On Wednesday, the Securities and Exchange Board of India (SEBI) approved extensive governance changes for mutual funds (MFs), brokerages, and alternative investment funds (AIFs), including the creation of a backstop facility worth Rs 33,000 crore. to stop a market dislocation from spreading to debt mutual funds.
To defend client finances lying with dealers, the controller made ASBA (Application Upheld by Hindered Sum) office discretionary for the auxiliary market and furthermore allowed day to day upstreaming of client reserves. Investors can therefore park their funds directly with clearing corporations and earn interest on them, avoiding brokers.
“Earlier the regulator used to take steps to protect the securities of the customers, and now we are protecting the cash of the investors,” SEBI Chairperson Madhabi Puri Buch stated in her address to a press conference. This will guarantee that there is no systemic risk at all. We cannot tolerate another incident similar to Karvy in our markets.”
Buch, on the other hand, stated that the matter was under judicial review and that an investigation was already underway when asked to comment on the report on the Adani group by US short seller Hindenburg Research. He stated, “We will follow the Supreme Court’s instructions in spirit and letter.”
Previously, there were concerns that a facility like ASBA might raise brokerage costs. Buch stated, “Similar concerns were raised when SEBI introduced ASBA for the IPO market,” which allayed these concerns. Unbundled costs will benefit from this.
The establishment of self-sponsored asset management companies (AMCs) has received approval from the SEBI board. To turn into a support free AMC, a substance should have a positive fluid total assets and a net benefit of essentially Rs 10 crore in every one of the quickly going before five years.
Additionally, SEBI amended the regulations to clarify the MF trustees’ responsibilities in the event of a disagreement between shareholders and unit holders.
Index providers were brought under the purview of the regulator’s board. SEBI registration is required for any index where local investors invest. SEBI wanted to make up for the lack of a regulatory framework for index providers in Buch. Domestic asset managers won’t be able to use global index providers like MSCI or FTSE as benchmarks if they aren’t registered with the regulator.
With the introduction of the Business Responsibility and Sustainability Reporting (BRSR) core, SEBI has also mandated environmental, social, and governance (ESG) disclosure assurance through a set of 49 parameters. This will be material to the main 250 recorded organizations from the monetary year 2024-25 (FY25).
SEBI has likewise made ready for setting up new sub-classes in ESG-themed MFs. In order to allow ESG rating providers some leeway, a separate chapter will be added to the regulations for credit rating agencies.
It has mandated that the top 100 companies first appear in major media agencies, discouraged the practice of permanent board seats for directors, encouraged timely disclosure of important events, and attempted to strengthen corporate governance norms. SEBI allowed hard underwriting for IPOs in response to news reports, allowing share sales to be saved in the event that they do not receive full subscription.
The capital markets regulator has mandated the valuation of AIFs’ investment portfolios and appointed an independent valuer to tighten its grip on them. Dematerializing the units is also a requirement for all AIF schemes with a corpus of more than Rs 500 crore. SEBI has also granted AIFs permission to wind down existing schemes and transfer uninvested investments to a new scheme with investors’ consent for 75% of the value.
SEBI’s board has additionally ordered the necessity of accreditation for the lead speculation group of AIFs.