SEBI has vide its circular dated 23rd November, 2021 mandated that all stock exchanges (excluding commodity derivates exchanges) and depositories and clearing corporations should display on their respective website, data on the complaints received against them and their redressal thereof, by 7th of the succeeding month. There is a format given for that purpose. This requirement will come into effect from the 1st of January, 2022 onwards.
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SEBI has vide its circular dated 23rd November, 2021 mandated merchant bankers to publish on their websites investors’ charter for various items such as IPOs, buyback, delisting, QIP, preferential issues, takeovers etc. This is slated for compliance from 1st January, 2022 onwards.
The operative part of their circular is given below:
With a view to provide investors an idea about the various activities pertaining to primary market issuances as well as exit options like Takeovers, Buybacks or Delistings, an Investor Charter has been developed in consultation with the Merchant Bankers.
- This charter is a brief document in an easy to understand language and contains different
services to the investors at one single place for ease of reference.
- All the registered Merchant Bankers are hereby advised to disclose on their website, Investor
Charter for each of the following categories, as provided at Annexure-‘A’ to this circular, –
3.1. Initial Public Offer (IPO) and Further Public Offer (FPO) including Offer for Sale (OFS);
3.2. Rights Issue;
3.3. Qualified Institutions Placement (QIP);
3.4. Preferential Issue;
3.5. SME IPO and FPO including OFS;
3.6. Buyback of Securities;
3.7. Delisting of Equity Shares;
3.8. Substantial Acquisitions of Shares and Takeovers.
- Additionally, in order to bring about transparency in the Investor Grievance Redressal Mechanism, it has also been decided that all the registered Merchant Bankers shall disclose on their respective websites, the data on complaints received against them or against issues dealt by them and redressal thereof, on each of the aforesaid categories separately as well as collectively, latest by 7th of succeeding month, as per the format enclosed at Annexure-‘B’ to this circular.
- These disclosure requirements are in addition to those already mandated by SEBI.
- The provisions of this circular shall come into effect from January 01, 2022
SEBI has vide its circular dated 28th October, 2021 allowed stock stock brokers to maintain multiple current accounts in various banks/ branches in various cities for various purposes such as client accounts, settlement accounts, exchange dues accounts as they may require. This has been necessitated due to the RBI circular dated 6th August, 2020 clamping down on current accounts being maintained where the account holder also has a borrowing account with the same bank. But considering the hue and cry raised by the industry, RBI later on 14th December, 2020 gave some relief by way of regulatory intervention. IRDAI had issued a similar such circular to its insurance intermediaries.
You can access the copy of the above circular here i.e .https://www.sebi.gov.in/legal/circulars/oct-2021/maintenance-of-current-accounts-in-multiple-banks-by-stock-brokers_53576.html
SEBI has laid down guiding principles for benchmarking of mutual funds by introducing a two tier structure in the case of income/ debt oriented schemes and growth/ equity oriented schemes, single tier in case of hybrid/ solution oriented schemes, thematic/ sectoral schemes, exhange funds/ ETFs, and Fund of Funds schemes. Please read on for details
- In order to standardize and bring uniformity in the Benchmarks of Mutual Fund Schemes and taking into account the recommendations of Mutual Fund Advisory Committee (MFAC), it has been decided that there would be twotiered structure for benchmarking of schemes for certain categories of schemes. The first tier benchmark shall be reflective of the category of the scheme, and the second tier benchmark should be demonstrative of the investment style / strategy of the Fund Manager within the category. All the benchmarks followed should necessarily be Total Return Indices.
- The following are the guiding principles for first tier benchmarks:
i. For Income / Debt Oriented Schemes
First Tier: One Broad Market Index per Index Provider for each category e.g.: NIFTY Ultra Short Duration Debt Index or CRISIL Ultra Short Term Debt Index for Ultra Short Duration Fund Category
Second Tier: Bespoke according to Investment Style/Strategy of the Index e.g.: AAA Bond Index
ii. For Growth / Equity Oriented Schemes
First Tier: One Broad Market Index per Index Provider for each category e.g.: S&P BSE 100 Index or NSE 100 Index for Large Cap Fund Category
Second Tier: Bespoke according to Investment Style/Strategy of the Index e.g.: Nifty 50 Index
iii. For Hybrid and Solution Oriented Schemes:
There would be a single benchmark, i.e., Broad Market Benchmark wherever available or bespoke to be created for schemes, which would then be applicable across industry.
iv. For Thematic / Sectoral schemes:
There would be a single benchmark as characteristics of the schemes are already tapered according to the theme/sector.
v. For Index Funds and Exchange Traded Funds (ETFs):
There would be a single benchmark as these schemes replicate an underlying index.
vi. For Fund of Funds Schemes (FoFs):
Similar to Index Fund and ETFs, if a FoF scheme is investing in a single fund, then benchmark of the underlying scheme shall be used for corresponding FoF. However, in case a FoF scheme invests in multiple schemes, then Broad
Market Index shall be applied.
vii. For Other Schemes:
Depending on underlying asset allocation, Broad Market benchmark may be arrived at.
- AMFI is advised to publish:
(a) Benchmarks intended to be used by AMCs as first tier benchmarks within a period of one month from the date of issuance of this circular.
(b) Benchmarks intended to be used as first tier benchmark by AMCs for open ended debt schemes as per the Potential Risk Class Matrix on or before December 1, 2021.
- The second tier Benchmark is optional and shall be decided by the AMCs according to Investment Style/Strategy of the Index.
Applicability of the circular
- The framework specified by AMFI as referred at para 3(a) above shall come into force with effect from December 1, 2021 and the framework specified by AMFI as referred at para 3(b) above shall come into force with effect from January 1, 2022.
SEBI mandate to the registered investment advisors that they should not deal in unregulated products including digital gold.
It is surprising that SEBI has not mentioned crypto currencies like bitcoins because i see advertisements being openly showed on the OTT platform for trading in bitcoins even though there is no regulation currently in place for bitcoins. So if the bitcoins are not officially allowed and it is not a legal tender or a security or a negotiable instrument or currency, then how come advertisements are allowed. There is one advertisement which asks people to deposit as low as Rs.100 in bitcoins and to do SIP in bitcoins. Frankly how many people know the real meaning of bitcoins. Its a dangerous territory and sooner that regulators wake up the better.
Copy of SEBI press release regarding digital gold given below.
SEBI has vide its circular dated 14th October, 2021 opened up the SCORES platform for companies intending to list its securities on the main board as well as on the SME/ Debt platform of the exchanges.
In case of listing on main board, the Draft red herring prospectus (DRHP) should have been filed with SEBI and in case of SME/ Debt platform, either an application to list its securities has been submitted or in-principle approval has been obtained from the stock exhanges. Only after these events has taken place, can an intending company get the SCORES registration done. The compliance officer of the company should submit a declaration signed by him and attach it with the online application.
You can read the circular here.
SEBI has mandated vide its circular dated 18th April, 2021 that all case of transmission of shares where the shares are held jointly, are to be transmitted to the surviving joint shareholder under the provisions of section 56(2) and 56(4)(c) of the Companies Act, 2013.
Section 56(2) says “nothing in sub-section (1) shall prejudice the power of the company to register, on receipt of an intimation of transmission of any right to securities by operation of law from any person to whom such right has been transmitted.”
Section 56(4)(c) specifies a time limit of one month from the date of receipt of the documents, within which the certificates have to be delivered post transmission.
The SEBI circular can be found here
SEBI has vide its circular dated 4th October, 2021 mandated that stock exchanges and clearing corporation will have to disclose on their websites, complaints received against them and redressed each month by the 7th of next month. This will come into effect from 1st January, 2022.
SEBI has vide its circular dated 4th October, 2021 discontinued usage of pool funds by entities including online platforms except stock exchange platforms for all mutual fund transactions. That means no entity can accumulate funds and then invest it into various mutual funds. It has to go directly from the investor’s bank account to the mutual fund and similarly in case of redemption also, from the mutual fund a/c directly into the investor’s account without any intermediary in between. This will come into effect from 1st April, 2022.
The gist of the circular is given below
- SEBI, vide circulars dated October 04, 2013 and October 19, 2016, allowed Mutual Fund Distributors (‘MFDs’) and SEBI registered Investment Advisers (‘IAs’) to use the infrastructure of recognized stock exchanges to purchase and redeem Mutual Fund (‘MF’) units on behalf of their clients.
- MFDs, IAs, Mutual Fund Utilities (‘MFU’), channel partners and other entities including online platforms (‘service providers’/ ‘platforms’) are providing services to investors to transact in mutual fund units. It is observed that based on bilateral understanding with AMCs, a few platforms pool the clients’ funds into a nodal account and subsequently transfer to AMCs either on per transaction basis or lump sum basis.
- Based on the discussions with stakeholders and recommendations of the Mutual Fund Advisory Committee of SEBI, the following has been decided with respect to transactions in the units of Mutual Funds undertaken through service providers/platforms other than stock exchanges:
3.1. AMCs shall ensure that the transactions (financial/ non-financial) can be executed only if there is a service agreement between the AMC and the service provider / platform.
3.2. AMCs shall ensure that intermediate pooling of funds and/or units in any manner by MFDs, IAs, MFU, channel partners or any other service providers/ platforms, by whatsoever name called, are discontinued for MF transactions. However, this requirement shall not apply to the SEBI registered Portfolio Managers subject to compliance with SEBI (Portfolio Managers) Regulations, 2020 and circulars issued thereunder.
3.3. AMCs shall put necessary systems in place to ensure the following:
3.3.1. For subscription, funds should be credited directly from the investors’ account into the MF scheme account without any intermediate pooling. For ease of transactions, funds can be routed through payment aggregators authorized by RBI or SEBI recognized clearing corporations, as the case may be.
3.3.2. For redemption, funds should be directly credited to the investor’s registered bank account from the MF scheme account without any intermediate pooling.
3.3.3. For subscription, units should be directly credited into the investor’s account by the mutual fund for both demat and non-demat modes without any intermediate pooling.
3.3.4. For redemption, units should be directly transferred from investor’s account to the mutual fund without any intermediate pooling, in both demat and non-demat modes.
3.3.5. MFDs / IAs, MFU, channel partners and other entities (including online platforms) facilitating MF transactions shall not accept payment through one-time mandate or issuance of mandates/ instruments in their name for mutual fund transactions.
3.3.6. Cheque payments from investor shall be made in favor of the respective MF Schemes only.
3.3.7. For better investor experience and faster transfer of funds, AMCs shall provide different methods of payment through RBI recognized modes of payment.
3.4. AMFI, in consultation with SEBI, shall issue guidelines for AMCs with regard to mitigating risks of co-mingling of funds at the level of Payment Aggregators/Payment Gateways involved in mutual fund transactions. It shall be mandatory for all AMCs to follow such guidelines.
3.5. AMCs shall ensure that for the purpose of investor servicing:
3.5.1. Detailed information at each stage of the relevant transaction, including rejection, shall be made available at the same time to all the stakeholders involved in the transactions, as applicable, including investors, Registrar and Transfer Agents (‘RTAs’), MFDs, IAs, etc. Only payment related information required to ensure reconciliation and traceability shall be made available to the Payment Aggregators.
3.5.2. Information sharing shall be system generated and adequately secured.
3.5.3. The information sharing with respect to direct plans of mutual fund schemes shall be in line with the clarifications issued by SEBI to AMFI vide letter dated September 6, 2021 (can be accessed from AMFI website at https://www.amfiindia.com/Themes/Theme1/downloads/circulars/SEBICla
3.5.4. Cost towards system development / improvement in this regard, if any, shall not be passed on to the investors.
B. Other measures to prevent third-party payments and to safeguard the interest of unitholders
- For mitigation of the risk of third party payments:
4.1. The onus of compliance with PMLA provisions and not permitting usage of third party bank account payments continues to lie with the AMCs.
4.2. In order to ensure that the folio and source bank account belong to the same person, AMCs shall make sure that payment for MF transactions are accepted through only such modes where independent traceability of end investor can be ensured and source account details are available as audit trail without relying on any other intermediary’s records. However, the investment in MF by way of cash/ through e-wallets (Prepaid Payment Instruments) shall be in compliance with SEBI
Circulars dated September 13, 2012 and May 22, 2014 (for cash) and May 8, 2017 (for e-wallets), respectively.
4.3. AMCs shall ensure that payment is credited directly to the registered and verified bank account of the investor mapped with the concerned folio, after due verification. The process carried out by AMCs to verify bank account details i.e. investor name, bank account number, bank name, etc. shall be available as audit trail.
4.4. In case of redemption of units, Two-Factor Authentication (for online transactions) and signature method (for offline transactions) shall be used to authenticate transactions. One of the Factors for such Two-Factor Authentication (for online transactions) shall be a One-Time Password sent to the unit holder at his/her email/ phone number registered with the AMC.
- AMC would be liable to compensate for losses, if any, occurred to a unit holder, where unauthorised transaction(s) occur(s) in unit holder’s folio due to fraud/ negligence/ deficiency on the part of the AMC, employee of AMC or persons/ entities whose services have been availed by the AMC including the platform providers, MFDs, RTAs, MFU, and channel partners, irrespective of whether or not the fraud is reported by the unit holder. For this purpose, it is clarified that any unauthorised transaction(s) performed by the Investment Advisors while providing services to the unit holder(s)
would not be considered as a liability of the AMC.
- To strengthen control with respect to verification of key details of investors like Bank account details, email id, mobile number and address etc., AMFI shall, in consultation with SEBI, issue guidelines. It shall be mandatory for all AMCs to follow such guidelines.
- The provisions of this Circular shall be applicable with effect from April 1, 2022.
SEBI has vide its circular dated 30th September, 2021 extended the timeline by which the annual compliance audit is to be conducted by registered investment advisors to 31st December, 2021. They get further one month time to report the adverse audit findings, if any. Hitherto, the timelines were 30th September, 2021 and 31st October, 2021 respectively.
- “Guidelines for Investment Advisers” issued vide Circular No. SEBI/HO/IMD/DF1/CIR/P/2020/182 dated September 23, 2020 (hereinafter referred as “Circular”) inter alia prescribed timeline of six months from the end of each financial year for Investment Advisers (IA) to conduct annual audit in respect of compliance of SEBI (Investment Advisers) Regulations, 2013 (“IA Regulations”) and circulars issued thereunder. Further, a timeline of one month from the date of the audit report but not later than October 31st of each year was prescribed for submitting adverse findings of such audit, if any, for the previous financial year starting with the financial year ending March 31, 2021.
- The Circular further specified a timeline of 6 months from the end of the financial year for the IAs to obtain an annual certificate from an auditor confirming compliance with the client level segregation requirements as specified in Regulation 22 of the IA Regulations.
- SEBI is in receipt of representations from IAs requesting for extension of abovementioned timelines prescribed for annual compliance audit and annual certificate confirming client level segregation due to pandemic.
- After due consideration, for financial year ending March 31, 2021, it has been decided to extend the timeline for compliance with the aforesaid requirements by three months.
- Accordingly, the Circular stands partially modified as under:
i. In accordance with clause 2 (vii) of the Circular, for financial year ending March 31, 2021, the IAs shall conduct the annual compliance audit by December 31, 2021 and submit the adverse findings of the audit, if any, by January 31, 2022.
ii. Further, in accordance with clause 2 (i) of the Circular, for financial year ending March 31, 2021, IA shall obtain a certificate from an auditor by December 31, 2021.
SEBI has in its Board meeting held on 28th September, 2021 tweaked some of the provisions of superior voting rights to make it more amenable and less bureacratic to techno centric promoters in start ups etc.
The Board decided to relax the eligibility requirements related to Superior Voting Rights (SR) Shares framework as follows:
Earlier, in 2019, SEBI had introduced superior voting rights (SR) framework specifically for issuer companies intensive in use of technology. The framework allows issuance of SR shares to promoters/ founders holding executive position in the company desirous of listing on the Main Board. The framework also has checks and balances such as coat tail provisions –i.e. matters in which SR shares shall have the same rights as that of ordinary shares and sunset clause i.e. time period until which such an SR shareholder shall enjoy superior voting rights.
i. As per the existing provisions, an SR shareholder should not be part of promoter group having net worth more than INR 500 crs. This has been changed to require that the SR shareholder, as an individual, should not have net-worth of more than INR 1000 crs.
ii. The minimum gap between issuance of SR shares and filing of Red Herring Prospectus is reduced to 3 months from the existing requirement of 6 months.
SEBI has in its Board meeting held on 28th September, 2021 sought to simplify the procedures especially when the acquirer seeks to delist the company along with the open offer being made under the Takeover regulations. The existing procedure was a complicated three step process which was cumbersome and time consuming. Now the acquirer can make a delisting offer along with the open offer itself and if he crosses the 90% threshold, then all shareholders will get the delisting prices, otherwise it will be the takeover price which will come into effect.
The detailed note on this is given below as per SEBI press release:
The Board approved the proposal to amend the existing regulatory framework for delisting of equity shares pursuant to open offer as provided under the extant Regulation 5A of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (Takeover Regulations).
Under the existing framework, if an open offer is triggered, compliance with Takeover Regulations could take the incoming acquirer’s holding to above 75% or perhaps even 90%, however, to ensure compliance with Securities Contract (Regulation) Rules, 1957 (SCRR) the acquirer would be forced to first bring his
stake down to 75% as the SEBI (Delisting of Equity Shares) Regulations, 2021 (Delisting Regulations) would not let the acquirer even to attempt at delisting unless the holding is first brought down to 75%. Such directionally contradictory transactions in a sequence pose complexity in the takeover of listed companies especially where the acquirer desires to get the company delisted pursuant to his take over.
The revised framework aims to make M&A transactions for listed companies a more rational and convenient exercise, balancing the interest of all investors in the process. The key features of revised framework for delisting pursuant to an open offer are as under: –
- The framework shall be made available in the case of open offers under the Takeover Regulations for an incoming acquirer who is seeking to acquire control under Regulation 3(1) or Regulation 4 or Regulation 5.
- If the acquirer is desirous of delisting the target company, the acquirer must propose a higher price for delisting with suitable premium over open offer price.
- If the response to the open offer leads to the delisting threshold of 90% being met, all shareholders who tender their shares shall be paid the same delisting price and if the response to the offer leads to the delisting threshold of 90% not being met, all shareholders who tender their shares shall be paid the same takeover price.
- If a company does not get delisted pursuant to the open offer under this framework, and the acquirer crosses 75% due to the open offer, a period of 12 months from the date of completion of the open offer will be provided to the acquirer to make further attempts to delist the company under the Delisting Regulations using the reverse book building mechanism. If delisting during this extended 12-month period is not successful, the acquirer then must comply with the minimum public shareholding norm within a period of 12 months from the end of such period.
- If the acquirer at the time of open offer, states upfront that it would opt for remaining listed, and the total stake at the end of the tendering period reaches above 75%, then the acquirer may opt for either proportionately scaling down of purchases made under both, i.e. the underlying share purchase agreement and the shares tendered under open offer, in such a manner that the 75% threshold is never crossed or alternatively, the acquirer shall have to become compliant with minimum public shareholding within the time stipulated under SCRR.
- While undertaking delisting under this framework, all the provisions of the Delisting Regulations shall be applicable mutatis-mutandis, save otherwise provided in this framework.
SEBI board meeting on 28th September, 2021 decided to launch a Gold Exchange along with appropriate regulations viz. SEBI (Vault Managers) Regulations, 2021. Salient features are as under:
Proposed framework for Gold Exchange and SEBI (Vault Managers)
- The Board, after deliberations, approved the framework for Gold Exchange and SEBI (Vault Managers) Regulations, 2021.
- The salient features of the framework for Gold Exchange are as under:
2.1 The instrument representing gold will be called ‘Electronic Gold Receipt’ (EGR) and it will be notified as “securities” under Securities Contracts (Regulation) Act, 1956.
2.2 EGRs will have the trading, clearing and settlement features akin to any other “securities”.
2.3 Any recognized stock exchange, existing as well as new, can launch trading in EGRs in a separate segment.
2.4 The denomination for trading of EGR and conversion of EGR into gold, can be decided by the recognized stock exchanges, with the approval of SEBI.
2.5 The Clearing Corporation will settle the trades, executed on the stock exchange/s, by way of transferring EGRs and funds to the buyer and seller respectively.
2.6 The EGR holder can continue to hold the EGR as long as intended, since EGRs will have perpetual validity.
2.7 The EGR holder, at his discretion, can also withdraw the underlying gold from the vaults, upon surrender of the EGRs.
2.8 To lower the costs associated with withdrawal of gold from the vaults, EGRs will be made “fungible” and “inter-operability between Vault Managers” will be allowed.
- The salient features of SEBI (Vault Managers) Regulations, 2021 are as under:
3.1 The Vault Manager should be a body corporate incorporated in India.
3.2 The Vault Manager should have net worth of at least Rs. 50 crores.
3.3 The Vault Manager will be registered and regulated as SEBI intermediary, for providing vaulting services meant for gold deposited to create EGRs.
3.4 The obligations of Vault Manager will include accepting deposits, storage and safekeeping of gold, creation of EGR, withdrawal of gold, grievance redressal and periodic reconciliation of physical gold with the records of depository.
- The Gold Exchange, encompassing the entire ecosystem of trading of EGR and physical delivery of gold, is expected to create a vibrant gold ecosystem in India commensurate with India’s large share of global gold consumption. The Gold Exchange would be a national platform for buying and selling
EGRs with underlying standardized gold in India and also create a national pricing structure for gold. The Gold Exchange is expected to offer a host of benefits for the value chain participants as well as for the entire gold market ecosystem, such as, efficient and transparent price discovery, investment
liquidity, assurance in the quality of gold, etc.