The Securities and Exchange Board of India (Sebi) on Wednesday approved a framework for Application Supported by Blocked Amount (ASBA) like facility being made available to investors for secondary market trading. ASBA is an application containing an authorization to block the application money in the bank account, for subscribing to an initial public offering (IPO). Sebi said the facility is based on blocking of funds for trading in the secondary market through UPI (unified payments interface) and will be optional for investors as well as stock brokers. The framework was approved by the board of SEBI at its meeting held on Wednesday. Sebi said under the framework client will continue to earn interest on his blocked funds in his savings account till the time amount is debited. There will be a direct settlement with clearing corporation (CC), without passing through pool accounts of the intermediaries, thereby providing client level settlement visibility to CC and thus avoiding the risk of co-mingling of clients’ funds and securities. The Sebi board introduced an alternative route to enable a diverse set of entities to become sponsors of mutual fund (MF). “Such entities, who otherwise may not have been eligible to be sponsors, include private equity funds, with requisite safeguards included in the proposal,” the market regulator said. The board approved a framework to provide for an institutional mechanism for prevention and detection of fraud or market abuse by stock brokers. For this, the stock broker regulations will be amended to provide systems for surveillance of trading activities and internal controls and whistle blower policy. The amendment will be made with regard to escalation and reporting mechanisms and obligations of the stock broker and its employees. These amendments will come into effect from October 1, 2023. In order to bring more transparency and to ensure timely disclosure of material events or information by listed entities,the board approved a few amendments to Listing Obligations and Disclosure Requirements (LODR) Regulations. It introduced a quantitative threshold for determining materiality of events and information. The board approved a stricter timeline for disclosure of material events / information for which a decision has been taken in the meeting of the board of directors (within 30 minutes) and which are emanating from within the listed entity (within 12 hours). The regulator also announced to set up a Corporate Debt Market Development Fund (CDMDF) in the form of an Alternative Investment Fund to act as a backstop facility for purchase of investment grade corporate debt securities during times of stress to instill confidence amongst the participants in the corporate bond market. The fund will enhance secondary market liquidity. When asked about the Adani-Hindenburg row, Sebi Chairperson Madhabi Puri Buch refused to comment as the matter was subjudice. “In the first place, we don’t comment on entity specific matters. On top of that, the matter is with the Supreme Court. We never comment on sub-judice matters,” Buch said. Earlier this month, the Supreme Court had set up a six-member expert committee headed by its former judge Justice A M Sapre to investigate whether there has been a regulatory failure in dealing with the alleged contravention of laws pertaining to the securities market by the Adani Group or other companies after Hindenburg Research came out with a report on January 24 this year. The other committee members include O P Bhat, K V Kamath, Nandan Nilekani, Somsekhar Sundaresan and Somsekhar Sundaresan and Justice JP Devdhar. Hindenburg Research had alleged the Group of brazen stock manipulation and accounting fraud, which the ports-to-energy conglomerate has denied. The Supreme Court also asked SEBI to investigate the allegations of stock manipulation leveled against the Adani Group and if there was a failure to disclose relevant information on related parties. The capital markets regulator has been given two months’ time to submit its report. Buch further said the Supreme Court order has instructed Sebi to give a status of its investigation to the expert committee.
