Regulatory updates

SEBI received various representations to expand the definition of ‘QIB’ in order to increase the potential investor base for issuers of debt securities and for further developing the debt markets. In this regard, on 16 May 2023, SEBI issued a consultation paper on expanding the definition of QIB for debt securities (the consultation paper).

Some of the entities which have been proposed to be covered within the definition of QIB include:

• Multistate cooperatives with net worth of more than INR500 crore
• Non-Banking Financial Companies (NBFC) and Housing Finance Companies (HFCs) regulated by RBI
• Regulatory authorities, autonomous bodies, authorities, boards or commissions or agencies, authorities, organisations or entities established, owned or controlled by the Central Government or a State Government
• Reinsurance companies regulated by IRDAI
• SEBI regulated entities with net worth of more than INR500 crore subject to guidelines specified by SEBI, etc.

The comment period ended on 29 May 2023.

To access the text of the consultation paper, please click here

The Unpublished Price Sensitive Information (UPSI) defined under SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations) means ‘any information, relating to a company or its securities, directly or indirectly, that is not generally available which upon becoming generally available, is likely to materially affect the price of the securities and shall, ordinarily include but not be restricted to, information relating to the following:

• Financial results
• Dividends
• Change in capital structure
• Mergers, de-mergers, acquisitions, delistings, disposals and expansion of business and such other transactions
• Changes in key managerial personnel.

SEBI, in its board meeting dated 29 March 2023 had approved the proposal for review and rationalisation of the disclosure of material events or information by listed entities.

Further, it was observed that certain information/events which are disclosed as material events in accordance with the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations) and should have been categorised as UPSI were not done so by the listed entities, thus highlighting that companies were not exercising due care in this regard.

Consequently, on 18 May 2023, SEBI issued a consultation paper, proposing that the current definition of UPSI be amended and the disclosures as required under Regulation 30 of the LODR Regulations be considered and disclosed as UPSI under the PIT Regulations.

The comment period ended on 2 June 2023

To access the text of the consultation paper, please click here

In November 2018, SEBI introduced Unified Payment Interface (UPI) as an additional payment mechanism with Application Supported by Blocked Amount (ASBA) for retail individual investors and prescribed the timelines for listing within six days of closure of issue (T+6), ’T’ being the day of the closure of issue.

Over the last few years, SEBI has undertaken a series of systemic enhancements across all the key stakeholders of the Initial Public Offering (IPO) ecosystem to streamline the activities involved in processing of public issues. In this regard, on 20 May 2023, it issued a consultation paper on reduction of timeline for listing of shares in public issue from existing T+6 days to T+3 days.

The comment period ended on 3 June 2023.

To access the text of the consultation paper, please click here

With an objective to deepen the bond market, it was proposed in the Union Budget 2018-19 to include a proposal that entities may be mandated to meet a certain percentage of their funding requirements from capital markets through issuance of corporate bonds.

In line with this, in November 2018, SEBI issued a circular w.r.t. fund raising by issuance of debt securities by large entities, thereby mandating such companies to raise at least 25 per cent of their incremental borrowings during a financial year by issuing debt securities.

However, over time, based on feedback from the corporates, SEBI felt the need to review the extant provisions and introduce certain changes. Accordingly, in August 2023, it issued a consultation paper on review of the framework for borrowings by large corporates and proposed certain key changes. Some of these include:

• Increase in the threshold of outstanding long-term borrowings
• Expansion in definition of outstanding long-term borrowings and incremental borrowings
• Removal of requirement of credit rating as a criterion for identifying an entity as a large corporate
• Removal of provision for penalty in the event of non-compliance by a large corporate, etc.

The comment period ended on 31 August 2023.

To access the text of the consultation paper, please click here

In 2022, SEBI had prescribed the regulatory framework for Social Stock Exchange (SSE). Further, SEBI also constituted a Social Stock Exchange Advisory Committee (SSEAC) to advise it on the issues relating to development and growth of the SSE segment. In this regard, certain issues and challenges were raised by the SSEAC and stock exchange(s) w.r.t. functioning of SSE. These include:

• The threshold of minimum issue size for NPOs issuing Zero Coupon Zero Principle Instrument (ZCZP), i.e., INR1 crore is on a high side
• The threshold of minimum application size in public issue of ZCZP, i.e., INR2 lakhs is high and should be reduced
• Entities that do not possess valid certificate under Section 80G but are established under Section 10(23C) and 10(46) of the Income Tax Act may be permitted as a Not Profit Organisation (NPO) on SSE
• The requirement of no pending notice or ongoing scrutiny by Income Tax department against NPOs for the purpose of registration on SSE may be done away with
• Substituting the term ‘social auditor’ with ‘social impact assessor’, etc.

Consequently, on 29 August 2023, SEBI issued a consultation paper on flexibility in the framework on SSE, thereby proposing certain recommendations to address the aforementioned issues

The consultation paper is open for comments up to 19 September 2023.

To access the text of the consultation paper, please click here

The SEBI (Delisting of Equity Shares) Regulations, 2021 (Delisting Regulations) state that an exit opportunity must be provided by the acquirer to all public shareholders, in case the equity shares of the company are sought to be delisted from all the recognised stock exchange(s), in which they are listed.

Over the last few years, SEBI has received several representations from the stakeholders, suggesting review of the delisting norms. In this regard, recently, SEBI issued a consultation paper on the review of voluntary delisting norms under the Delisting Regulations (the consultation paper). Some of the key proposals include:

• Alternatives to the reverse book building process
• Counter-offer framework
• Determination of floor price
• Review of the reference date for determination of floor price.

The comment period ended on 4 September 2023.

To access the text of the consultation paper, please click here