SEBI introduces new asset class; liberalises MF Lite framework

The board meeting was the first since Hindenburg Research and Congress’ allegations of ‘conflict of interest’ against SEBI chairperson Madhabi Puri Buch and her husband Dhaval Buch.

The board did not announce tighter norms to curb speculative trading in Futures & Options (F&O), as expected by most of the market participants.

“The new investment product aims to provide investors with a professionally managed and well regulated product that offers greater flexibility, higher risk-taking capabilities for higher ticket size, while ensuring that appropriate safeguards and risk mitigation measures are in place,” the SEBI said in a press release issued after the board meet.

The minimum investment limit for the new product will be Rs 10 lakh per investor across all investment strategies of the new product in a particular AMC (Asset Management Company).

The SEBI board approved a relaxed framework with light-touch regulations viz, “MF Lite framework” for entities desirous of launching only passive mutual fund schemes. The SEBI said existing AMCs having both active and passive schemes, will have the option to hive off respective passive schemes, if they so desire, to a different group entity, thereby resulting in management of active and passive schemes by separate AMCs under a common sponsor.

If they choose to continue the passively managed schemes within the existing AMCs under the existing MF Regulations, the relaxed disclosures and other regulatory requirements for the passive schemes based on indices that would be covered under the MF Lite framework would be applicable to them as well, it said.

The markets regulator also enhanced the scope of optional (T+0), same day, settlement cycle, which was launched in March this year. It announced to increase, in a phased manner, the number of scrips eligible for trading under optional T+0 settlement from the 25 to top 500 in terms of market capitalization.

All registered stock brokers can offer access to the optional T+0 settlement cycle to their investors, and they will be free to charge differential brokerage for the same. The earlier proposal to move from optional T+0 settlement to optional instantaneous settlement is not under consideration for now, the SEBI said.

To enable faster Rights Issue along with the flexibility of allotment to specific investors and giving an investment opportunity to existing shareholders, the board reduced the timeline for completion of Rights Issue to 23 working days from the date of approval, from the present 317 days.

“This mechanism would be even faster than the preferential allotment route that takes 40 working days. In addition, it would give existing shareholders of the company an opportunity to participate even more, in the future potential growth of the company,” the regulator said.

All Rights Issues of size below Rs 50 crore have been brought under the purview of SEBI.

The SEBI board also approved the proposal of review of the regulatory framework for Investment Advisors (IAs) and Research Analysts (RAs) to facilitate ease of doing business by providing relaxation in eligibility criteria for registration and simplifying the compliance requirements.

These proposed changes are expected to accelerate the growth of the number of registered IAs and RAs to cater to the needs of the rapidly increasing number of domestic investors.

The SEBI board made amendments to the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations) to rationalize the scope of expressions ‘connected person’ and ‘immediate relative’

It amended the provision relating to person deemed as connected person by including a firm or its partner or its employee in which a ‘connected person’ is also a partner; and a person sharing household or residence with a ‘connected person.

It also made the provision relating to person deemed as connected person applicable to “relative” (spouse, parents and parents of spouse, siblings and siblings of spouse and child) instead of “immediate relative”.

Investors will now have an option to trade in the secondary market (cash segment) either using UPI (Unified Payments Interface) block mechanism (Application Supported By Blocked Amount (ASBA)-like for secondary markets), or 3-in-1 trading facility in addition to the current mode of trading.

The board also announced measures for speedier disposal of matters related to certain types of violations. It also approved key measures for facilitating ease of doing business for listed and to be listed entities by way of amendments to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018.