Regulatory updates

The Securities and Exchange Board of India (SEBI) in its board meeting held on 30 September 2024 approved the following key amendments:

Amendments to SEBI (Listing Obligations and Disclosure Requirement Regulations), 2015 (LODR Regulations)

• Single filing system: A system that automatically disseminates the filing done on one stock exchange to the other stock exchanges using an Application Programming Interface (API)-based integration was introduced.
• Integration of periodic filings: To minimise the number of periodic filings by a listed entity, a merger of the periodic filings under the LODR Regulations into the following two broad categories was approved:

• Integrated filing (Governance) comprising of corporate governance report and the statement on redressal on investor grievance.
• Integrated filing (Financial) comprising of financial results, statement of deviation in use of proceeds, related party transactions etc.

• System driven disclosures of certain filings: An automated process of disclosure of shareholding pattern and new or revised credit ratings was introduced. Automation for these disclosures would ease the compliance procedures and reduce the burden of disclosures for listed entities.
• Newspaper advertisements: The requirement of publishing detailed advertisements in newspapers for financial results was approved to be made optional for listed entities.
• Vacancies in board committees: In order to provide adequate time to listed entities, a timeline of three months to fill up vacancies in Board Committees was approved.
• Disclosure of material events:

• Additional timeline has been prescribed for disclosure of events in some cases:
• For the disclosure of outcome of the board meeting that concludes after close of trading hours, an increased timeline of 3 hours instead of 30 minutes has been approved.
• In case of litigations or disputes wherein claims are made against the listed entity, an increased timeline for disclosure to 72 hours has been approved from the existing 24 hours
• Disclosure of tax litigations and disputes: A listed entity should disclose tax litigations/disputes including tax penalties based on application of criteria for materiality.

Amendments to the SEBI (Issue of Capital and Disclosure Requirement) Regulations, 2018 (ICDR Regulations)

• Faster Rights Issue with flexibility of allotment to specific investors under ICDR Regulations

• Introduced faster rights issue process with completion in 23 working days.
• Discontinuation of the current requirement of filing draft letter of offer with SEBI for issuance of its observation, instead it would be filed with stock exchanges for its in-principle approval
• Permitting promoters to renounce their rights entitlements to any specific investor(s) and allowing the issuer to allot under-subscribed portion of rights issue to any specific investor(s).

• Combining ‘pre-issue advertisement’ and ‘price band advertisement’ as a single advertisement and mandating disclosure of certain information through a QR code link.
• Permitting issuers to voluntarily disclose proforma financials for acquisition or divestment already undertaken or proposed to be undertaken from issue proceeds in case of public issue, rights issue and Qualified Institutional Placements (QIPs).

Amendments to SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations)

The SEBI observed that certain categories of persons who are not covered in the scope of the definition of ‘connected persons’ as per existing regulations, may also be in a position to have access to Unpublished Price Sensitive Information (UPSI) from ‘connected persons’ to a company, by virtue of their close relationship with such ‘connected persons’. Such deemed connected persons, owing to their proximity and close relationship with the connected persons, are considered to be in such a position where they can potentially indulge in insider trading. Accordingly, the definition of connected persons was approved to be widened under the PIT Regulations as follows:

Connected person: The definition of ‘connected person’ under PIT Regulations has been amended to include

• A firm or its partner or its employee in which a ‘connected person’ is also a partner; and
• A person sharing household or residence with a ‘connected person.

Relative: The definition of ‘relative’ under PIT Regulations has been amended based on the definition of ‘relative’ under the Income Tax Act, 1961. It now includes

• Spouse of the person
• Parent of the person and parent of its spouse
• Sibling of the person and sibling of its spouse
• Child of the person and child of its spouse;
• Spouse of the person listed at (iii) and
• Spouse of the person listed at (iv).

Immediate relative: In order to ensure that there is no increased compliance requirements, the definition of ‘immediate relative’ is proposed to be retained under the PIT Regulations. However, provision relating to person deemed as connected person are applicable to ‘relative’ instead of ‘immediate relative’

Amendments to SEBI (Mutual Fund) Regulations, 1996 (MF Regulations)

• SEBI has introduced a new investment product under the existing mutual fund framework with minimum INR10 lakh investment. This new product would be referred to as ‘investment strategies’. This new category is intended to remain distinct from traditional mutual funds.
• Introduction of liberalised Mutual Funds Lite (MF Lite) framework for passively managed schemes of mutual funds. This framework introduces relaxed eligibility requirements for sponsors, including modifications to net worth, track record, and profitability criteria. This shift is designed to promote ease of entry into the mutual fund sector, encouraging new players while reducing compliance burdens.

Amendments to regulations relating to Non-Convertible Securities

The Securities and Exchange Board of India (SEBI) vide the SEBI (Issue and Listing of Non-Convertible Securities) (Second Amendment) Regulations, 2024 (NCS amendments) has prescribed the following key amendments with respect to the filing and content of offer documents:

• Timeline for making public the draft offer document (Regulation 27): The draft offer document filed with the stock exchange(s) should be made public by posting the same on the website of the stock exchange(s) for a period of 5 working days from the date of filing the draft offer document with stock exchange. For issuers whose specified securities are listed on a recognized stock exchange, the offer document should be made public for one day immediately after filing the draft offer document (earlier the time period was 7 working days).
• Advertisement for public issue (Regulation 30): Issuers of NCS may advertise regarding the public issue through electronic modes such as online newspapers or website of the issuer or of the stock exchange (earlier, advertisements could only be made in the newspapers). Further, issuers that opt to advertise through electronic modes are required to publish a notice in the specified newspapers, exhibiting the QR code and link to the online advertisement.
• Period of subscription (Regulation 33A): The minimum period for which the public issue of debt securities or non-convertible preference shares would be open has been reduced to one working day (earlier it was three working days). The maximum period (of 10 working days) remains unchanged.
• Content of offer document: The following changes have been made to the content of the offer document:

• The time period for which the key operational and financial parameters are required to be disclosed has been clarified.
• The personal address and Permanent Account Number of promoters is not required to be disclosed
• Details of branches and units of the issuer will be given by way of a QR code and web link
• Details of proposed used of proceeds will be required to be disclosed instead of ‘project cost and means of financing’.
• Flexibility has been provided in the signatories for the purpose of providing attestation in the offer document.

Effective date:The amendments would come into force on the date of their publication in the Official Gazette.

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To access the text of the NCS amendments, please click here

As a part of the continuing endeavor to streamline the process of bonus issue of equity shares to protect the interests of investors and to promote the development of the securities market, SEBI vide its circular dated 16 September 2024, has issued directions to reduce the time taken for credit of bonus shares and enable trading of such shares within T+2 days, where T is the record date (earlier, no timelines were prescribed for this, and practically, trading took two to seven working days from the record date).

The circular further details the procedure to implement the above decision.

Penal consequences have been prescribed in case of delay in compliance with the aforementioned timelines.

Effective date: The circular would come into effective for all bonus issues announced on or after 1 October 2024.

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To access the circular, please click here

With an aim to provide clarifications on certain aspects of the valuation framework for AIFs, SEBI issued a circular (SEBI circular) dated 19 September 2024, modifying the framework for valuation of investment portfolios of AIFs. The SEBI circular specifies the following:

• Valuation norms: Securities, other than unlisted, non-traded, or thinly-traded securities, would be valued in line with mutual fund rules (earlier even unlisted and non-traded/thinly traded securities were required to be valued as per mutual fund rules). Such unlisted, non-traded or thinly traded securities would be valued in accordance with the International Private Equity and Venture Capital Valuation (IPEV) Guidelines for valuation of investment portfolio of AIFs⁶ SEBI has mentioned that with respect to thinly traded and non-traded securities, it is envisaged to harmonize the valuation norms across entities within SEBI’s regulatory purview in a time bound manner so as to facilitate applicability of the same for valuation of investment portfolios of AIFs on or after 31 March 2025..

SEBI has mentioned that with respect to thinly traded and non-traded securities, it is envisaged to harmonize the valuation norms across entities within SEBI’s regulatory purview in a time bound manner so as to facilitate applicability of the same for valuation of investment portfolios of AIFs on or after 31 March 2025.

• Material Changes: Any change in the valuation methodology or approach in order to comply with Clause 22.1 of the Master Circular for AIFs⁷ Clause 22.1 of the Master Circular for AIFs deals with the valuation of different types of securities. would not be considered a material change. However, valuation of investment based on both the old and new methodologies should be disclosed to investors to ensure transparency. (Earlier, changes in the methodology and approach for valuation of investments of schemes of AIF, were considered as material changes that would significantly influence the decision of the investor. In such cases an exit option had to be provided to investors who did not want to continue to invest in the AIF post such a change.)
• Independent valuer: The SEBI circular has prescribed the eligibility criteria for an independent valuer which is either a partnership entity or a company as:

• Such an entity or company should be registered as a valuer with the Insolvency and Bankruptcy Board of India (IBBI) and
• The deputed/authorized person who undertakes the valuation should be a member of the Institute of Chartered Accountants of India (ICAI) or the Institute of Company Secretaries of India (ICSI) or the Institute of Cost Accountants of India (ICMAI) or the CFA Institute.

• Reporting timelines: The timeline for AIFs to report their valuations to performance benchmarking agencies based on audited investee data has been extended from six months to seven months.

Effective date: The circular would come into force with immediate effect (i.e. from 19 September 2024).

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To access the circular, please click here

With a view to align the listing timelines in case of public issue of debt securities and NCRPS with that of non-convertible securities issued on private placement basis and specified securities, SEBI vide its circular dated 26 September 2024 (the circular) has reduced the timeline for listing of debt securities and NCRPS to T+3 working days from the existing T + 6 working days.

Effective date and transition: The listing timeline of T+3 working days has been introduced as an option for issuers, which would be available to public issues of debt securities and NCRPS opening on or after 1 November 2024. This option would be available for one year. During the said voluntary period (from 1 November 2024 to 31 October 2025), if an issuer opts for T+3 working days timeline but fails to meet the timeline, Regulation 37(2) of the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021(NCS Regulations) which requires issuers to refund the application moneys in an event of failure to list such securities within specified timelines will become applicable only after T+6 working days.

The listing timeline of T+3 working days would become mandatory for all public issues of debt securities and NCRPS opening on or after 1 November 2025.

Further, the listing timeline of T+3 working days should be appropriately disclosed in the Offer Documents of public issue.

The revised timelines for the various activities involved in the public issue process have been prescribed in the circular.

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To access the text of the circular, please click here

Currently, Regulation 57 of the LODR Regulations require issuers of Non-Convertible Securities (NCS) to report the status of their payment obligations⁸ Payment of interest or dividend or repayment or redemption of principal withing one working day of their payment becoming due. However, Paragraph 8.4 of Chapter XVII of the Master Circular⁹ Master Circular for issue and listing of Non-convertible Securities, Securitised Debt Instruments, Security Receipts, Municipal Debt Securities and Commercial Paper. requires issuers of listed commercial paper to submit a certificate confirming the fulfilment of their payment obligations within two days of the payment becoming due.

In order to align the timeline of intimating stock exchanges regarding status of payment obligations for listed NCS and listed commercial paper, paragraph 8.4 of Chapter XVII of the Master Circular, has been amended vide a circular dated 6 September 2024 (the circular) to require issuers of commercial paper to issue a certificate confirming fulfilment of its payment obligations, within one working day of payment becoming due.

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To access the text of the circular, please click here