From allowing share purchase through the Application Supported by Blocked Amount (ASBA) facility — where investor funds remain blocked in their own bank accounts instead of being passed to the broker until the execution of purchase order — to making it mandatory for the top 100 companies to clarify on market rumours, market regulator SEBI on Wednesday adopted a slew of measures in its quarterly board meeting.
The regulator was holding its first press meet since the Adani-Hindenburg saga broke out in January. However, its chief, Madhabi Puri Buch, refused to answer questions related to the issue on the reasoning that it would submit the status report of its investigation directly to the Supreme Court. “The elephant in the room is Adani, and we don’t comment on sub-judice matters,” said Buch.
The regulator said it will put out a mechanism to prevent and detect fraud or market abuse by stock brokers. Amendments will be made to the stock brokers’ regulations that will also provide for having a whistle-blower policy as well as systems for surveillance of trading activities and internal controls. “Another Karvy like episode will be over our dead body,” said Buch.
It maybe noted that the ASBA facility will be optional for clients and brokers. SEBI has also set guidelines for the disclosure of material events by listed companies. Additionally, it has specified some micro norms for bonus issues by companies, including mandatory permission from exchanges.
The regulator has allowed private equity funds to now sponsor mutual funds (MFs). Multiple ESG (environmental, social and governance) schemes can be launched by MFs. SEBI is also evaluating rules for total expense ratio (TER) process by MFs, for which detailed guidelines should be out soon. TER is the amount that MFs proportionately charge investors for the expense incurred on a scheme.
SEBI will also regulate index providers to foster transparency and accountability in the governance and administration of financial benchmarks in the securities market. International index providers like MSCI with India-focused products, if used by Indian entities, will be regulated by SEBI.
Moreover, SEBI has also approved a backstop fund for the corporate debt market. The facility will be managed by SBI MF and the initial corpus will be ₹3,000 crore, which will be contributed by all asset management companies (AMCs). The government has approved a 10-time leverage on the corpus, which will be guaranteed by the National Credit Guarantee Trustee Company. The facility is to prevent events like Franklin Templeton MF, where it had to stop redemptions of its debt schemes due to losses. Only funds participating in the mechanism can sell bonds to the backstop fund.
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