Sebi: Sebi OKs faster rights issues, new asset class

Mumbai: The Securities and Exchange Board of India approved several proposals, including the introduction of a new asset class, a shortened timeline for completing rights issues and an increase in the number of stocks eligible for same-day settlement, at a board meeting on Monday that stretched for seven and a half hours.

This was Sebi‘s first board gathering after the emergence of conflict-of-interest allegations directed at the regulator’s chair, Madhabi Puri Buch. Sebi’s press statement issued late evening remained silent on allegations against Buch and HR issues raised by its employees.

Sebi said asset management companies will now be able to offer differentiated investment strategies such as long-short equity and inverse exchange-traded funds – also called “short” or “bear” ETFs that provide returns that are opposite of the underlying assets – with a minimum investment of ₹10 lakh.

‘Connected Person’

“The new product aims to curtail the proliferation of unregistered and unauthorised investment schemes/entities, which often promise unrealistic high returns and exploit investors’ expectations for better yields, leading to potential financial risks,” Sebi said.The regulator did not make any announcement on changes to futures and options trading, which was widely expected in the market.

On amended rights issue rules, it said companies will now be able to raise funds quicker. Also, promoters can renounce their rights entitlement in favour of a select investor.

Rights issues can be completed in 23 working days from the date when the issuer’s board approves the issue, compared with 317 days now. “This mechanism would be even faster than the preferential allotment route that takes 40 working days,” Sebi said.

The board also approved a lenient framework with minimal regulatory constraints – referred to as MF Lite regulations – for passive schemes like index funds and exchange-traded funds.

It revised the definition of a “connected person” who has access to unpublished price-sensitive information. The amended definition now encompasses a firm, its partners and employees in which a connected person is also a partner. Additionally, individuals sharing a residence with a connected person are now considered connected persons.

The definition has been expanded to include the spouse, parents, in-laws, siblings and siblings-in-laws. These changes aim to strengthen the regulations surrounding insider trading and ensure that people with access to privileged information are properly identified and monitored.

Sebi also increased the number of stocks eligible for trading under the optional T+0 settlement in a phased manner from the top 25 to the top 500 in terms of market capitalisation.