link for the aforesaid Notification is as follows:
https://egazette.gov.in/(S(vtn1nxytdgptir2s21fs2hbs))/ViewPDF.aspx

27. SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) (Amendment) Regulations, 2024

SEBI vide Notification SEBI/LAD-NRO/GN/2024/187 dated June 27, 2024, notified the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) (Amendment) Regulations, 2024 amending the Original Regulation SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003. The Amendment Regulations shall be effective from the date of their publication in the Official Gazette.

Vide this Notification:

1. Definition of dealing in securities is amended to include the act of buying, selling, or subscribing pursuant to any issue of any security or agreeing to buy, sell, or subscribe to any issue of any security or otherwise transacting in any way in any security by any persons including as principal, agent, or intermediary referred to in section 12 of the Act either by themselves or through mule accounts.

2. Definition of Mule Account is inserted to include a trading account maintained with a stock broker or a dematerialized account or bank account linked with such trading account in the name(s) of a person, where the account is effectively controlled by another person, whether or not the consideration for transactions in the account are paid by such other person.

3. Person prohibited- Explanation to Regulation 4(1) with respect to a person prohibited from indulging in manipulative, fraudulent, and unfair trade practices has been substituted as follows:

any act of diversion, misutilization, or siphoning off of assets or earnings of a company whose securities are listed or any concealment of such act or any device, scheme, or artifice to manipulate the books of accounts or financial statement of such a company that would directly or indirectly manipulate the price of securities of that company, or
transactions through mule accounts for indulging in manipulative, fraudulent, and unfair trade practices.

The link for the aforesaid Notification is as follows:
https://egazette.gov.in/(S(vtn1nxytdgptir2s21fs2hbs))/ViewPDF.aspx

Amendments in Securities Law

Amendments by SEBI in June 2024

1. Master Circular for Bankers to an Issue registered with SEBI

2. SEBI’s Mobile App on Personal Finance for investors

3. Disclosures of Material Changes and Other Obligations for Foreign Portfolio Investors (FPIs)

4. Enhancement of operational efficiency and Risk Reduction - Pay-out of securities directly to client demat account

5. Framework for providing flexibility to Foreign Portfolio Investors in dealing with the securities post-expiry of their registration

6. Review of Facility for Basic Services Demat Account (BSDA) for Financial Inclusion and Ease of Investing

7. Framework of “Financial Disincentives for Surveillance-Related Lapses” (FDSRL) at Market Infrastructure Institutions (MII)

8. Guidelines on Anti-Money Laundering (AML) Standards and Combating the Financing of Terrorism (CFT) /Obligations of Securities Market Intermediaries under the Prevention of Money Laundering Act, 2002, and Rules framed there under

9. Uploading of KYC information by KYC Registration Agencies (KRAs) to Central KYC Records Registry (CKYCRR)

10. Consultation Paper on Flexibility in Participation by Mutual Funds in Credit Default Swaps (CDS)

11. Master Circular for Portfolio Managers

12. Consultation Paper on Review of Eligibility Criteria of Stock Derivatives in line with the market growth

13. Ease of Doing Investments- Non-submission of ‘Choice of Nomination’

14. Modification in Framework for Offer for Sale (OFS) of Shares to Employees through Stock Exchange Mechanism

15. Modification in duration for Call Auction in pre-open session for Initial Public Offer (IPO) and Relisted scrips

16. Introduction of a special call auction mechanism for price discovery of scrips of Listed Investment Companies (ICs) and Listed Investment Holding Companies (IHCs)

17. System Audit of Professional Clearing Members (PCMs)

18. Master Circular for Electronic Gold Receipts (EGRs)

19. SEBI (Prohibition of Insider Trading) (Second Amendment) Regulations, 2024

20. Consultation Paper on recommendations of the Expert Committee for facilitating ease of doing business and harmonization of the provisions of ICDR and LODR Regulations

21. Master Circular for Mutual Funds

22. SEBI Board Meeting

23. Consultation Paper on disclosure of Risk-Adjusted Return by Mutual Funds

24.Facility for Basic Services Demat Account (BSDA) for Financial Inclusion and Ease of Investing

25. SEBI (Stock Brokers) (Amendment) Regulations, 2024

26. SEBI (Foreign Portfolio Investors) (Second Amendment) Regulations, 2024

27. SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) (Amendment) Regulations, 2024

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