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SEBI moves to regulate Index Providers

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SEBI recently held its 203rd board meeting wherein it inter alia approved several amendments to regulatory provisions including approving several new frameworks. The SEBI Chairperson Smt. Madhabi Puri Buch after the board meeting in a press conference announced the approved changes followed by a SEBI Press Release on its website in relation to the same.  

Broadly, the changes approved included (i) bringing flexibility in Social Stock Exchanges by inter alia reducing minimum public issue size from INR 1 crore to INR 50 lakh and reducing minimum application size for public issues from INR 2 lakh to INR 10,000 to enable wider participation of retail investors; (ii) Introduction of Regulatory Framework for Index Providers – SEBI approved framework for registration of ‘Significant Indices’ based on certain objective criteria. The regulations will take cue from International Organization of Securities Commissions (IOSCO) Principles for Financial Benchmarks; (iii) Allowing creation of Small & Medium REITs – The framework will include allowing for creating separate schemes of REITs for an asset value of INR 50 crore as opposed to the present minimum criteria of INR 500 crore and (iv) Amendment to AIF Regulations – (a) Any fresh investment made by an AIF, beyond September 2024, shall be held in dematerialised form with certain exceptions and (b) The mandate of appointing a custodian has been extended to all AIFs.  

In this background, the The Economic Times Times has featured an article discussing the changes approved during the SEBI board meeting.  

“The article features the views of Mr. Sumit Agrawal, Managing Partner, Regstreet Law Advisors and former SEBI officer who in relation to allowing creation of Small & Medium REITs observed that “This growth-oriented initiative is poised to facilitate fractional ownership of real estate in a more organised and structured manner”. Further, in relation to the SEBI proposal to introduce a regulatory framework for Index Providers he observed that “With the global and Indian financial sectors experiencing a surge in passive investment, the need for clear regulations regarding indexes and index service providers has become evident…Sebi seems to have shifted its policy from regulating all indexes to focusing on significant ones. Indexes vary in scope, ranging from broad-based and widely used to narrowly focused, including specialised ones tailored for specific users.”  

The The Economic Times Times article is accessible at: https://m.economictimes.com/markets/stocks/news/sebi-oks-fractional-ownership-framework-for-realty-assets/amp_articleshow/105507194.cms

The SEBI Press Release is accessible at: https://www.sebi.gov.in/sebi_data/attachdocs/nov-2023/1700916755216.pdf

Readers are welcome to send their views to Regstreet Law Advisors at info@regstreetlaw.com.