SEBI held its 209th Board Meeting in Mumbai, announcing key decisions to strengthen transparency, market integrity, and ease of doing business. Highlights include:
1. High-Level Committee on Conflict of Interest and Disclosures
SEBI will establish a High-Level Committee (HLC) to review conflict-of-interest provisions, disclosure norms, and governance frameworks. The HLC will comprise experts from regulatory bodies, government, public and private sectors, and academia. Member names will be announced later.
In August 2024, Sumit Agrawal and MS Sahoo authored an article in Business Standard titled “Smoke, Fire and Fog: Looking Beyond the Haze of Hindenburg Allegations.” They emphasized the need for a principle-based conflict management framework, structured recusal mechanisms, and enhanced disclosures to protect regulatory integrity.
Additionally, in 2020, Sumit Agrawal wrote “The Process and Past Controversies in Appointment of SEBI Chairman” (Bar & Bench), analyzing SEBI Chairperson appointments, Financial Sector Regulatory Appointments Search Committee (FSRASC) procedures, and legal challenges affecting regulatory independence.
2. Enhanced FPI Disclosure Thresholds
To align with Press Note 3 and prevent circumvention:
- FPIs with over INR 50,000 crore equity AUM (previously INR 25,000 crore) must disclose ultimate beneficial ownership on a full look-through basis per SEBIโs August 2023 circular.
- FPIs with over 50% of their equity AUM in a single corporate group must continue disclosures to comply with MPS & SAST norms.
- All FPIs remain subject to PMLA regulations for regulatory scrutiny.
ย 3. Category II AIF Investment Norms Update
In response to LODR amendments mandating listed issuance of debt securities:
- Category II AIF investments in listed debt rated โAโ or below will be classified as unlisted securities for meeting minimum investment criteria.
- This aims to boost lower-rated debt investments while ensuring regulatory flexibility.
4. Strengthening Governance in Market Infrastructure Institutions (MIIs)
- Public Interest Directors (PIDs): SEBI approval remains mandatory; shareholder approval not required. If an MII declines PID re-appointment, reasons must be provided.
- Cooling-Off Period for KMPs: MIIs may prescribe cooling-off for KMPs/directors before joining competitors; SEBI will no longer mandate PID cooling-off across MIIs.
- Critical KMP Appointments: Compliance Officer (CO), Chief Risk Officer (CRiO), Chief Technology Officer (CTO), and Chief Information Security Officer (CISO) appointments will require MII Governing Board approval, not just NRC approval.
ย 5. Revised Fee Framework for Investment Advisers (IAs) & Research Analysts (RAs)
- Advance Fee Limit Increase: IAs & RAs can now collect up to one yearโs advance fees (previously six months for IAs, three months for RAs).
- Clarifications on Applicability: Fee restrictions apply only to individual/HUF clients; institutional, accredited investors, and proxy advisory clients are exempt.
6. Deferment of Legal Entity Segregation for Merchant Bankers, Debenture Trustees, and Custodians
- The earlier requirement to separate regulated activities into independent legal entities within two years has been deferred for further review.
A copy of the SEBI Press Release is enclosed.