NEW DELHI, Jan 1: Safeguarding investors’ interest and spreading financial literacy will be at the forefront in capital markets regulator Sebi’s scheme of things in 2017, after a year marked with several reform measures and increased traction for mutual funds and IPOs.
Besides, Sebi is hopeful about several new investment avenues — such as Real Estate and Infrastructure Investment Trusts (REITs and InvITs), Municipal Bonds and Startup listings — to progress ahead, as also for the numerous measures for deepening of bond market to begin yielding desired results.
A senior official said the regulator will give special attention to these new products in the new year to ensure their success and has been already open to all positive suggestions to make these new vehicles investor-friendly.
Some of the key developments during 2016 included inauguration of the new National Institute of Securities Market (NISM) campus at Patalganga, increased capital raising through IPOs (over Rs 26,000 crore) and increased inflow into mutual funds.
Besides, Applications Supported by Blocked Amount (ASBA) facility was made compulsory, reduction in listing time from T+12 to T+6 and strengthening of the risk management in commodity derivatives market were other key steps that Sebi put in place to safeguard the interest of investors under Chairman U K Sinha.
The new year would also see a leadership change at the Securities and Exchange Board of India (Sebi) as Sinha’s tenure would come to an end on March 1. The search and selection process to find his successor is already underway.
The new campus NISM, an educational initiative of Sebi, was inaugurated by Prime Minister Narendra Modi last month and it will help in fulfilling the demand for adequate qualified securities market professionals.
In the primary market, a renewed buoyancy was seen with 26 companies collectively raising over Rs 26,000 crore. ASBA was made compulsory from January 2016 for all issues, thereby reducing the listing time from T+12 to T+6.
Sebi also directed listed entities to disclose the cumulative impact of all the audit qualifications on relevant financial items in a separate form along with the annual audited financial results filed in terms of Listing Regulations.
The regulator also directed the top 500 listed entities by market capitalisation to formulate and make public a dividend distribution policy in order to help investors make an informed investment decision and identify stocks that match their investment objectives.
Sebi also laid down a framework for issuance of debt securities on private placement basis through an electronic book mechanism, in order to streamline procedures for issuance of debt securities on private placement basis and enhance transparency to discover prices.
In a major decision amid a huge bad loan problem in the country, Sebi prohibited ‘wilful defaulters’ from raising capital through public issue, from taking control over listed companies and from becoming market intermediaries, among other restrictions.
Delisting regulations were also tightened in order to
ensure effective enforcement of exit option to the public shareholders in case of compulsory delisting and taking into account the interest of the investors. Also, promoter and whole-time directors of such delisted companies will not be allowed to become directors of any listed company till the exit option is provided to public shareholders.
In secondary markets, several steps were taken to make processes more investor-friendly and enhance investor protection.
These steps include standardisation and simplification of procedures for transmission of securities, simplification of Account Opening Kit and Investor protection fund (IPF) norms for depositories.
The year 2016 also saw record inflows into mutual funds retail investors with AUM nearing Rs 17 lakh crore. The year also saw SIP being a favoured investment product and there was also a surge in number of investors from beyond top 15 cities.
“Well regulated mutual fund industry and enhanced investor protection norms contributed to the growth of the mutual fund industry in 2016,” the official said.
Another major policy initiative taken by Sebi in 2016 was relaxation of norms for REITs and InViTs in order to facilitate their growth in the Indian capital market.
As per the revised norms, REITs and InVITs can now invest in two level SPV structure through Holding Company subject to certain conditions, mandatory sponsor holding for REITs has been reduced to 15 per cent, number of sponsors for InviT and REITs has been removed and REITs are now allowed to invest up to 20 per cent in under construction assets.
Sebi also issued guidelines for public issue of REITs, financial information to be disclosed in offer document for REITs and continuous disclosures and compliances for REITs.
The regulator also amended the Alternative Investment Funds (AIF) Regulations in order to further develop the alternative investment industry and the startup ecosystem in India.
Among major relaxations, the upper limit for number of angel investors in a scheme was increased from forty 49 to 200 and the requirements of minimum investment amount by an Angel Fund in any venture capital undertaking was reduced from halved to Rs 25 lakh.
Besides, the lock-in requirements of investment made by angel funds in the venture capital undertaking was reduced from three years to one year. Angel funds have been allowed to invest in overseas venture capital undertakings upto 25 per cent of their investible corpus in line with other AIFs.
Also, angel funds will be allowed to invest in start-ups incorporated within five years, which was earlier 3 years.
Sebi also tightened disclosure norms for credit rating agencies with a view to strengthen their functioning and to bring in more transparency and accountability in their policies.
To facilitate “ease of doing business” for market intermediaries, Sebi decided to grant permanent registration to merchant bankers, depository participants, investment advisers, research analysts and seven other categories of market intermediaries.
Sebi also introduced an online system for investment advisers and research analysts to promote ease of operations in terms of e-registration, compliance reporting, etc.
Sebi also took major policy initiatives for the development of the commodity markets with a view to bring it at par with equity markets.
One of the major decision was to allow Commodity Derivatives Exchanges to introduce trading in “options” considering the fact that it shall lead to overall development of the commodity derivatives market, attract broad base participation, enhance liquidity, facilitate hedging and bring in more depth to the commodity derivatives market.
In order to increase the transparency in the dealings between the stock broker and the clients in commodity derivatives market, Sebi aligned provisions relating to the proprietary trading carried out by the stock brokers of commodity derivatives exchanges in line with the securities market.
Sebi also fixed Daily price limit for non-agri commodity derivatives in order to curb speculative participation and consequent volatility in prices of non-agricultural commodity derivatives, thus making trading in commodities safer.
Sebi also directed commodity derivative exchanges to have a well laid down and documented policy for spot price polling mechanism, display spot price polling mechanism adopted for every contract on its website and disclose giving requisite details with respect to individual spot price polling participants on its website.
This will ensure transparency in spot price polling process and dissemination of prices considering the criticality of transparent discovery of spot prices in running of futures market.
Sebi also announced a series of measures for strengthening and upgrading of risk management in commodity derivatives markets. Some new concepts were also introduced to deal with liquidity problems in stressed situations.
For instance, up to two days of risk coverage by initial margin, concentration margin, tools to regain matched book and ‘default waterfall’. An exchange’s accountability in a default has also been increased to match those at equity exchanges.
Apart from this, the minimum base capital for clearing members which clear and settle only non-algorithmic trades for other trading members has been prescribed at Rs 25 lakh margin benefit on spread positions — which was resulting in higher leverage — shall be entirely withdrawn latest by the start of tender period or expiry-sixth day, whichever is earlier.
In order to ensure that exchanges are enabled to respond to the market requirements quickly, Sebi has permitted national commodity derivatives exchanges to modify future contract specifications related to ticker symbol, basis, maximum order size, trading unit, delivery unit, quotation base value, tick size, delivery centres, etc. (PTI)