Outcome of SEBI Board meeting held on 22nd August 2019

SEBI in its board meeting which was held on 22nd August, 2019 has approved several recommendations made by the HR Khan Committee to simplify and rationalise the existing regulatory framework for foreign portfolio investors (FPIs) by easing operational constraints and compliance requirements.

These are the important takeaways from the SEBI meeting:
A. Decisions on FPI Regulations:

  • Documentation requirement for KYC to be simplified.
  • Broad-based eligibility criteria’s for FIIs will be done away with.
  • SEBI to ease compliance, registration process for FPI.
  • FPIs to be re-categorised from 3 classes to 2 classes.
  • Central Banks of other countries to be made eligible for FPI registration.
  • Registration for multiple investment manager(MIM) structures to be simplified.
  • The requirements for issuance and subscription of offshore derivative instruments (ODIs) will also be rationalized.

B. In another key move, the SEBI has decided to relax buyback norms for listed firms that own non-banking financial companies (NBFCs) and housing finance companies (HFCs) subsidiaries. This move will free conglomerates from the restrictive debt-to-equity ratio (DER) norms calculated on a consolidated basis for guiding buybacks.

C. The board has considered and approved few amendments to SEBI (Issue and Listing of Debt Securities by Municipalities) Regulations, 2015.

D. SEBI has decided to tighten regulations for Credit Rating Agencies. For rating firms to have timely information on the default of an entity, the issuer and the rating agency need to enter into an agreement in which the issuer will provide explicit consent to the rating agency to obtain details of the issuer’s existing or future borrowings; its repayment or delay or default in servicing the debt either from the lender or any other statutory organization.

E. SEBI approved a detailed set of rules for the new ‘Informant Mechanism’ under its Prohibition of Insider Trading (PIT) Regulations. However, these benefits would only be available to individuals and corporates, and professionals like auditors will not be able to use this route as they are duty-bound to report any wrongdoing.

F. SEBI also decided to give flexibility to the Mutual Funds to invest in unlisted non-convertible debentures up to a maximum limit of 10 per cent of the debt portfolios of the scheme. 

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