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SEBI tightens norms for loan default disclosure by listed firms

Our Bureau Mumbai | Updated on November 20, 2019 Published on November 20, 2019

Ajay Tyagi, Chairman of SEBI   -  Shashi Ashiwal

Gives just 24 hours beyond 30 days of non-payment; also raises the entry barrier for portfolio management services cos to ₹5 cr

Listed companies cannot hide their loan default beyond 31 days.

At its board meeting on Wednesday market regulator SEBI mandated that “In case of any default in repayment of principal or interest on loans from banks or financial institutions which continues beyond 30 days from the pre-agreed payment date, listed entities shall, promptly, but not later than 24 hours from the 30th day, disclose the fact of such default.”

Higher networth for PMS

The regulator also tightened the norms for the portfolio management services (PMS) industry. SEBI said that the networth criterion for portfolio managers will now be ₹5 crore instead of ₹2 crore earlier. Those with a networth of less than ₹5 crore will not get SEBI registration. This, experts said, would affect thousands of portfolio managers across India.

SEBI has given a three-year timeline for existing portfolio managers to meet the new criteria. It also raised the minimum ticket size for investors who want to use portfolio managers’ services to ₹50 lakh from ₹25 lakh. SEBI said that portfolio managers would not have to compulsorily appoint a custodian and a compliance officer.

Dhaval Kapadia, Director, Portfolio Specialist, Morningstar Investment Advisors India, said: “Globally, regulators typically don’t follow the practice of defining an investment floor for PMS products. Instead, they define the type of investors who can invest in them, called accredited or qualified investors with certain minimum networth and other criteria.

“Further, within PMS products there are different strategies with varying levels of risk such as concentrated equity strategies vis-a-vis multi-asset strategies that invest only in mutual funds or ETFs. It is not clear if this has been considered while defining the minimum investment ticket and whether a minimum investment should be retained at ₹25 lakh for multi-asset MF/ETF portfolios versus higher risk strategies,” said .

Prakarsh Gagdani, CEO, 5Paisa.com, said: “By increasing the PMS limit, SEBI has made it clear that a major section of retail investors should come via the mutual fund route. Customised portfolio management is designated only for HNIs, hence clearly demarcating customer categories.”

Rights issue norms

SEBI also revised the norms for issuance of shares on rights basis to existing shareholders. The timeline has been reduced to 31 days from 55 days currently. As per SEBI, now the top 1,000 listed companies will have to include business responsibility reporting as part of their annual report. This was earlier mandated only for the top 500 companies.

Published on November 20, 2019
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