Ever since the introduction of framework for prevention of insider trading (“PIT”), the Securities and Exchange Board of India (“SEBI”), as the primary regulator of securities markets has consistently been sharpening its tools to effectively discharge its duty of ensuring market integrity, curbing malpractices and safeguarding interests of investors.Continue Reading Decoding SEBI’s Tech Arsenal for Insider Trading: Structured Digital Database (Part I)
While the Insolvency and Bankruptcy Code, 2016 (“IBC”) provides for insolvency resolution and liquidation of ‘corporate persons’, it excludes ‘financial service provider’ (“FSP(s)”) from the said provision. The Central Government, pursuant to its powers under Section 227 of IBC, had notified Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019 (“FSP Rules”) for resolving specified non-banking financial companies (“Specified NBFCs”) registered with the Reserve Bank of India.Continue Reading Stock Broker is a Financial Service Provider – The NCLAT ruling may offer respite
Increasing the role and relevance of ‘Proxy Advisory Firms’ in corporate governance
Until very recently, the recommendations of proxy advisory firms did not impact companies much, as it did not have the power to influence or fail/ stop a resolution from being passed. However now, the recommendations of proxy advisory firms are becoming increasingly relevant given that many institutional investors are basing their positions while voting on resolutions on such advice. This is evidenced from the fact that a proxy advisory firms have recently managed to prevent a resolution for granting employee stock options to employees of a group entity of a very large Indian bank from being passed due to the absence of “any compelling reasons”. In another interesting case, a proxy advisory firm came very close to preventing a resolution pertaining to an increase in the remuneration of a director from being passed on account of this increase being “skewed” and “guaranteed”.Continue Reading Impact of Proxy Advisory Firms: Turning tides and failing resolutions
The objective of the PIT Regulations is to prohibit insiders with access to Unpublished Price Sensitive Information (“UPSI”) from making illicit gains and to ensure timely, adequate and even disclosure of UPSI to the public. Hence, the determination of what constitutes as UPSI becomes necessary. In this regard, the Securities and Exchange Board of India (“SEBI”) has signalled a shift from a principle-based regime to a more prescriptive regime, which is likely to result in increased compliance obligations for the listed companies.Continue Reading FIG Paper (No. 26 – Series. 3): Navigating SEBI’s Definition of UPSI
Social media platforms have become an essential communication tool in the post pandemic world. The advent of the COVID-19 pandemic led to a sustained rise of retail investors on the D-Street, in an eager attempt to profit from the great COVID bull run. Ever more, retail investors are looking at influencers on social media platforms for financial advice instead of approaching registered advisors (without evaluating the life alerting consequences it may have).Continue Reading End of the Party for Sin (Fin) Fluencers? SEBI’s Regulatory Crackdown on Finfluencers
With effect from October 1, 2023, India’s top 100 listed entities (based on market capitalisation) would have to mandatorily confirm, deny, or clarify market rumours to the stock exchanges, and this requirement extends to the top 250 listed entities with effect from April 1, 2024. The Securities and Exchange Board of India (“SEBI”), by way of notifying amendments to the LODR Regulations on June 14, 2023 (“LODR Amendments”), has introduced this mandatory requirement under Regulation 30 read with Schedule III of the LODR Regulations (referred to below as the “Market Rumours Amendment”).Continue Reading Market Rumours: SEBI’s New Prescription and India Inc’s Dilemma
The Securities and Exchange Board of India (“SEBI”) has recently introduced significant changes to the governance framework for listed companies through an amendment to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”).
The amendments were signaled by various consultation papers issued by SEBI over the last 6-9 months, including consultation papers on ‘Review of disclosure requirements for material events or information under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015’ and ‘Strengthening Corporate Governance at Listed Entities by Empowering Shareholders – Amendments to the SEBI (LODR) Regulations, 2015’.Continue Reading SEBI Amendments to the LODR – An Overview of Key Changes
On June 15, 2023, Securities and Exchange Board of India [“SEBI”] had released— (i) Master Circular for Investment Advisers; and (ii) Master Circular for Research Analysts.
The Master Circulars serve as comprehensive compilations of all directions issued by SEBI pertaining to Investment Advisers [“IAs”] and Research Analysts [“RAs“]. SEBI’s Master Circulars for IAs and RAs aim to provide easy access to relevant guidelines and promote compliance among IAs and RAs.Continue Reading FIG Paper No. 22: Decoding SEBI’s Master Circular for Investment Advisers and Research Analysts
In a recent order (“Order”), the Securities and Exchange Board of India (“SEBI”) held that a category I alternative investment fund registered with it (“Fund”); its investment manager (“Manager”); and its trustee (“Trustee”), were in violation of certain SEBI (Alternative Investment Funds) Regulations, 2012 (“AIF Regulations”). Specifically, these violations were with respect to provisions associated with (i) the code of conduct applicable to the Fund, Manager and Trustee; and (ii) provisions related to leverage and borrowings applicable to the Fund.Continue Reading SEBI Adjudicates on Pledging of Securities held by Category I AIFs
On May 18, 2023, the Securities and Exchange Board of India [“SEBI”] had placed a consultation paper related to the total expense ratio charged by Asset Management Companies [“AMC”] to unitholders of mutual funds. June 8, 2023 was set as the deadline for submission of public comments. The due date, however, was extended to June 8, 2023.
The proposal is aimed at curbing distributor practices such as unnecessary switching of schemes and pushing new fund offerings for higher commissions. SEBI in its consultation paper proposed to introduce performance fees for funds. It proposed two approaches, but also suggested testing the models under the Regulatory Sandbox.Continue Reading FIG Paper (No. 21 – Series 1): SEBI’s Mutual Fund Expense Ratio Consultation Paper: Impact Analysis