The reduction in the TER could shave off profitability of large fund houses by up to 12 per cent. Share prices of listed AMCs HDFC MF
and Reliance Nippon MF
could see a correction, said experts.
The regulator “broadly” accepted the relaxations suggested by the HR Khan committee pertaining to the know-your-customer (KYC) requirements of foreign portfolio investors (FPIs), particularly non-resident Indians (NRIs). The move will help assuage overseas investors’ concerns at a time the rupee is weakening against the dollar.
Earlier this month, the Khan panel said Sebi’s controversial April 10 circular should be used for determining KYC
and not for ownership. The panel also said NRIs should be allowed to invest and manage a foreign fund. Tyagi said it has broadly accepted all the proposals made by the Khan committee and will soon issue a final circular that will address most of the concerns, including high-risk jurisdiction issue.
also accepted the overhaul of consent framework and changes to inside trading regulations based on expert panel recommendations. The regulator will take a “principle-based approach” to enable settling violations such as insider trading through the consent route. However, any cases that impact the integrity of the market or create huge loss to investors will be kept out. The changes will help reduce the pending case burden at Sebi as earlier even small violations under insider trading were kept out of consent framework. The new consent regime has kept out fugitive offenders and wilful defaulters out of the ambit. Sebi also barred such entities from raising public funds.
Sebi will amend the so-called prohibition of insider trading (PIT) and prohibition of fraudulent and unfair trade practices (FUTP) based on recommendations made by TK Viswanathan committee to give itself more teeth crackdown against fraudulent activity. The new definition of “dealing in securities” will include employees, agents and also curb use of front entities for insider trading. Listed companies will also have to put in place systems to prevent misuse of price-sensitive information. More importantly, Sebi said it will seek powers from the government to intercept calls and electronic communication under the Telegraph Act. At present, such powers are only with central agencies like CBI and Income Tax department.
Tyagi said there are privacy issues with this proposal and the powers will have to be handled with outmost care.
Sebi also gave an in-principle nod to a new unified payment interface (UPI)-based framework for IPOs to allow listing of a security in three days, down from six days at present. The regulator also approved a new framework for reclassification of promoter entities as ordinary shareholders. The move will require board and shareholder approvals. Sebi said it will introduce a new framework, which will be operational next fiscal onwards, that will push large corporate towards the bond market for their funding requirements. The move will help reduce the load on the banking system and help deepen the corporate bond market.
Sebi also approved interoperability among clearing corporations which will lead to better margin utilisation and help reduce cost of trading. The regulator said it will allow a “peer-to-peer” framework for interoperability.
On the National Stock Exchange
(NSE) colocation matter, Tyagi said the regulator is examining the consent application filed by the exchange. The regulator has issued show cause notice to 30 entities in the matter. On the ICICI Bank disclosure issue, Tyagi said the bank and its chief have submitted their replies to the show cause notices issued by the regulator. Sebi hinted that the bank intends to submit a consent plea to settle the matter.
Tyagi said the extension of trading hours may not take place from October 1 as exchanges are yet to submit their detailed operation plan. Further, Sebi said it is examining the proposals submitted by NSE
to start trading in commodities derivatives.
Sebi said it will soon review the processes for credit rating agencies and soon issue a circular on the issue. The move comes after default rating issued to IL&FS within months after assigning a AAA-rating. “Despite all the checks and balances and inspections, these issues keep emerging,” Tyagi said when asked it was looking into the practices adopted rating agencies.
Principle-based approach for consent mechanism
Overhaul of insider trading norms
Seeks powers to intercept calls
IPO listing timeline reduced to three days
Fugitive offenders barred from raising public funds
Rules to reclassify promoters as ordinary shareholders
Framework for large corporates to tap bond markets
Listed firms to make disclosures pertaining to sexual harassment