SEBI Updates Dec 2023

Amendments in the Securities Regulations

SEBI Updates December 2023

1. Extension of timeline for entering the details of the existing outstanding non-convertible securities in the Security and Covenant Monitoring system hosted by Depositories

On January 05, 2023, SEBI vide Circular No. SEBI/HO/DDHS/RACPOD1/CIR/P/2023/003, extended the timeline till January 31, 2023, for entering the details of existing outstanding non-convertible securities in the security and covenant monitoring system hosted by depositories.

Earlier, this was to be done by October 31, 2022. This is the second time SEBI has extended the deadline to comply with the rules. Earlier, the deadline was September 2022, which was extended to October 2022.

The link for the aforesaid Circular is as below:
https://www.sebi.gov.in/legal/circulars/jan-2023/extension-of-timelines-for-entering-and-verification-of-the-details-of-the-existing-outstanding-non-convertible-securities-in-the-security-and-covenant-monitoring-system-hosted-by-depositories_67045.html

2. Monitoring and periodical reporting of compliance with the requirements pertaining to the Security and Covenant Monitoring System hosted by Depositories

On January 05, 2023, SEBI vide Circular No. SEBI/HO/DDHS/RACPOD1/CIR/P/2023/002 intimated the Depositories to ensure periodic monitoring regarding compliance with the requirements relating to the Security and Covenant Monitoring and to bring to the notice of SEBI any instances of non-compliance every quarter, not later than 1 month from the end of the quarter in the format as specified in the Circular. This Circular came into force from April 01, 2023.

The link for the aforesaid Circular is as below:
https://www.sebi.gov.in/legal/circulars/jan-2023/monitoring-and-periodical-reporting-of-the-compliance-with-the-requirements-pertaining-to-security-and-covenant-monitoring-system-hosted-by-depositories_67043.html

3. SEBI extends relaxation on dispatching hard copies of financial statements

On January 05, 2023, SEBI vide Circular No. SEBI/HO/CFD/PoD-2/P/CIR/2023/4 extended the relaxation to listed companies from dispatching physical copies of financial statements till September 30, 2023. The earlier extension was till December 31, 2022.

This extension came after similar relaxations were provided by the Ministry of Corporate Affairs to companies dispatching physical copies of financial statements, including board’s report, auditor’s report, or other documents to shareholders through a circular dated December 28, 2022.

However, listed entities were required to send hard copies of annual reports to those shareholders who requested the same. Also, companies were required to disclose the weblink to the annual report to enable the shareholders to have access to the full annual report.

The link for the aforesaid Circular is as below:
https://www.sebi.gov.in/legal/circulars/jan-2023/limited-relaxation-dispatch-of-physical-copies-of-financial-statements-etc-regulation-58-of-sebi-listing-obligations-and-disclosure-requirements-regulations-2015_67033.html

4. Operational Circular for Credit Rating Agencies

On January 06, 2023, SEBI vide Circular No. SEBI/HO/DDHS/DDHS-RACPoD2/P/CIR/2023/6 issued an Operational Circular for Credit Rating Agencies which is a compilation of all the existing circulars (covering operational & procedural aspects) issued by SEBI till December 31, 2022, with consequent changes. This Circular came into force from February 01, 2023.

The link for the aforesaid Circular is as below:
https://www.sebi.gov.in/legal/circulars/jan-2023/operational-circular-for-credit-rating-agencies_67080.html

5. Management and Advisory services by AMCs to Foreign Portfolio Investors

On January 06, 2023, SEBI vide Circular No. SEBI/HO/IMD/IMD-PoD1/P/CIR/2023/5 permitted Asset Management Companies (AMCs) to provide management and advisory services to all Foreign Portfolio Investors (FPIs) operating from International Financial Services Centres (IFSCs).

This is subject to certain conditions, including that such FPIs will be allowed to invest in mutual fund schemes other than the schemes in the category of “thematic”. For investment in equity and equity derivative securities listed on recognized stock exchanges in India, the FPIs will not be allowed to take contra-position for 6 months from the date of purchase or sale of such securities.

Earlier in December 2019, SEBI allowed AMCs to provide management and advisory services to appropriately regulated FPIs that include pension funds, insurance companies, and banks.

The link for the aforesaid Circular is as below:
https://www.sebi.gov.in/legal/circulars/jan-2023/management-and-advisory-services-by-amcs-to-foreign-portfolio-investors_67064.html

6. Comprehensive Framework on Offer for Sale (OFS) of Shares through Stock Exchange Mechanism

On January 10, 2023, SEBI vide Circular No. SEBI/HO/MRD/MRD-PoD-3/P/CIR/2023/10 issued a comprehensive framework on the Offer for Sale of Shares through the Stock Exchange Mechanism which modifies the earlier set of guidelines originally introduced on 18 July 2012.

The Circular has been issued pursuant to representations made to SEBI by various stakeholders and recommendations of a working group of stock exchanges constituted by SEBI. This Circular came into effect from February 09, 2023.

The link for the aforesaid Circular is as below:
https://www.sebi.gov.in/legal/circulars/jan-2023/comprehensive-framework-on-offer-for-sale-ofs-of-shares-through-stock-exchange-mechanism_67157.html

7. Upstreaming of clients’ funds by Stock Brokers (SBs) / Clearing Members (CMs) to Clearing Corporations (CCs)

To safeguard clients’ funds lying with Stock Brokers (SBs) / Clearing Members (CMs), SEBI vide circulars issued in June, specified the framework requiring SB/CMs to place clients’ funds with Clearing Corporations (CCs) also called upstreaming.

Representations have been received from various stakeholders citing operational difficulties in complying with the aforementioned framework. Accordingly, SEBI advised the industry associations to consult with Market Infrastructure Institutions (MIIs) under the aegis of Broker’s Industry Standards Forum (ISF) and submit a proposal, so that operational difficulties can be addressed and the said framework for upstreaming can be complied with.

The recommendations of ISF have been considered and accordingly, SEBI on December 12, 2023, vide Circular No. SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2023/187 (“the Circular”) revised the framework for upstreaming.

Accordingly, SBs/CMs shall upstream all the clients’ clear credit balances to CCs on End of Day (EOD) basis. Such upstreaming of clients funds shall be done only in the form of either cash, lien on Fixed Deposit Receipts (FDRs) created out of clients’ funds, or pledge of units of Mutual Fund Overnight Schemes (MFOS) created out of clients’ funds.

Further, the Circular inter-alai also provides the guidelines for the following:

Receipt/payment of funds by SBs and CMs from/to their clients;
Upstreaming via FDR created out of clients’ funds;
Upstreaming via pledge of units of Mutual Fund Overnight Schemes (MFOS);
Eligibility of bank instruments provided by clients as collateral for upstreaming.

The link of the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/dec-2023/upstreaming-of-clients-funds-by-stock-brokers-sbs-clearing-members-cms-to-clearing-corporations-ccs-_79788.html

8. Simplification of requirements for the grant of accreditation to investors

SEBI vide Circular dated August 26, 2021, on ‘Modalities for implementation of the framework for Accredited Investors’, specified a framework for accreditation of investors by Accreditation Agencies.

Based on the feedback received from various stakeholders, to provide flexibility and facilitate ease of accreditation of investors, SEBI on December 18, 2023, vide Circular No. SEBI/HO/AFD/PoD1/CIR/2023/ 189 (“the Circular”) simplified the requirements for the grant of accreditation to investors as under:
1.Accreditation Agencies, which are also KYC Registration Agencies (KRAs), may access Know Your Customer (KYC) documents of applicants available with them in the capacity of KRA and may also access the same from the database of other KRAs, for accreditation;
2.The Accreditation agencies shall grant accreditation solely based on the KYC and the financial information of the applicants;
3.The accreditation certificate issued by accreditation agencies shall include the following disclaimer:
“the assessment of the applicant for accreditation is solely based on the applicant’s KYC and financial information and does not in any manner exempt market intermediaries and pooled investment vehicles from carrying out necessary due diligence of the accredited investors at the time of onboarding them as their clients.”

Further, the validity period of the accreditation certificate has been revised by fulfillment of the criteria mentioned in the Circular.

Accordingly, Annexure A (‘Modalities of accreditation’) and Annexure B (‘List of documents to be submitted by the applicant for accreditation’) to SEBI Circular dated August 26, 2021, have been revised and are given in Annexure 1 and Annexure 2 of the Circular respectively.

The provisions of the Circular shall come into effect from December 18, 2023.

The link of the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/dec-2023/simplification-of-requirements-for-grant-of-accreditation-to-investors_79990.html

9. Amendment to Circular dated July 31, 2023, on Online Resolution of Disputes in the Indian Securities Market

SEBI vide circular dated July 31, 2023, provided guidelines Online Dispute Resolution Portal (“ODR Portal”) which harnesses online conciliation and online arbitration for the resolution of disputes arising in the Indian Securities Market. These guidelines were amended by SEBI vide Circular dated August 04, 2023, and were consolidated with other regulatory requirements vide Master Circular dated August 11, 2023.

Pursuant to feedback received for providing clarity on certain aspects, SEBI on December 20, 2023, vide Circular No. SEBI/HO/OIAE/OIAE_IAD-3/P/CIR/2023/191 (“the Circular”) has amended the Circular dated July 31, 2023 which inter-alia provides for the following:

Methodology for initiating claims against the Government of India / President of India or a State Government / Governor of a State;
Within 10 days of an investor initiating online arbitration, the market participant is to deposit 100% of the admissible claim value with the relevant market infrastructure institution (MII) and pay the applicable fees for online arbitration.
If market participants choose online arbitration, they must inform the Online Dispute Resolution (ODR) institution within 10 days of concluding the conciliation process.
SEBI has also adjusted the fee slab for arbitration processes above Rs 50 lakh to ‘Above Rs 50 lakh-Rs 1 crore’ and an ad-valorem fee @ 1% of the claim value or Rs.1,20,000/- whichever is more has been prescribed for claims of Rs. 1 crore and above.

SEBI’s amendments in the circular demonstrate a dedication to improving the online dispute resolution framework in the Indian securities market. The focus on clarity, inclusivity, and transparent fee structures is aimed at streamlining the resolution process. It is crucial for market participants, such as listed companies, brokers, and intermediaries, to quickly adapt to these changes.

The link for the aforesaid Circular is as follows: –
https://www.sebi.gov.in/legal/circulars/dec-2023/amendment-to-circular-dated-july-31-2023-on-online-resolution-of-disputes-in-the-indian-securities-market_80110.html

10. Amendments to SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018 and SEBI (Listing Obligation and Disclosure Requirements) Regulations 2015

On December 21, 2023, SEBI vide notifications No. SEBI/LAD-NRO/GN/2023/162 and No. SEBI/LAD-NRO/GN/2023/161 replaced the term ‘Social Audit’ with ‘Social Impact Assessment’ in the SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018 and SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015 respectively. The requirement for audit of the annual impact report of a Social Enterprise registered on the Social Stock Exchange or which has raised funds through the Stock Exchange, is substituted with the assessment by a Social Impact Assessment Firm employing Social Impact Assessor.

The link for the aforesaid Notification for SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018 is as follows: –
https://egazette.gov.in/(S(ct1khtvw510ld2ocy3dodnpo))/ViewPDF.aspx

The link for the aforesaid Notification for SEBI (Listing Obligation and Disclosure Requirements) Regulations 2015 is as follows: –
https://egazette.gov.in/(S(ct1khtvw510ld2ocy3dodnpo))/ViewPDF.aspx

11. Consultation paper on the Introduction of optional T+0 and optional Instant Settlement of Trades in addition to the T+1 Settlement Cycle in Indian Securities Markets

The tremendous growth of, and increase in the number of investors, in the Indian Securities Market has put a greater onus on SEBI to make markets more efficient and safer for its participants, with a special focus on retail participants. Reliability, low cost, and high speed of transactions are key features that attract investors to particular asset classes.

Over the years in its endeavour to keep pace with the changing times and carry out its mandate of development of securities markets and investor protection, SEBI has shortened the settlement cycle, the latest being the introduction of T+1 settlement which was introduced in 2021 in a phased manner and fully implemented in January 2023. Accordingly, reducing settlement time and increasing the operational efficiency of equity dealings can further draw and retain investors into this asset class. Further, it is noteworthy to mention that the Indian Banking System is efficient in providing real-time transfer of funds and the depository system also has visibility of client-level holdings thereby enabling instant debit and credit of securities.

Given the above SEBI on December 22, 2023, issued a Consultation Paper for public comments on the introduction of a shorter settlement cycle viz. T+0 Settlement Mechanism and Instant Settlement Mechanism as an option in addition to the existing T+1 settlement.

The Consultation Paper specifies the following:
1.Features of T+0 Settlement Mechanism and Instant Settlement Mechanism (together ‘the mechanism’);
2.Benefits of the proposed mechanism;
3.Potential Concerns of the proposed mechanism;
4.Mitigation of Potential Concerns.

Further, SEBI held discussions with various stakeholders including Stock Exchanges (SEs), Depositories, Clearing Corporations (CCs), and stock brokers in the matter. A Working Group of SEs, Depositories, and CCs was formed to examine the feasibility of the introduction of a shorter settlement cycle and its associated legal, operational, technological, and market impact, etc. For this purpose, the Working Group proposes implementation of the same in two phases – Phase 1: T+0 Settlement Cycle and Phase 2: Instant Settlement Cycle.

Comments on the proposals in Annexure A and the queries under the Public Comments of the Consultation Paper shall be sent by January 12, 2024.

The link for the aforesaid Consultation Paper is as follows:
https://www.sebi.gov.in/reports-and-statistics/reports/dec-2023/consultation-paper-on-introduction-of-optional-t-0-and-optional-instant-settlement-of-trades-in-addition-to-t-1-settlement-cycle-in-indian-securities-markets-_80204.html

12. Extension of timelines for providing ‘choice of nomination’ in eligible demat accounts and mutual fund folios

SEBI vide Master Circulars dated May 19, 2023, and October 06, 2023, for Mutual Funds and Depositories respectively, inter-alia prescribed that the Depository Participants, Asset Management Companies, and Registrar & Transfer Agents are required to encourage the demat account holders/ mutual fund unit holders to fulfill the requirement for nomination/opting out of the nomination by sending a communication on fortnightly basis by way of emails and SMS to all such demat account holders/ mutual fund unit holders who are not in compliance with the requirement of nomination. The communication shall provide guidance to provide nomination or opt out of the nomination.

SEBI vide circulars issued in September 2023 extended the last date for submission of ‘choice of nomination’ for demat accounts and mutual fund folios respectively to December 31, 2023.

SEBI, based on representations received from the market participants, for ease of compliance and investor convenience, has on December 27, 2023, vide Circular No. SEBI/HO/MIRSD/POD-1/P/CIR/2023/19 decided to extend the last date for submission of ‘choice of nomination’ for Demat accounts and mutual fund folios to June 30, 2024.

All other provisions related to the requirement of Nomination under the above-mentioned Master Circulars shall remain unchanged.

The link for the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/dec-2023/extension-of-timelines-for-providing-choice-of-nomination-in-eligible-demat-accounts-and-mutual-fund-folios_80221.html

13. Framework on Social Stock Exchange (“SSE”)

SEBI vide its Circular dated September 19, 2022, notified the detailed framework on Social Stock Exchange. Further, SEBI under feedback received through public consultation approved and vide notification dated December 21, 2023, notified amendments to SEBI ICDR Regulations and SEBI LODR Regulations. SEBI on December 28, 2023, vide Circular SEBI/HO/CFD/PoD-1/P/CIR/2023/196 has approved modification/additions to the Circular dated September 19, 2022, which inter-alia provides for the following:
a.Procedure for public issuance of Zero Coupon Zero Principal Instruments by a not-for-profit organization;
b.Contents of the fundraising document; and
c.Other conditions relating to issuance of Zero Coupon Zero Principal Instruments.

The link for the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/dec-2023/framework-on-social-stock-exchange_80233.html

14. Master Circular for Online Resolution of Disputes in the Indian Securities Market

In furtherance of the interests of investors and under public consultations and consequent to notification of Alternative Dispute Resolution Amendment Regulations in 2023, SEBI on December 20, 2023, vide Circular No. SEBI/HO/OIAE/OIAE_IAD-3/P/CIR/2023/195 has further updated the Master Circular on Online Resolution of Disputes in the Indian Securities Market dated July 31, 2023 issued for updating the SEBI Circular dated July 31, 2023. The Master Circular provides for streamlining the existing dispute resolution mechanism in the Indian securities market under the aegis of Stock Exchanges and Depositories (collectively referred to as Market Infrastructure Institutions (MIIs)).

The Master Circular prescribes the following:
i.Establishment of a common Online Dispute Resolution Portal (“ODR Portal”) by the MIIs in consultation with their empaneled ODR institutions;
ii.Manner of initiation of the dispute resolution process;
iii.Necessary features and facilities to be made available on the ODR portal and dispute allocation system;
iv.Conciliation process;
v.Arbitration process;
vi.Applicable fees for the conciliation process and the arbitration process;
vii.Empanelment and training of the panel of Conciliators and Arbitrators;
viii.Roles & Responsibilities of the MIIs;
ix.Responsibilities of the Market Participants;
x.Timelines for implementation of the provisions of the Circular;

Further, the Master Circular also provides that Disputes between Investors/Clients (including institutional/corporate clients) and listed companies (including their registrar and share transfer agents) or any of the specified intermediaries / regulated entities in the securities market (as specified in Schedule A to the Circular) arising out of latter’s activities in the securities market, will be resolved in accordance with this circular and by harnessing online conciliation and/or online arbitration as specified in this circular.

Disputes between institutional or corporate clients and specified intermediaries / regulated entities in the securities market as specified in Schedule B to the Circular can be resolved, at the option of the institutional or corporate clients:
a.in accordance with this circular and by harnessing online conciliation and/or online arbitration as specified in this circular; OR
b.by harnessing any independent institutional mediation, independent institutional conciliation, and/or independent arbitration institution in India.

The link for the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/master-circulars/dec-2023/master-circular-for-online-resolution-of-disputes-in-the-indian-securities-market_80236.html

15. Consultation Paper on amendments to SEBI Regulations concerning Verification of Market Rumour

Regulation 30(11) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”) requires listed entities to verify and confirm, deny, or clarify market rumours that are reported in the mainstream media (“rumour verification requirement”).

Further, to facilitate capital formation and ease of doing business, at the behest of SEBI, three industry associations, viz. ASSOCHAM, CII, and FICCI came together to form the Industry Standards Forum (“ISF”) under the aegis of the Stock Exchanges to set industry standards. The ISF took up the rumour verification requirement as one of the pilot projects for formulating standards.

Accordingly, SEBI on December 28, 2023, issued a Consultation Paper on amendments to SEBI Regulations concerning Verification of Market Rumour seeking comments/views/suggestions from the public on the following proposals:

i.Material Price Movement as the criteria to verify market rumours instead of the material event in terms of Regulation 30 of LODR Regulations:

Currently, a listed entity is required to verify rumours only with regards to rumours about material events or information i.e. rumour should be concerning an impending specific ‘material’ event or information in terms of the provisions of regulation 30 of LODR Regulations.

In this context, ISF has suggested defining ‘materiality’ in terms of price movement in the scrips of the listed entity and considering the “material price movement” instead of “material event” as a trigger for rumour verification requirement since the aim is to verify rumours that affect or results in a sudden change in the price of the securities.

ISF has proposed the following parameters and the framework for determining material price movement in the securities of the listed entity:
i.Price range of the securities of the listed entity;
ii.Movement in the benchmark index (Nifty50 / Sensex);

Since, in the case of securities under a high price range, even a smaller percentage variation in the price would lead to a higher price variation in absolute terms, it is proposed that a lower percentage variation should be considered for securities falling under a high price range and a higher percentage variation should be considered for securities falling under low price range for determining material price movement. Further, it is proposed to link the price movement in securities to movement in Nifty50 / Sensex (benchmark index) which will allow us to factor in the market dynamics.

Proposed framework for material price movement:

A.In case benchmark index movement is greater than -1% and less than 1%:
The price range of the scrip Percentage variation in scrip price
Rs. 0-99.95 Greater than or equal to 5
Rs. 100- 199.95 Greater than or equal to 4
Rs. 200 and above Greater than or equal to 3

B.In case of benchmark index movement is greater than 1%:
The price range of the scrip Percentage variation in scrip price
Rs. 0-99.95 Greater than or equal to (5+ % change in benchmark index at 9:30) or Band hit
Rs. 100- 199.95 Greater than or equal to (4+ % change in benchmark index at 9:30) or Band hit
Rs. 200 and above Greater than or equal to (3+ % change in benchmark index at 9:30) or Band hit

C.In case benchmark index movement is less than – 1%:
The price range of the scrip Percentage variation in scrip price
Rs. 0-99.95 Greater than or equal to (5- % change in benchmark index at 9:30) or Band hit
Rs. 100 – 199.95 greater than or equal to (4- % change in benchmark index at 9:30) or Band hit
Rs. 200 and above greater than or equal to (3- % change in benchmark index at 9:30) or Band hit

Notes:
1.Index movement is to be considered at 9:30 am of the trading day w.r.t. the closing price on the previous trading day.
2.Percentage variation in scrip price is to be considered at any point of time during trading hours w.r.t. the closing price of the scrip on the previous trading day.
3.In case of negative news, the parameter cut-off applicable will be on the opposite side calculated as above.

The timeline for verifying market rumours shall be within 24 hours of material price movement instead of within 24 hours of reporting in the mainstream media as per the existing rumour verification requirement.

SEBI seeks comments on the following:
1.Whether ‘materiality’ for rumour verification requirements be considered in terms of material price movement?
2.Whether you agree with the proposed framework for material price movement as given in Annexure B?
3.Whether you agree that rumour shall be required to be verified and confirmed, denied, or clarified within 24 hours from material price movement?

ai.Mechanism to ensure that unaffected price is considered with respect to transactions relating to the securities of a listed entity upon confirmation of market rumour:
The market price of the shares of the listed entity might be affected upon confirmation of market rumours by the listed entity. Further, under various SEBI regulations, the Pricing of transactions relating to the securities of a listed entity is required to be based on the market price of securities being traded on the stock exchanges.

In this regard, ISF has suggested that an unaffected price should be considered when the listed entity confirms the market rumour due to material price movement.

a.ISF has proposed two frameworks for considering unaffected prices are proposed below:

Framework A (as proposed by ISF):
Details of Framework A:
i.The date immediately preceding the date on which the listed entity first confirms the rumour shall be deemed to be the ‘relevant date’ for determining the pricing for the transaction.
ii.Under the existing regulatory requirements, the look-back period is considered from the date preceding the relevant date. Accordingly, under the proposed framework, the look-back period for the calculation of volume-weighted average price (“VWAP”) shall be considered from the date preceding the new relevant date.

Advantages of implementing Framework A:
Any price variation due to rumour in the market and after confirmation of such market rumour is not taken into account for determining the pricing of transactions relating to the securities of a listed entity.

Challenges in implementing Framework A:
i.The framework does not consider the price changes due to any announcement by the listed entity, news about the industry, or developments across the market after the confirmation of rumour by the listed entity till public announcement/board approval i.e. the relevant date for the transaction under the existing regulatory requirements. The shareholders may be deprived of economic benefits in such cases.
ii.It is difficult to rule out the possibility of any person/entity having an interest in the transaction knowingly spreading rumours forcing the listed entity to confirm the market rumour and take benefit of a favorable price before any positive announcements or developments in the market.

Framework B (alternate proposal)
Details of Framework B:
i.The price variation due to rumour and confirmation of rumour may be excluded from the calculation of VWAP. The price variation in daily WAP from the day of material price movement till the end of the next trading day after confirmation of the rumour shall be attributed to the rumour and confirmation of the rumour (“WAP variation”). In today’s digital age where information flows quickly, one trading day is considered to be reasonable for the market to take cognizance of the rumour or its confirmation.
ii.From the day of the material price movement, the daily WAP in the look-back period shall be adjusted by the WAP variation mentioned above. The adjusted VWAP shall be calculated based on this adjusted daily WAP.
iii.In case of rumours at multiple stages of the same transaction, the price adjustment may be provided for all cases where there is a material price movement and the listed entity confirms the rumour.

Advantages of implementing Framework B:
Only the price variation due to the rumour and confirmation of market rumour is adjusted for determining the pricing of transactions relating to the securities of a listed entity. Price variation due to other factors such as announcements by the listed entity, news pertaining to the industry, or developments in the market will be included in the price of the transaction. Hence, shareholders will get a fair value of the shares of the listed entity.

Challenges in implementing Framework B:
i.No. of days for which the price gets impacted, upon confirmation of the market rumour, may vary due to various circumstances.
ii.There is a possibility that the price variation may hit the band limit on the next trading day post rumour confirmation and may spread to the following day.

Illustration for calculation of VWAP under the above proposed Frameworks A and B in case of preferential issue to qualified institutional buyers (QIBs) is placed in Annexure C to the Consultation Paper.

SEBI seeks comments on the following:
1.Whether the unaffected price should be considered when the listed entity confirms the market rumour due to material price movement?
2.Whether you agree that the unaffected price should be applicable for 60 days or 180 days, as the case may be from the date of confirmation of the market rumour till the ‘relevant date’ under the existing regulations?
3.Whether Framework A should be implemented? If yes, provide suggestions to address the challenges mentioned under the respective Framework A?
4.Whether Framework B be implemented? If yes, provide suggestions to address the challenges mentioned under the respective Framework B?

bi.Obligation on promoters, directors, KMP, and senior management:
In many instances, the market rumours pertain to the promoters/directors / KMP / senior management and the listed entity to comply with the rumour verification requirement under LODR Regulations, the need to seek information from such persons. Accordingly, there is a need to cast an obligation upon the promoters, directors, KMP, and senior management to provide adequate, accurate, and timely responses to queries raised or explanations sought by the listed entity to comply with the rumour verification requirement.

SEBI seeks comments on the following:
Whether promoters, directors, KMP, and senior management be mandated to provide adequate, accurate, and timely responses to queries raised or explanations sought by the listed entity to ensure compliance with the requirements under Regulation 30(11) of LODR Regulations?

iv.Classification of information that was not verified by listed entities as UPSI:
SEBI is of the view that there may be instances where certain information has been classified as UPSI by the listed entity and there are rumours about such information that doesn’t result in material price movement. Further, the listed entity neither confirms, denies, or clarifies such rumours published in the mainstream media. In such cases, such media reports should not be used later by an insider as a defense that the information was ‘generally available’.

SEBI seeks comments on the following:
In case certain information is classified as UPSI by the listed entity and market rumour about that information is not verified by the listed entity, then whether such information should be continued to be treated as UPSI and not ‘generally available’ information?

The comments or suggestions, along with the rationale, may be submitted by any of the modes specified in the consultation paper by January 18, 2024.

The link for the aforesaid Consultation Paper is as follows:
https://www.sebi.gov.in/reports-and-statistics/reports/dec-2023/consultation-paper-on-amendments-to-sebi-regulations-with-respect-to-verification-of-market-rumours_80237.html

16. Settlement of Running Account of Client’s Funds lying with Trading Member (TM)

To safeguard the interest of investors SEBI had mandated settlement of the running account of the client’s funds on the first Friday of the quarter/month, which mandate was incorporated as Clause 47 of “Master Circular on Stock Brokers” (“Master Circular”) issued in May, 2023.

SEBI has received representation from Broker’s Industry Standards Forum (ISF) citing various problems faced by brokers due to a single day of settlement viz. missing out on payment timings of banks due to late finalization, delayed instructions, etc.

Accordingly, the ISF to address the operational difficulties has recommended that TMs may be allowed to settle the running account of clients on Friday and/or Saturday and SEBI after due consideration, to ensure ease of doing business for various stakeholders while at the same time safeguarding the interests of the investors by ensuring error-free settlement has on December 28, 2023, vide Circular No. SEBI/HO/MIRSD/MIRSD-PoD1/P/CIR/2023/197 has modified Clause 47 of the Master Circular.

Further, in the above modification, SEBI has also ensured safeguarding against any possibility of misuse of one client’s funds to settle another client’s running account and has stipulated any funds received from clients shall remain in the upstreaming account i.e. placed with Clearing Corporations.

The link for the aforesaid Circular is as follows:
https://www.sebi.gov.in/legal/circulars/dec-2023/settlement-of-running-account-of-client-s-funds-lying-with-trading-member-tm-_80239.html

17. Cat III Alternative Investment Funds cannot invest in MF units permanently

Mutual funds are not permissible investment for Category III Alternative Investment Funds (AIFs): Asper SEBI’s informal guidance (December 14, 2023) Mutual funds are not permissible investments for Category III AIFs, reiterated the market regulator SEBI, in response to a query raised by Athena Alternative Investments Trust. The fund had asked if a Category III AIF could invest in mutual funds permanently. At present, Category III AIFs are not allowed to invest in mutual funds, other than liquid funds as temporary investments. To this, the regulator issued an informal guidance on December 14, 2023.

SEBI said that Regulation 18 of AIF Regulations allows Cat III AIFs to (a) invest in securities of listed or unlisted investee companies, derivatives, units of other AIFs, or complex or structured products; (b) deal in goods received in delivery against physical settlement of commodity derivatives; (c) buy or sell credit default swaps in terms of the conditions as may be specified by the board from time to time; and (d) engage in leverage or borrow subject to consent from the investors in the fund and subject to a maximum limit, as may be specified by the Board.

Under Regulation 2(1)(o) of AIF Regulations, the guidance note said, “investee company” means any company, special purpose vehicle, limited liability partnership, body corporate or real estate investment trust, or infrastructure investment trust in which an AIF invests.

“Thus, investment in mutual funds is not covered under permissible investments by a Category III AIF,” the note said.

However, “the un-invested portion of the investable funds and divestment proceeds pending distribution to investors of AIFs (including Cat III AIFs) may be invested in liquid mutual funds or bank deposits or other liquid assets of higher quality such as Treasury bills, Triparty Repo Dealing, and Settlement, Commercial Papers, Certificates of Deposits, etc. till the deployment of funds as per the investment objective or the distribution of the funds to investors as per the terms of the fund documents, as applicable”.

The link for the aforesaid Informal Guidance is as follows:
https://www.sebi.gov.in/sebi_data/commondocs/dec-2023/Athena_Alternative_Investments_Trust_IG_p.pdf

18. Filing of Announcements about Loss of Share Certificate/Issue of Duplicate Share Certificate/Closure of Trading Window and Corporate Insolvency Resolution Process (‘CIRP’) in XBRL format on the BSE listing center and NSE Electronic Application Processing System (NEAPS) platform

The BSE and NSE (together the ‘Stock Exchanges’ (SE)), in their initiative to gradually shift towards only XBRL submissions for announcements, has on December 08, 2023 intimated that the following announcements under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘SEBI LODR’) will be made available in XBRL format with effect from December 09, 2023 (‘effective date’):
1.Loss of Share Certificate/Issue of Duplicate Share Certificate;
2.Closure of Trading Window;
3.Corporate Insolvency Resolution Process.

At the initial stage, the PDF filings will be considered by the Exchange as compliance with Regulation 30 of the SEBI LODR. Further, all listed entities would be required to also submit the filings in XBRL mode within 24 hours of submission of the said PDF filing. At a later stage (date to be informed separately) Exchange will shift to only XBRL submission.

The XBRL utility for the above-mentioned subjects is available in the XBRL section of the Listing Centre of BSE and at the path COMPLIANCE >> Common XBRL Upload >> Equity Announcement- XBRL on NEAPS.

Further, it may be noted that on NEAPS the aforesaid three events, will be made available in iXBRL format to the listed entities and it will be made available to the listed entities at the path Report >> Announcement XBRL Report. iXBRL or Inline XBRL, is an open standard that enables a single document to provide both human-readable and structured, machine-readable data.

The link for the BSE Notice dated December 08, 2023, is as follows:
https://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page=20231208-34

The link for the NSE Circular dated December 08, 2023, is as follows:
https://nsearchives.nseindia.com/web/sites/default/files/inline-files/NSE%20Circular-%20Filing%20of%20Announcements%20pertaining%20to%20Loss%20and%20Duplicate%20Share%20Certificate%2C%20Trading%20Window%2C%20CIRP%20in%20XBRL%20format%20on%20NEAPS%201.pdf

19. Filing of Quarterly Reconciliation of Share Capital Audit Report under Regulation 76 of SEBI (Depositories and Participants) Regulations, 2018

Currently, Listed entities are required to submit the Reconciliation of Share Capital Audit Report (Reco Report) under Regulation 76 of SEBI (Depositories and Participants) Regulations, 2018 with the BSE in two different paths (for PDF and XBRL) of the BSE Listing Center.

As a part of BSE’s continuous efforts to promote ease of making filing/submissions, BSE on December 29, 2023, vide Notice No. 20231229-59, has introduced a facility for making both submissions under a single path.

The path of the BSE Listing Center for filing both the PDF and XBRL format of the Reco Report is as below:
BSE Listing Center > Listing Compliance > Compliance Module > Regulation 76 (DP) – Reconciliation of share capital audit report

Further, there is no change in the current process for XBRL submissions related to all other regulations/provisions except for the Reco Report.

The link for the BSE Notice dated December 29, 2023, is as follows:
https://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page=20231229-59