The Securities and Exchange Board of India (SEBI) convened its 207th board meeting on September 30, 2024, bringing significant regulatory changes aimed at enhancing investor protection, market efficiency, and overall ease of doing business. Here are the key takeaways from the meeting, highlighting the regulatory shifts and their impact on the investment landscape.
1. Mutual Fund Lite Framework
SEBI introduced a liberalised Mutual Fund Lite (MF Lite) framework to ease market entry for new players and encourage innovation. This framework lowers the eligibility requirements for sponsors, reducing compliance burdens, and promotes a clear division between active and passive management. It aims to make the mutual fund space more competitive by fostering market liquidity and innovation.
Investor Benefit: Reduced compliance and increased market competition offer greater opportunities and potential returns for investors.
2. New Investment Product Class for Mutual Funds
A new investment product has been introduced to bridge the gap between mutual funds and portfolio management services, specifically targeting high-net-worth individuals (HNIs) with greater flexibility in portfolio construction. The minimum investment for this product is set at Rs 10 lakh per investor.
Investor Benefit: Provides more diverse investment opportunities with higher risk-return potential while ensuring professional management.
3. T+0 Settlement Cycle Expansion
SEBI has extended the scope of the optional T+0 settlement cycle to cover the top 500 listed companies by market capitalisation. This enhancement provides investors with an option for same-day share and fund transfers, thus improving trading efficiency.
Investor Benefit: Faster settlements and enhanced liquidity make investing more flexible and efficient.
4. Enhanced ESG Debt Securities Framework
To promote sustainable finance, SEBI has approved frameworks for ESG (Environmental, Social, Governance) Debt Securities, including social bonds, sustainability bonds, and sustainability-linked bonds. These instruments are intended to align investment opportunities with environmental and social objectives.
Investor Benefit: Encourages socially responsible investing, providing opportunities to invest in projects that align with sustainability goals.
5. Revised Rights Issue Process
The rights issue process has been revamped, reducing the timeline for completion to just 23 working days, compared to the previous average of 317 days. Additionally, several compliance obligations have been relaxed, making the rights issue more efficient.
Investor Benefit: Faster access to rights issues, allowing investors to capitalize on growth opportunities more quickly.
6. Ease of Compliance for Investment Advisers and Research Analysts
Eligibility criteria and compliance requirements for Investment Advisers (IAs) and Research Analysts (RAs) have been relaxed. The regulatory changes include a reduced qualification threshold and removal of experience prerequisites for registration, providing greater flexibility.
Investor Benefit: Reduced compliance barriers make financial advisory services more accessible, potentially bringing more expertise to investors.
7. Proportional Rights for Investors in AIFs
SEBI has clarified the regulatory intent for Alternative Investment Funds (AIFs) to ensure that investors’ rights to investments and distributions are proportional to their commitments. This is intended to provide fair treatment across the board.
Investor Benefit: Ensures equity among investors in AIFs, promoting transparency and fairness.
8. Nomination Facility Enhancements
SEBI has improved the nomination facility by increasing the number of nominees allowed, simplifying the asset transmission process, and introducing consistent norms across different investment platforms.
Investor Benefit: Enhanced flexibility in estate planning, making the transfer of investments to beneficiaries more streamlined.
9. Faster Resolution for Securities Law Violations
SEBI has amended regulations to include summary proceedings for certain types of securities law violations by intermediaries. These changes aim for quicker resolution while upholding principles of natural justice.
Investor Benefit: Quicker resolution of compliance issues, ensuring better market stability and reduced uncertainty.
Conclusion
SEBI’s September 2024 board meeting brought substantial regulatory changes across various investment vehicles, targeting increased transparency, enhanced investor protection, and improved market efficiency. The introduction of MF Lite, the expansion of T+0 settlements, and the new ESG Debt Securities framework are just a few initiatives reflecting SEBI’s ongoing commitment to developing India’s capital markets.
As an investor, these regulatory updates open new avenues for participation while reinforcing market stability and trust.