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Amendments by SEBI in February 2024

Amendments by SEBI in February 2024

1. Consultation Paper to Revise and Revamp Nomination Facilities in the Indian Securities Market

The Financial Stability and Development Council (FSDC) in its 27th meeting held on May 8, 2023, highlighted the need to facilitate the settlement of unclaimed deposits and claims in the financial sector across all segments.

Further, to strengthen investor protection, SEBI has also identified the reduction of unclaimed assets in the Indian Securities Markets as a key focus area and various measures have been put in place including stringent KYC, nominations requirements and simplified transmission norms, a centralized mechanism for reporting the demise of an investor through KRAs, etc. to address this issue. In the recent past SEBI issued various circulars on the provision of nomination or declaration to ‘opt-out’ and had also extended the timelines for the same at repeated requests of investors.

In view of the above, on February 02, 2024, SEBI published a Consultation Paper (CP) for public comments to Revise and Revamp Nomination Facilities in the Indian Securities Market.

The scope of the CP under Chapter 3 covers the following financial assets:

  1. the demat accounts (and securities held within such accounts);
  2. the units of mutual fund schemes held in a non-materialized form and expressed in a statement of account; and
  3. the units of AIF held in a non-materialized form and expressed in a statement of account or physical form (until dematerialization, as mandated, is completed).

With regards to the above SEBI seeks public comments on whether any other financial asset, other than those mentioned above, in the Indian Securities market requires being covered by the CP. If so, please provide the rationale.

The CP provides that revised and revamped nomination facilities will operate without affecting the prevalent systems of law governing transmission and succession viz.:

  1. Rule of Survivorship (in case of joint ownership or joint holdings)
  2. When a person has died leaving a Will; and
  3. When a person has died without leaving a Will, i.e. intestate.

Chapter 4 of the CP elaborates on the above-mentioned prevalent systems/general rules of law governing transmission and succession and seeks public comments on the following:

  1. Do any of the above rules require being changed? If so, please provide the rationale and indicate what should such a change be.
  2. Are there any additional rules that require recognition or specification? If so, please provide the rationale.

Further, under Chapter 4, SEBI has proposed “Guardrails and additional measures” to address concerns of investors that nomination facilities can be regarded as safe, secure, convenient, and reliable means for making, changing, or canceling nominations e.g. making, changing, or canceling nominations by use of the digital signature certificate or Aadhaar based e-sign or physical signatures of the investors or through dual authentication, provision of personal identifiers by the investor making the nomination and contact details of the nominee etc.

With regard to the above SEBI seeks public comments on the following:

  1. Do any of the above guardrails or measures require being changed? If so, please provide the rationale and indicate what should such a change be.
  2. Are there any additional guardrails or measures that require specification? If so, please provide the rationale.

 Chapter 5 of the CP provides for the measures required to be taken by the relevant regulated entities to revise and revamp nomination facilities in the Indian Securities Market e.g. provision of e-nomination facilities, enabling making, changing, or canceling of nominations in a secure, verifiable and authentic manner; i.e., by use of the digital signature certificate or Aadhaar based e-Sign or physical signatures of the investor/s or through dual/multi-factor authentication, etc.

 With regard to the above SEBI seeks public comments on the following:

  1. Do any of the above measures require being changed? If so, please provide the rationale and indicate what should such a change be.
  2. Are there any additional measures that require specification? If so, please provide the rationale.

 The link for the aforementioned Consultation Paper is as follows:
https://www.sebi.gov.in/reports-and-statistics/reports/feb-2024/consultation-paper-to-revise-and-revamp-nomination-facilities-in-the-indian-securities-market_81023.html

2. Addendum to Consultation Paper on Interim recommendations of the Expert Committee for facilitating Ease of Doing Business and harmonization of the provisions of ICDR and LODR Regulations

Pursuant to the Union Budget Announcement for FY 2023-24, to simplify, ease and reduce cost of compliance, an Expert Committee chaired by Shri S.K. Mohanty, ex-Whole Time Member, SEBI was set up to inter-alia review the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR) and SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR).

This Expert Committee was set up to facilitate the Ease of Doing Business for listed entities in India, bringing in clarity and reducing the overall compliance burden, including the cost of compliance while effectively balancing investor protection and compliance with the applicable laws. Further, SEBI vide press release dated October 04, 2023, sought comments on various SEBI Regulations including the LODR and ICDR Regulations. The comments received from the public are being deliberated in the Working Groups formed by the Expert Committee.

Meanwhile, the Expert Committee submitted a Report containing interim recommendations to facilitate ease of doing business under the LODR & ICDR Regulations. Accordingly, SEBI on January 11, 2024, published a Consultation Paper (CP) for public comments containing the following interim recommendations of the Expert Committee:

a. LODR Regulations:

  1. Applicability of the regulations based on market capitalization;
  2. Limit of membership and Chairmanship of Committees for a director;
  3. Filling up of vacancies of Key Managerial Personnel;
  4. Timeline for prior intimation of Board Meetings;
  5. Gap between meetings of the Risk Management Committee.

b. ICDR Regulations:

  1. Inclusion of equity shares received on conversion or exchange of fully paid-up Compulsory Convertible Securities and Depository Receipts for Minimum Promoters’ Contribution;
  2. Non-individual shareholders to be permitted to contribute towards Minimum Promoters’ Contribution without being identified as a Promoter
  3. Thresholds for increase or decrease in issue size triggering re-filing of draft offer documents;
  4. Flexibility to extend the bid/offer closing date on account of force majeure events minimum by one day instead of the present requirement to extend by a minimum of three days.

In furtherance of the above, on February 02, 2024, SEBI published an Addendum to the CP (ACP) giving an additional recommendation on ease of doing business under the ICDR Regulations on ‘Review of the requirement of 1% security deposit in public/rights issue of equity shares as prescribed under the ICDR Regulations’. The recommendation has been explained in the Annexure to the ACP.

The link for the aforesaid Addendum to the Consultation Paper is as follows:
https://www.sebi.gov.in/reports-and-statistics/reports/feb-2024/addendum-to-consultation-paper-on-interim-recommendations-of-the-expert-committee-for-facilitating-ease-of-doing-business-and-harmonization-of-the-provisions-of-icdr-and-lodr-regulations_81040.html

3. Consultation paper on flexibility to Category I and II AIFs to create an encumbrance on their holding of equity in infrastructure sector investee companies to facilitate the raising of debt by such Investee Companies

As per SEBI (Alternative Investment Funds) Regulations, 2012 (‘AIF Regulations’), Category I AIFs and Category II AIFs are respectively prohibited from borrowing either directly or indirectly or engaging in any leverage except for meeting temporary funding requirements. However, Category III AIFs are permitted to engage in leverage or borrow, but only to the extent of two times the NAV subject to consent from the investors.

SEBI, in a recent order dated May 31, 2023, in the matter of India Infrastructure Fund II, Global Infrastructure Partners India Private Limited, and IDBI Trusteeship Services Limited, held that the use of the expression ‘directly or indirectly’ prohibits Category I and II AIFs from being party to any borrowing either directly or indirectly. Pledging of securities of portfolio companies by an AIF for loans availed of by such companies falls within the meaning of indirect borrowing. Further, the use of the expression ‘any leverage’ is not confined to leverage availed of by the Category I and II AIFs itself. It prohibits Category I and II AIFs from being party to any leverage availed of either by Category I and II AIFs or by any other entity. Thus, pledging of securities held by an AIF in investee companies for loans availed of by the investee companies violates provisions of the AIF Regulations.

Further, by creating a pledge or charge or hypothecation by an AIF on its assets to secure the loans obtained by its investee companies, investors may lose their entire equity in the investee company in case such investee companies default on repayment of their loan/ debt. This may be the case if the equity of the investee company post-default has some value. Thus, creating pledges on assets of the investee companies by the AIF may, at times, not be in the best interest of the investors.

Given the above, on February 02, 2024, SEBI issued a Consultation Paper (CP) to seek public comments on a proposal for amendment to AIF Regulations, to provide ease of doing business for AIFs by allowing Category I and II AIFs to create an encumbrance on their holding of equity in infrastructure sector investee companies to facilitate the raising of debt by such investee companies.

The CP provides for the following:

  1. Background of the proposal;
  2. Issues for consideration;
  3. Examination of issues; and
  4. Proposal

The link for the aforesaid Consultation Paper is as follows:
https://www.sebi.gov.in/reports-and-statistics/reports/feb-2024/consultation-paper-on-flexibility-to-category-i-and-ii-aifs-to-create-encumbrance-on-their-holding-of-equity-in-infrastructure-sector-investee-companies-to-facilitate-raising-of-debt-by-such-investee-_81047.html

4. Guidelines for returning the draft offer document and its resubmission

Schedule VI of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 (“ICDR Regulations”), specifies information for disclosure in the draft offer document or the draft letter of offer and the offer document or the letter of offer, as applicable.

It has been observed that at times draft offer documents/draft letters of offer filed with SEBI for public issue/rights issue of securities are found lacking in compliance concerning instructions provided under Schedule VI of the ICDR Regulations. Such documents require revisions/changes and thus lead to a longer processing time. For the timely processing of offer documents, the offer documents as filed by the issuers and lead manager(s) must give adequate disclosures and are compliant with Schedule VI of the ICDR Regulations.

Given the above, to ensure completeness of the offer document for investors and provide greater clarity & consistency in the disclosures and for timely processing, on February 06, 2024, SEBI vide Circular No. SEBI/HO/CFD/PoD-1/P/CIR/2024/009 (“the Circular”), has issued ‘Guidelines for returning of draft offer document and its resubmission’.

 Accordingly, in addition to Schedule VI of ICDR Regulations, draft offer documents that are not compliant with the instructions provided under the said guidelines shall be returned to the issuer. The Guidelines are placed in Annexure A to the Circular.

The link of the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/feb-2024/guidelines-for-returning-of-draft-offer-document-and-its-resubmission_81146.html

5. Consultation Paper on the framework for providing flexibility to FPIs in dealing with the securities post-expiry of their registration

Under SEBI (Foreign Portfolio Investors) Regulations, 2019 (‘FPI Regulations, 2019’), there are several instances in which the securities held by FPIs remain frozen in their demat accounts viz.:

  1. Expiry of registration of FPI due to non-payment of the registration fee on time;
  2. Failure to liquidate holdings within the timelines prescribed for non-compliances such as a change in the compliance status of home jurisdiction of the FPI w.r.t. signatory to IOSCO MMOU/bilateral MoU with SEBI/membership of BIS/FATF, failure to provide additional KYC documents in case of reclassification from Category I to Category II within prescribed timelines, etc.
  3. Write-off of securities held in demat account post surrender or expiry of registration.

FPI Regulations, 2019, do not provide for the regularization of FPI registration or disposal of securities, post-expiry of registration.

Further, there are no regulatory prescriptions for dealing with:

  1. securities that remain in the demat accounts of FPIs, post expiry of registration and expiry of prescribed timelines for liquidation;
  2. securities written off by the FPIs.

As the securities, blocked in the accounts of FPIs or written off by the FPIs, continue to remain frozen for perpetuity, the share capital of such companies is also being blocked for trading. The demat accounts of the FPIs also remain open (in a frozen state) even after the FPIs have surrendered their registration, which is not desirable as it renders such accounts vulnerable to misuse.

Given the above, on February 07, 2024, SEBI issued a Consultation Paper (CP) seeking public comments on a proposed framework for the following:

  1. Regularization of FPI registration and disposal of securities, post expiry of registration;
  2. Facilitation of liquidation of securities by FPIs, post expiry of registration;
  3. Framework for dealing with future cases of FPIs with blocked securities in their accounts;
  4. Framework for dealing with existing cases of non-compliant FPIs with blocked securities in their accounts; and
  5. Framework for disposal of written-off securities.

The aforementioned proposed framework was discussed by the FPI Advisory Committee, in its meeting held on December 13, 2023. The Committee deliberated on the proposals and recommended certain changes in the proposals placed before it.

The link of the aforesaid Consultation Paper is as follows:
https://www.sebi.gov.in/reports-and-statistics/reports/feb-2024/consultation-paper-on-framework-for-providing-flexibility-to-fpis-in-dealing-with-their-securities-post-expiry-of-their-registration_81210.html

6. Consultation Paper on Relaxation in Timelines for Disclosure of Material Changes by Foreign Portfolio Investors

Regulation 22 of SEBI (Foreign Portfolio Investors) Regulations, 2019 (‘FPI Regulations, 2019’), provides for general obligations and responsibilities of FPIs which include making certain disclosures to SEBI and/or their respective Designated Depository Participants (DDPs) within the prescribed period of 7 working days. The period of 7 working days was prescribed under FPI Regulations, 2019 pursuant to an amendment to the said regulations, notified on March 15, 2023. Prior to the amendment, the FPI Regulations, 2019 mandated that the said disclosures be made ‘forthwith’ by the FPIs

Further, to bring consistency with the provisions of the FPI Regulations, 2019, SEBI vide Circular dated March 27, 2023, amended the Master Circular for Foreign Portfolio Investors, Designated Depository Participants and Eligible Foreign Investors (‘FPI Master Circular’), to provide for a similar period of 7 working days for the following obligations and disclosure requirements:

  1. Change in structure, ownership, or control;
  2. Change in name in PAN records;
  3. Deletion of sub-fund/share classes in case of segregated portfolios;
  4. Change in material information that has a bearing on the certificate granted to the FPI.

However, it may be noted that Rule 9B of Prevention of Money-laundering (Maintenance of Records) Rules, 2005 (‘PMLR’), provides for 30 days for the submission of documents for any update in the information provided by a client of a reporting entity. The said rules are also applicable in the case of FPIs.

SEBI has received several representations from market participants regarding relaxation in the said timeline of seven working days due to certain challenges in making disclosures within the prescribed timeline, inter-alia, especially in case of change in Beneficial Owner, and has requested for relaxation in the timelines for disclosures.

SEBI has set up 16 Working Groups to review various SEBI regulations from the perspective of Ease of Doing Business. One such group constituted by SEBI is the ‘Working Group for Review of FPI Regulations, 2019’ (‘FPI Working Group’). The matter of disclosure timelines was also discussed in the FPI Working Group. The FPI Working Group was of the view that the current timeline of 7 working days is extended to 30 days in line with the requirements under PMLR. However, the FPI Working group also noted that the extant framework requires the DDPs to examine such material changes and re-assess the eligibility of the FPI and the requirement of fresh registration, if any. After deliberations, it was agreed that w.r.t. material changes that necessitate fresh registration/affect privileges/exemptions, the disclosure may be made by the FPI within 7 working days of such change while the supporting documents may be provided within 30 days of such change.

Given the extant provisions under PMLR, representations received from market participants, recommendation of the FPI Working Group, and considering the challenges faced by Foreign Portfolio Investors, on February 07, 2024, SEBI issued a Consultation Paper (CP) to seek public comments on the following proposals:

  1. Type I material changes shall be informed by FPIs 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;
  2. Type II material changes shall be informed and supporting documents (if any) shall be provided by FPIs within 30 days of such change; and
  3. The final list of Type I material changes shall be prepared in consultation with industry participants/stakeholders.

The link of the aforesaid Consultation Paper is as follows:
https://www.sebi.gov.in/reports-and-statistics/reports/feb-2024/consultation-paper-on-relaxation-in-timelines-for-disclosure-of-material-changes-by-foreign-portfolio-investors_81211.html

7. SEBI (Employees’ Service) (Amendment) Regulations, 2024

SEBI vide Notification No. EBI/LAD-NRO/GN/2024/165 dated February 07, 2024 (“the Notification”) has notified the SEBI (Employees’ Service) (Amendment) Regulations, 2024 (“the Amendment Regulations”) to further amend the SEBI (Employees’ Service) Regulations, 2001 (“the Regulations”). The following amendments have been made to the Regulations:
  1. In regulation 6 relating to the classification and appointment of whole-time employees, sub-regulation (4)(d) has been replaced with the following:
  2. “(d) Competent authority shall constitute a selection committee, comprising such number of persons and outside experts as may be determined for recruitment and promotion:
  3. Provided that for recruitment at the level of Executive Director on deputation or contract, the Competent authority shall constitute a search-cum-selection committee, comprising such number of persons and outside experts as may be determined:
  4. Provided further that the appointment to the post of Executive Director shall be approved by the Board before an offer of appointment is issued to the selected candidate.
The link of the aforesaid Notification is as follows: https://www.sebi.gov.in/legal/regulations/feb-2024/securities-and-exchange-board-of-india-employees-service-amendment-regulations-2024_81336.html

8. Revised Pricing Methodology for Institutional Placements of Privately Placed Infrastructure Investment Trust (InvIT)

SEBI vide Circular SEBI/HO/DDHS/DDHS-PoD/P/CIR/2024/10 dated February 08, 2024, updated the pricing method of privately placed Infrastructure Investment Trusts (InvITs) guideline for setting prices during institutional placements.

Regulation 14(4) of the SEBI (Infrastructure Investment Trusts) Regulations, 2014 (‘InvIT Regulations’) says that any subsequent issue of units after the initial public offer may be made by way of institutional placement, in addition to other mechanisms provided in the regulations.

Paragraph 7.9 of the SEBI Master Circular for InvITs dated July 06, 2023, provides the pricing guidelines for institutional placement of InvIT. It states that the institutional placement by InvIT shall be made at a price not less than the average of the weekly high and low of the closing prices of the units of the same class quoted on the stock exchange during the 2 weeks preceding the relevant date.

The pricing guidelines for institutional placements of privately placed Infrastructure Investment Trusts (InvITs) have been revised and it has been decided that the floor price for such placements shall be the Net Asset Value (NAV) per unit of the InvIT.

Accordingly, the pricing for listed InvITs stands modified so that privately placed InvITs can undertake institutional placement based on the NAV of the assets of the InvIT:

“The institutional placement by public InvIT shall be made at a price not less than the average of the weekly high and low of the closing prices of the units of the same class quoted on the stock exchange during the 2 weeks preceding the relevant date. However, the public InvIT may offer a discount of not more than 5% on the price so calculated, subject to the approval of unitholders through a resolution.

“Relevant Date” shall be the date of the meeting in which the board of directors of the investment manager decides to open the issue.

 A new clause has been inserted into the SEBI Master Circular for InvITs dated July 06, 2023, which states that the institutional placement by privately placed InvIT shall be made at a price not less than the NAV per unit, based on the full valuation of all existing InvIT assets conducted in terms of InvIT Regulations.

 The link of the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/feb-2024/revised-pricing-methodology-for-institutional-placements-of-privately-placed-infrastructure-investment-trust-invit-_81268.html

9. SEBI cautions the public against dealing with Unregistered Entities

SEBI vide Press Release No. 02/2024 dated February 13, 2024, warns the public against dealing with unregistered entities. SEBI has noticed an increase in unregistered entities and online platforms pretending to be SEBI-registered intermediaries. They use fake SEBI certificates to attract the public, promising high returns on investments.

SEBI hereby cautions investors against placing their money with any entity based on such claims. Investors are urged to conduct due diligence and verify the registration status of any entity claiming to be a SEBI-registered intermediary. Investors must understand that investments offering high returns usually involve high risk including fraud risk and there can be no guarantees of assured returns in the securities market.

When investing in the securities market, investors are advised to:

  1. Verify before investing:Before engaging with any investment service provider, investors are strongly advised to verify the entity’s registration status on the SEBI website (www.sebi.gov.in) by following the below path: sebi.gov.in → Intermediaries / Market Infrastructure Institutions → Recognised Intermediaries.
  2. Beware of promises of high returns:Investors should be cautious of any entity that promises assured or exceptionally high returns. The principle that ‘higher returns come with higher risks of losing your money altogether holds in the securities market.
  3. Verify enforcement action by SEBI:The details of any enforcement action taken by SEBI against an entity/ intermediary on the SEBI website on the following path: www.sebi.gov.in → Enforcement → Orders.
  4. Be well informed:SEBI encourages investors to empower themselves with knowledge about the securities market for a safer investment journey. Knowledge is your best defense against fraud. For comprehensive resources on understanding the basics of investing, recognizing the importance of dealing with registered intermediaries, and more, please visit SEBI’s investor education website at https://investor.sebi.gov.in.

The link to the aforesaid Press Release is as follows:
https://www.sebi.gov.in/media-and-notifications/press-releases/feb-2024/sebi-cautions-public-against-dealing-with-unregistered-entities_81395.html

10. Consultation paper on Ease of Doing Business initiatives for Portfolio Managers

SEBI on February 15, 2024, issued a Consultation Paper seeking public comments on proposals with respect to relaxation in timelines for disclosure of material changes by Foreign Portfolio Investors (‘FPIs’) and for making it easier for Portfolio Managers to do business.

Portfolio Management Services (PMS) are currently regulated by SEBI (Portfolio Managers), Regulations, 2020, and related circulars including the Master Circular dated March 20, 2023. The Finance Minister announced in the FY 2023-24 budget the intention to simplify, ease, and reduce compliance costs for the financial sector through a consultative process. To align with this, SEBI set up Working Groups to review compliance under various SEBI Regulations. A working group (‘EODB working group’) was formed to review the present framework under PMS Regulations and recommend measures to promote the ease of doing business for Portfolio Managers.

While the EODB working group has undertaken a comprehensive review of various processes and guidelines applicable to the Portfolio Managers, it has provided its first set of recommendations on the following:

  1. Facilitate collective oversight of PMS distributors by making registration with the Association of Portfolio Managers in India (APMI) mandatory for PMS distributors.
  2. Facilitate ease of digital onboarding process for clients of Portfolio Managers.

This consultation paper provides details of the above-mentioned recommendations of the EODB working group and some additional proposals and seeks suggestions from the public on the same.

The link of the aforesaid Consultation Paper is as follows:
https://www.sebi.gov.in/reports-and-statistics/reports/feb-2024/consultation-paper-on-ease-of-doing-business-initiatives-for-portfolio-managers_81463.html

11. Centralization of certifications under the Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS) at KYC Registration Agencies (KRAs)

The reporting financial institution (RFI) [as defined under rule 114F (7) of Income Tax Rules, 1962] is required to obtain a self-certification from the client, as part of the account opening documentation, to determine the client’s residence for tax purpose as per the SEBI circulars CIR/MIRSD/2/2015 dated August 26, 2015, and CIR/MIRSD/3/2015 dated September 10, 2015, and guidance note on FATCA and CRS norms.

To promote ease of doing business and compliance reporting, it is provided that the intermediaries, who are RFI, shall upload the FATCA and CRS certifications obtained from the clients onto the system of KRAs with effect from July 01, 2024.

The existing certifications obtained from clients before July 01, 2024, shall be uploaded by the intermediaries onto the systems of KRAs within 90 days of implementation of this circular.

The intermediary shall confirm the reasonableness of such certification based on the information obtained in respect of account opening, including any documentation obtained in accordance with Prevention of Money Laundering (Maintenance of Records) Rules, 2005, and shall update the self-certification, as and when there is a change reported by the client.

The link of the aforesaid Circular is as follows:
SEBI | Centralization of certifications under the Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS) at KYC Registration Agencies (KRAs)

12. Consultation Paper on Ease of Doing Business Initiatives for Mutual Funds

SEBI on February 23, 2024, issued a Consultation Paper seeking public comments on the proposals regarding ease of doing business initiatives for Mutual Funds

The Hon’ble Finance Minister in the budget announcements for FY 2023-24, inter-alia, announced to simplify, ease, and reduce cost of compliance for participants in the financial sector through a consultative approach. Accordingly, a working group for review of compliance requirements for Mutual Funds was formed to review the present framework under SEBI (Mutual Funds) Regulations, 1996. The working group has provided its interim recommendations on the following:

  1. Appointment of a single fund manager for domestic and overseas/commodity funds
  2. Relaxation of nomination requirement for joint holders.
  3. Streamlining of prudential norms for passive schemes w.r.t exposure to a single issuer within AMC’s group companies.

This consultation paper provides details of the abovementioned recommendations of the working group and seeks suggestions from the public on the same.

The link of the aforesaid Consultation Paper is as follows:
https://www.sebi.gov.in/reports-and-statistics/reports/feb-2024/consultation-paper-on-ease-of-doing-business-initiatives-for-mutual-funds_81722.html

13. SEBI issues advisory against fraudulent trading schemes claiming to be offered to Indian Residents by FPIs:

SEBI vide Press Release No. 04/2024 dated February 26, 2024, issued an advisory against fraudulent trading schemes claiming to be offered to Indian Residents by FPIs.

SEBI has been receiving several complaints regarding fraudulent trading platforms that falsely claim or suggest affiliation with SEBI-registered Foreign Portfolio Investors (FPIs) and claim to offer trading opportunities through FPI or Foreign Institutional Investor (FII) Sub-accounts or Institutional Accounts with special privileges.

Fraudsters are enticing victims through online trading courses, seminars, and mentorship programs in the stock market, leveraging social media platforms like WhatsApp or Telegram, as well as live broadcasts. Posing as employees or affiliates of SEBI-registered FPIs, they coax individuals into downloading applications that purportedly allow them to purchase shares, subscribe to IPOs, and enjoy “Institutional account benefits”—all without the need for an official trading or Demat account. These operations often use mobile numbers registered under false names to orchestrate their schemes.

SEBI urges investors to exercise caution and to steer clear of any social media messages, WhatsApp groups, Telegram channels, or apps claiming to facilitate stock market access through FPIs or FIIs registered with SEBI. Such schemes are fraudulent and do not have SEBI’s endorsement.

The link to the aforesaid Press Release is as follows:
https://www.sebi.gov.in/media-and-notifications/press-releases/feb-2024/sebi-issues-advisory-against-fraudulent-trading-schemes-claiming-to-be-offered-to-indian-residents-by-fpis_81733.html 

14. Consultation paper on proposals to improve Ease of Doing Business concerning the additional disclosure framework for FPIs

SEBI on February 27, 2024, issued a Consultation Paper seeking public comments on two proposals to amend the additional disclosure framework for FPIs specified under the August 24, 2023 circular.

The first proposal is to exempt Category I University Funds and University-related Endowments FPI that meet certain objective criteria from the requirement of enhanced disclosures.

The second proposal is to exempt enhanced reporting requirements for some funds with concentrated holdings in entities with no identified promoter group, where there is no risk of breach of Minimum Public Shareholding (MPS).

The link of the aforesaid Consultation Paper is as follows:
https://www.sebi.gov.in/reports-and-statistics/reports/feb-2024/consultation-paper-on-proposals-to-improve-ease-of-doing-business-with-respect-to-the-additional-disclosure-framework-for-fpis_81807.html

15. Corporate Grouping of Listed Companies

On February 09, 2024, BSE vide Notice No. 20240209-41 introduced an online facility for filling in information related to changes in the corporate group through the listing center. This Notice is in continuation to Circular No. 20231130-27 issued by BSE dated November 30, 2023, informing about maintaining a repository containing names of companies forming a part of each Indian corporate group. Through said circular BSE has also informed that in case of any change in its corporate group pursuant to any event such as Corporate Restructuring, Takeover, Merger, Demerger, Acquisition, delisting, etc., the companies have to intimate the Exchange within 2 Working Days of the Effective Date of the change through email.

The online facility is available in the listing center login below path:

BSE Listing Centre> Listing Compliance > Corporate Group Repository

For identifying the corporate group, the following criteria/parameters shall, inter alia, be considered by the listed companies / proposed to be listed companies –

  1. A company and all its subsidiary companies will have the same ownership group.
  2. All associate companies of a company also belong to the same group.
  3. If the annual report of the company specifically attributes itself to a group.
  4. If the annual report of a company does not specify its affiliation with an ownership group but the website of the company does, then ownership is determined using the website as the primary source.
  5. Sometimes the parent company of a group might list all its affiliates on its website, this information is also required to be used as a reference for determining the ownership group of a company.
  6. Related party relationships as disclosed in the Annual report are also to be checked for determining the ownership group of an entity.
  7. In the case of a company that serves as a joint venture between an Indian group and a foreign group, it is attributed to the Indian group to the company.
  8. If a promoter/promoter group of a company is also a major shareholder of another company, then that other company is considered part of the same group.

The link for the aforesaid Notice on BSE is as follows:
https://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page=20240209-41

16. Intimation of credit of Dividend into attached bank accounts of notified parties under Special Court (TORTS) Act 1992

On February 09, 2024, BSE vide Notice No. 20240209-42 stated that the exchange received a letter from the office of the custodian, dated February 1, 2024, advising the exchange to issue circular to listed companies to ensure that whenever online dividend payment is credited into the bank account of notified parties, intimation thereof is invariably sent to Custodian’s office without fail for further necessary action.

The link for the aforesaid Notice on BSE is as follows:
https://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page=20240209-42

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