Under its new chairman Tuhin Kanta Pandey, the Securities and Exchange Board of India (Sebi) has gravitated towards greater transparency and ease of doing business, setting an objective of “effective and optimum” regulation.
On Monday, during its first board meeting under Pandey, the regulator has decided to constitute a high-level committee (HLC) to review conflicts of interest and unveiled initiatives to simplify regulatory processes.
The HLC, soon to be formed, will do a comprehensive review of provisions relating to conflicts of interest, disclosures, and other matters related to top officials.
This move aims to address concerns surrounding transparency at the organisation, which had faced allegations of conflict of interest against its previous chairperson.
The HLC, comprising eminent persons and experts, will submit its recommendations within three months of its formation.
The suggestions will be placed before the board.
Sebi has also raised the investment threshold for granular ownership disclosures by foreign portfolio investors (FPIs) from Rs 25,000 crore to Rs 50,000 crore.
On disclosures of conflicts of interest, Pandey said the framework was last revised in 2008 and required an update.
The committee will discuss operational measures for disclosures on recusing oneself from cases.
“There were concerns around trust. I would say things are fine.
"There is no tendency to hide. It is just that we need a framework — on how one can complain, how it is looked at, and what the best practices are,” he told reporters after the board meeting.
On doubling the threshold for FPIs, Pandey said the measures would help bring in more capital.
He added the regulator was engaging with FPIs to help facilitate capital formation.
The FPI disclosure norms, introduced in August 2023, had set the threshold.
Those with assets under custody (AUC) of over Rs 25,000 crore or with over 50 per cent of their AUC concentrated in a single corporate group were required to provide details on additional ownership.
While Sebi has doubled this threshold, the concentration limit of 50 per cent remains unchanged.
The Sebi board also decided to allow investment advisers (IAs) and research analysts (RAs) to charge fees in advance for one year or less, subject to client agreement.
Previously, IAs and RAs were restricted to charging advance fees for a maximum period of two quarters and one quarter, respectively.
This change aims to provide more flexibility in fee structuring.
Meanwhile, the Sebi board deferred the proposal to amend regulations governing merchant bankers, debenture trustees, and custodians.
Revised proposals will be considered at a future meeting after a review and evaluation of alternative approaches.
Due to the limited availability of unlisted debt securities, Sebi has said investment by Category II alternative investment funds in listed debt securities rated A or below will be treated on a par with investment in unlisted securities for compliance with minimum investment conditions.
Tweaks to the MII appointment process
Sebi approved changes to the process of appointing public interest directors (PIDs) on the governing boards of market infrastructure institutions (MIIs).
The existing process, which requires Sebi approval but not shareholder approval, will continue.
Additionally, the board decided if an MII’s governing board did not reappoint a PID after the person’s first term, the reasons for that must be recorded and communicated to Sebi.
While Sebi will no longer prescribe a cooling-off period for a PID moving from one MII to another, the appointment of other key officials such as compliance officer, chief risk officer, and chief technology officer will need approval from the governing board of the MII instead of the nomination and remuneration committee (NRC).
New F&O proposals
Sebi officials provided an update on the proposed reforms on risk monitoring and open interest formulation in futures and options (F&O).
While the majority of the suggestions on this have been positive, key stakeholders have raised concerns that the regulator will carefully consider.
Ananth Narayan, whole-time member of Sebi, acknowledged the importance of F&O for hedging, market making, and price discovery.
He noted that Sebi had conducted extensive consultations, receiving over 800 suggestions, and engaged with participants to address their concerns.
On market volatility, the new chairman said there could have been a higher India VIX (volatility index), going by the turmoil in the world.
However, it is surprising that it is not much. The India VIX is less than 14.
Pandey emphasised the work done by Sebi on curbing pump-and-dump operators and financial influencers spreading misinformation.
On pump and dump, Sebi officials said there had been overall “savings” of Rs 22,000 crore through the regulator’s recent three orders, which caught such operators at the pumping stage.
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