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Amendments in Securities Law

1. SEBI (Index Providers) Regulations, 2024

SEBI vide notification no. SEBI/LAD-NRO/GN/2024/167 dated March 08, 2024, notified a new regulation known as Securities and Exchange Board of India (Index Providers) Regulations, 2024 which shall come into force on the 180th day from the date of their publication in the Official Gazette i.e from September 04, 2024.

This regulation has been notified to foster transparency and accountability in the governance and administration of financial benchmarks in the securities market.

This regulation shall apply only to Index Providers that administer Significant Indices consisting of securities listed on a recognized stock exchange in India for use in the Indian securities market. In accordance with the said regulations, Significant Indices mean Indices administered by an Index Provider, which are tracked or benchmarked by domestic mutual fund schemes with the cumulative assets under management exceeding the limits as may be specified from time to time.

The regulation consists of the following:

  1. Preliminary
  2. Registration of Index Providers
  3. Governance and Conflict of Interest
  4. Index Quality and Methodology
  5. Accountability and Disclosures
  6. Special Audit
  7. Action in case of Default
  8. Miscellaneous

The link of 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

2. SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2024

SEBI vide notification no. SEBI/LAD-NRO/GN/2024/166 dated March 08, 2024, notified SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2024, which shall come into force on the date of their publication in the Official Gazette.

Vide this notification, definition of Real Estate Investment Trust (REIT) has been substituted as follows:

A person who pools Rs. 50 crores or more for the purpose of issuing units to at least 200 investors so as to acquire and manage real estate asset(s) or property(ies), that would entitle investors to receive the income generated therefrom without giving them the day-to-day control over the management and operation of such real estate asset(s) or property(ies).

REIT shall include SM REIT and shall not include any company which acquires and manages real estate asset(s) or property(ies) and offers or issues securities to the investors.

A new Chapter VIB has been introduced known as Small and Medium REITs (SM REIT). SM REITs shall have an asset value of at least Rs. 50 crore vis-à-vis minimum asset value of Rs. 500 crore for existing REITs.

The regulatory framework for SM REITs, inter – alia, provides for the structure of SM REITs, migration of existing structures meeting certain specified criteria, obligations of the investment manager including net worth, experience and minimum unitholding requirement, investment conditions, minimum subscription, distribution norms, valuation of assets, etc.

The link of the aforesaid Notification is as follows:
https://www.sebi.gov.in/legal/regulations/mar-2024/securities-and-exchange-board-of-india-real-estate-investment-trusts-amendment-regulations-2024_82138.html

The link for the aforesaid FAQ on BSE Portal is as follows:
https://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page=20240322-14

3. Measures to instill trust in the securities market – Expanding the framework of Qualified Stock Brokers (QSBs) to more stock brokers

SEBI vide Circular No. SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2024/14 dated March 11, 2024, revised the framework about the parameters for designating a stockbroker as QSB, to protect the interest of investors and for building trust in the securities market.

The revised list of parameters to be considered for designating a stockbroker as QSB, on an annual basis is as follows:

  1. the total number of active clients of the stock broker;
  2. the available total assets of clients with the stock broker;
  3. the trading volumes of the stock broker (excluding the proprietary trading volume of the stockbroker);
  4. the end-of-day margin obligations of all clients of a stockbroker (excluding the proprietary margin obligation of the stockbroker in all segments);
  5. the proprietary trading volumes of the stockbroker.
  6. compliance score of the stock broker;
  7. grievance redressal score of the stock broker; and

The provisions of this circular shall come into force in a risk-based, staggered manner to ensure smooth adoption and effective implementation for all the QSBs by providing enough time for them, based on their size, to make necessary changes.

Based on this, the effective date of implementation for different QSBs based on the parameter by which they are designated as QSBs is June 01 of the subsequent year for the parameters mentioned at points 1 to 5 above and September 01 of the subsequent year for the parameters mentioned at point 6 and 7.

SEBI has also provided the procedure for identifying a stock broker as QSB and Facilitating stockbrokers to voluntarily get designated as QSBs.

The link of the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/mar-2024/measures-to-instill-trust-in-securities-market-expanding-the-framework-of-qualified-stock-brokers-qsbs-to-more-stock-brokers_82149.html

4. Simplification and streamlining of Offer Documents of Mutual Fund Schemes - Extension of timelines

SEBI vide Circular No. SEBI/HO/IMD/IMD-RAC-2/P/CIR/2024/000015 dated March 12, 2024, extended the timeline for implementing simplified Mutual Fund Scheme Information Documents.

SEBI had earlier introduced a simplified format for Scheme Information Documents (SID) through circular SEBI/H0/IMD/IMD-RAC-2/P/CIR/2023/00175 on November 01, 2023.

In response to a request from the Association of Mutual Funds in India (AMFI), SEBI decided to revise the applicability date of the provisions. The updated SID/KIM/SAI format will be implemented from June 01, 2024. Draft SIDs are to be filed with SEBI on or before May 31, 2024, or SIDs already filed with SEBI or SIDs for which the final observations have already been received from SEBI can use the old format until June 30, 2024 (with data as on May 31, 2024), with necessary updates.

As per the Master circular dated May 19, 2023, regarding the updation of SID and KIM within 1 month from the end of the half year i.e. April 30, 2024, for the half year ended March 31, 2024. An extension until June 30, 2024, is granted for the scheduled updation of SID and KIM specifically for the half-year ended March 31, 2024.

The link of the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/mar-2024/simplification-and-streamlining-of-offer-documents-of-mutual-fund-schemes-extension-of-timelines_82169.html

5. Repeal of circular(s) outlining the procedure to deal with cases where securities are issued prior to April 01, 2014, involving the offer/allotment of securities to more than 49 but up to 200 investors in a financial year

SEBI vide Circular No. SEBI/HO/CFD/PoD-1/P/CIR/2024/ 016 dated March 13, 2024, notified to repeal the circular related to the outlining procedure to deal with cases where securities are issued prior to April 01, 2014, involving offer/allotment of securities to more than 49 but up to 200 investors in a financial year.

SEBI had issued Circular No. CIR/CFD/DIL3/18/2015 dated December 31, 2015 and Circular No. CFD/DIL3/CIR/P/2016/53 dated May 03, 2016, laying down the procedure to deal with cases where securities are issued before April 01, 2014, involving offer/allotment of securities to more than 49 persons but up to 200 persons in a financial year. The companies can avoid penal action by providing the investors an option to surrender the securities and receive the refund amount at a price not less than the amount of subscription money paid along with 15% interest p.a. thereon or such higher return as promised to the investors.

SEBI citing that considerable time has elapsed since the repeal of the Companies Act, 1956, decided to repeal the aforesaid Circulars and the same shall stand rescinded with effect from 6 months from the date of issue of this Circular, without prejudice to the operation of anything done or any action taken under the said Circular.

The link of the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/mar-2024/repeal-of-circular-s-outlining-procedure-to-deal-with-cases-where-securities-are-issued-prior-to-april-01-2014-involving-offer-allotment-of-securities-to-more-than-49-but-up-to-200-investors-in-a-_82230.html 

The link of the aforesaid Circular on NSE portal is as follows:
https://nsearchives.nseindia.com/web/sites/default/files/inline-files/NSE_Circular_14032024.pdf

The link of the aforesaid Circular on BSE portal is as follows:
https://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page=20240318-54

6. SEBI 204th Board Meeting

SEBI vide a Press Release No. 05/2024 dated March 15, 2024, informed the stakeholders of its Board Meeting in which the following decisions were approved:

  1. Launch of Beta Version of optional T+0 settlement
  2. Additional disclosure requirements exempted for certain FPIs
  3. Timelines for disclosure/documentation related to material changes by FPIs relaxed
  4. Enhancing ease of doing business for FPIs by providing flexibility to FPIs in dealing with the securities post expiry of their registration
  5. Facilitating ease of doing business for companies coming for IPOs /fundraising
  6. Facilitating ease of doing business for listed companies – on-going compliance requirements
  7. Facilitating a uniform approach to verification of market rumours by equity-listed entities
  8. Flexibility provided to Category I and II AIFs to create an encumbrance on their holding of equity in infrastructure sector investee companies
  9. Enhancing trust in the AIF ecosystem by introducing due diligence measures with respect to investors and investments, thereby paving the way for the introduction of other Ease of Doing Business measures
  10. Timeline for mandatory applicability of Listing Norms for High-Value Debt Listed Entities (HVDLEs) extended
  11. Additional flexibility to AIFs and their investors to deal with unliquidated investments of their schemes beyond the expiry of tenure
  12. Framework for issuance of subordinate units by a privately placed InvIT to facilitate the purchase of infrastructure assets
  13. ‘Stock Exchange’ to be recognized as a body for the administration and supervision of Research Analysts and Investment Advisers

The link of the aforesaid Press Release is as follows:
https://www.sebi.gov.in/media-and-notifications/press-releases/mar-2024/sebi-board-meeting_82286.html

The link of our Article on the aforesaid is as follows:
Capital Market -Approval of Certain amendments in 204th Board Meeting of SEBI held on 15.03.2024 – AmitaDesai

7. Audiovisual (AV) representation of disclosures made in the Public Issue Offer Documents

SEBI vide Draft Circular No. SEBI/HO/CFD/TPD/CIR/2024/XXX dated March 19, 2024, placed consultation on draft circular proposing that the disclosures made in the Draft Red Herring Prospectus (DRHP) and Red Herring Prospectus (RHP) of public issues shall also be made available in Audiovisual (AV) format by the issuer companies desiring to list on the main board for ease in understanding of the salient features of public issues.

Such AV shall be prepared and placed in public domain by Lead Manager to the public issue on main board which shall initially be in bilingual version i.e. English and Hindi. The Hindi version shall contain the text in Devanagari script. It is provided that the contents in the AV shall be in compliance with the advertisement code prescribed by SEBI under Schedule IX of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018.

The comments/ suggestions on the Consultation Paper should be submitted latest by April 9, 2024.

The link of the aforesaid Draft Circular is as follows:
https://www.sebi.gov.in/reports-and-statistics/reports/mar-2024/consultation-on-draft-circular-audiovisual-av-representation-of-disclosures-made-in-the-public-issue-offer-documents_82385.html

8. Safeguards to address the concerns of the investors on transfer of securities in dematerialized mode

SEBI vide Circular No. SEBI/HO/MRD/MRD-PoD-2/P/CIR/2024/18 dated March 20, 2024 issued safeguards to address the concerns of the investors on transfer of securities in dematerialized mode.

To harmonize the classification of inactive/dormant accounts across Stock Exchanges & Depositories and to strengthen the measures to prevent fraud / misappropriation for inoperative demat accounts, SEBI amended Para 1.12 of its Master Circular for Depositories dated October 06, 2023.

Para 1.12 of SEBI Master Circular prescribed guidelines to address the concerns arising out of transfer of securities from the Beneficial Owner (BO) Accounts without proper authorization by the concerned investor.

The amendment prescribed the following safeguards to address the concerns of the investors on transfer of securities in dematerialized mode.

  1. The depositories shall give more emphasis on investor education particularly with regard to careful preservation of Delivery Instruction Slip (DIS) by the BO.
  2. The Depositories may advise the BOs not to leave “blank or signed” DIS with the Depository Participants (DPs) or any other person/entity.
  3. The DPs shall not accept pre-signed DIS with blank columns from the BO(s).
  4. If the DIS booklet is lost/stolen/not traceable by the BO, the same must be intimated to the DP immediately by the BO in writing. On receipt of such intimation, the DP shall cancel the unused DIS of the said booklet.
  5. The DP shall also ensure that a new DIS booklet is issued only on the strength of the DIS instruction request slip (contained in the previous booklet) duly complete in all respects, unless the request for fresh booklet is due to loss, etc.
  6. In case the request for issuance of the DIS booklet is received in an inactive/dormant account, the DIS booklet shall be delivered at the registered address of the BO as per the DP records.
  7. The DPs shall not issue more than 10 loose DIS to one account holder in a financial year (April to March). The loose DIS can be issued only if the BO(s) come in person and sign the loose DIS in the presence of an authorised DP official.
  8. The DPs shall put in place appropriate checks and balances with regard to the verification of signatures of the BOs while processing the DIS.
  9. The DPs shall cross check with the BOs under exceptional circumstances before acting upon the DIS.
  10. The DPs shall mandatorily verify with a BO before acting upon the DIS, in case of an inactive/dormant account, whenever any security in such account is transferred at a time. Such verification by DPs shall require a recorded phone call on registered number of BO by the authorized official of the DP and shall be additionally authorised by the Compliance officer or any other designated senior official of the DP. The authorized official of the DP verifying such transactions with the BO, shall record the details of the process, date, time, etc., of the verification on the instruction slip under his/her signature.
  11. However, in case of active accounts, such verification may be made mandatory only if the BO account has 5 or more International Securities Identification Number (ISINs) and all such ISIN balances are transferred at a time.

The provisions of this circular shall come into effect from April 1, 2024.

The link of the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/mar-2024/safeguards-to-address-the-concerns-of-the-investors-on-transfer-of-securities-in-dematerialized-mode_82417.html

9. Amendment to Circular for mandating additional disclosures by FPIs that fulfil certain objective criteria

SEBI vide Circular No. SEBI/HO/AFD/AFD-PoD-2/P/CIR/2024/19 dated March 20, 2024 amended SEBI Circular No. SEBI/ HO/ AFD/ AFD-PoD-2/CIR/P/2023/148 dated August 24, 2023 (Earlier Circular) which mandated additional disclosures required to be done by FPIs which fulfil the objective criteria.

Now, FPI having more than 50% of its Indian equity Assets Under Management (AUM) in a corporate group shall not be required to make the additional disclosures as specified in the Earlier Circular, subject to compliance with all of the following conditions:

  1. The apex company of such corporate group has no identified promoter. For this purpose, the list of corporate groups based on the corporate repository published by the Stock Exchanges and their respective apex companies having no identified promoters shall be made public by Depositories.
  2. The FPI holds not more than 50% of its Indian equity AUM in the corporate group, after disregarding its holding in the apex company (with no identified promoter).
  3. The composite holdings of all such FPIs (that meet the 50% concentration criteria excluding FPIs which are either exempted or have disclosed) in the apex company is less than 3% of the total equity share capital of the apex company.

The link of the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/mar-2024/amendment-to-circular-for-mandating-additional-disclosures-by-fpis-that-fulfil-certain-objective-criteria_82418.html

10. Introduction of Beta version of T+0 rolling settlement cycle on optional basis in addition to the existing T+1 settlement cycle in Equity Cash Markets

SEBI vide Circular No. SEBI/HO/MRD/MRD-PoD-3/P/CIR/2024/20 dated March 28, 2024 issued a framework to introduce the beta version of the T+0 trade settlement cycle on an optional basis. This will be in addition to the existing T+1 settlement cycle in the equity cash market.

The beta version of T+0 settlement will be introduced for a limited set of 25 scrips and with a limited number of brokers. The operational guidelines in this regard are as under:

  1. Eligible Investors:All investors are eligible to participate in the segment for T+0 settlement cycle, if they are able to meet the timelines, process and risk requirements as prescribed by the MIIs.
  2. Surveillance Measures:The surveillance measures as applicable in T+1 settlement cycle shall be applicable to scrips in T+0 settlement cycle.
  3. Trade Timings: One continuous trading session from 09:15 AM to 1:30 PM.
  4. Price Band:The price in the T+0 segment will operate with a price band of +100 basis points from the price in the regular T+1 market. This band will be re-calibrated after every 50 basis points movement in the underlying T+1 market.
  5. Index calculation and settlement price computation:T+0 prices will not be considered in index calculation and settlement price computation. There shall be no separate close price for securities based on trading in T+0 segment.
  6. Netting of Obligations:There shall be no netting in pay-in and pay-out obligations between T+1 and T+0 settlement cycle.

The link of the aforesaid Circular is as follows:
SEBI | Introduction of Beta version of T+0 rolling settlement cycle on optional basis in addition to the existing T+1 settlement cycle in Equity Cash Markets

11. Corporate Grouping of Listed Companies

On March 27, 2024, NSE vide Circular Ref No. NSE/CML/2024/07 mandated all Listed companies to intimate NSE any change in corporate group of such company due to Corporate Restructuring, Takeover, Merger, Demerger, Acquisition, delisting etc., within 2 working days of the Effective Date of such change. For the same NSE introduced an online module to facilitate the listed companies to file the intimation of change of its corporate group through NEAPS application (Link: https://neaps.nseindia.com/NEWLISTINGCORP/login.jsp).

Path to intimate the change in Corporate Group on NSE Portal is as follows:
NEAPS login > Compliance > Disclosures > Corporate Grouping FPI

The link for the aforesaid Circular on NSE Portal is as follows:
https://nsearchives.nseindia.com/web/sites/default/files/inline-files/NSE_Circular_27032024.pdf

12. FAQ on Trading Window closure period under SEBI (Prohibition of Insider Trading) Regulations, 2015 (“PIT Regulations”)

On March 28, 2024, NSE vide Circular Ref No: NSE/CML/2024/08 notified FAQ on Trading Window closure period under SEBI (Prohibition of Insider Trading) Regulations, 2015 (“PIT Regulations”)- Extending framework for restricting trading by Designated Persons (“DPs”) by freezing PAN at security level to all listed companies in a phased manner.

The link for the aforesaid FAQ on NSE Portal is as follows:
https://nsearchives.nseindia.com/web/sites/default/files/inline-files/NSE_Circular_28032024_5.pdf

The link for the aforesaid FAQ on BSE Portal is as follows:
https://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page=20240328-52

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