Sebi decides to introduce new asset class; 'MF Lite' framework for passive funds

Markets regulator Sebi's board on Monday cleared a proposal to introduce a new asset class for high-risk profile investors to bridge the gap between mutual funds and portfolio management services and approved MF light-touch framework for passive schemes.

The board cleared 17 proposals, including an amendment to insider trading rules to clarify the definitions of 'connected person' and 'immediate relative' and relaxed eligibility criteria and compliance requirements for investment advisers and research analysts.

This was the first board meeting after the US-based short seller Hindenburg Research and Congress party made allegations against Sebi's chairperson Madhabi Puri Buch.

Hindenburg accused Buch and her husband of having investments in offshore funds controlled by Vinod Adani, the brother of Adani Group chairman Gautam Adani, which were allegedly used to round trip funds and inflate stock prices.

Also, it was alleged that Sebi had amended rules pertaining to real estate investment trusts (REITs) in a way that benefited Blackstone, where Buch's husband was a senior advisor. Buchs and Sebi had denied the allegations.

In a statement issued by Sebi after the board meeting, the regulator said it has been decided to introduce provisions for "summary proceeding" in the intermediaries rules to handle certain minor violations of securities laws by intermediaries more swiftly and efficiently.

Also, it has decided to provide more flexibility for allotting shares to specific investors in rights. Further, promoters would be permitted to transfer their rights entitlement to select investors during rights issues, potentially attracting more investment into the market.

The board also cleared a relaxed framework with 'light-touch' regulations for entities desirous of launching only passive mutual fund schemes.

MF Lite framework or light-touch regulations include relaxed requirements relating to eligibility criteria for sponsors, including net worth, track record and profitability, the responsibility of trustees, approval process and disclosures, Sebi said.

In addition, the regulator has rationalised the disclosure requirements in the offer document and reduced the rights issue processing time to make it a preferred fundraising route.

"Sebi's initiative in reducing timelines (i.e. rights issue to be completed in 23 days approx from the existing time required of 317 days) for rights issue is a welcome step. With reduced timelines, corporates can have faster access to funds through rights issues," Makarand M Joshi, founder of corporate compliance firm MMJC and Associates, said.

The board has also approved a proposal on a UPI block mechanism and 3-in-1 trading facility, whereby Qualified Stock Brokers (QSBs) should offer either a UPI block (like ASBA for secondary markets) or a 3-in-1 trading facility, and expand the optional T+0 settlement cycle for faster trade settlements in a phased manner from the top 25 to top 500 stocks in terms of market capitalisation.

To promote ease of doing business and facilitate smoother processes, it has amended (LODR) Regulations, 2015, and Sebi (ICDR) Regulations, 2018, and approved measures to simplify compliance and ease of disclosures for non-convertible securities.

The board has given its go-ahead to the Informal Guidance Scheme to provide wider access and streamline the process.

Also, it has overhauled the rules for merchant bankers, specified 'pro-rata and pari-passu rights' of investors of alternative investment funds (AIFs) and decided to bring offshore derivative instruments (ODIs) and FPIs under the same disclosure requirements.

The regulator has decided to introduce a uniform, investor-friendly norms for nomination in the Indian securities market, expanded the scope of the framework to promote corporate fundraising through sustainable finance and replaced the requirement of document attestation by a notary or Gazetted officer with self-attestation.