Context:
The newly formed High-Level Committee (HLC), comprising eminent experts from regulatory bodies, government, private sector, and academia, will submit its recommendations within three months of formation.
- Recommendations will be placed before the SEBI board for consideration.
- The conflict-of-interest framework, last updated in 2008, will be revisited to enhance operational disclosures, including self-recusal mechanisms.
- SEBI Chairman Tuhin Kanta Pandey emphasized the need for a clear framework to build trust and handle complaints transparently.
Raised FPI Disclosure Threshold
- The threshold for granular ownership disclosures by Foreign Portfolio Investors (FPIs) has been doubled from ₹25,000 crore to ₹50,000 crore.
- This move is expected to attract more capital and ease compliance.
- The concentration limit of 50% of AUC in a single corporate group remains unchanged.
- The regulator continues engaging with FPIs to facilitate capital formation.
Fee Structure Reforms for IAs and RAs
- Investment Advisors (IAs) and Research Analysts (RAs) are now allowed to charge advance fees for up to one year, subject to client agreement.
- Previously, advance fee collection was capped at two quarters for IAs and one quarter for RAs.
- This aims to provide more flexibility in fee structuring and improve client servicing.
Deferred Proposals
- The SEBI board deferred amendments to regulations concerning merchant bankers, debenture trustees, and custodians.
- Revised proposals will be reconsidered in future meetings after exploring alternative approaches.
Treatment of Category II AIF Investments
- SEBI clarified that investments by Category II Alternative Investment Funds in listed debt securities rated ‘A’ or below will now be treated as investments in unlisted securities, addressing market limitations in unlisted debt availability.
Changes in MII Governance Appointments
- SEBI approved process changes for appointing Public Interest Directors (PIDs) on Market Infrastructure Institution (MII) boards.
- If a PID is not reappointed after the first term, the reason must be recorded and shared with SEBI.
- The cooling-off period for PIDs moving between MIIs has been removed.
- Appointment of key officials (compliance officer, chief risk officer, chief technology officer) will now require approval from the MII governing board instead of the nomination and remuneration committee (NRC).
F&O Market Reforms Update
- SEBI officials provided an update on proposed reforms for risk monitoring and open interest formulation in the futures & options (F&O) market.
- While most feedback has been positive, certain stakeholder concerns are under review and will be considered before finalization.
SEBI’s recent board meeting decisions highlight its intent to foster transparency, ensure strong governance, and promote ease of doing business. By doubling FPI thresholds, revising conflict-of-interest frameworks, and streamlining governance in MIIs, the regulator is taking proactive steps to build trust and facilitate sustained market growth.
