SEBI’s press release PR No: 68/2017 dated December 28, 2017 (available here) sets out certain decisions taken in its Board meeting on the same date. Some of the key decisions have been summarized hereunder:
1. Additional methods for listed entities to achieve minimum public shareholding requirements.
Listed companies have two additional methods available to them to comply with the requirement of minimum public shareholding:
(a) Qualified institutions placement; and
(b) Sale of shares up to 2% held by promoters/promoter group in open market.
Listed companies have till August 21, 2018 to comply with the minimum holding requirements.
2. Norms for shareholding and governance in mutual funds.
For the purpose of preventing conflict, the following persons/entities are not permitted to have, either individually or collectively, 10% or more stake in an asset management company (AMC)/ trustee companies of any other mutual fund OR have representation on the board of an AMC/ trustee companies of any other mutual fund:
(a) a sponsor of a mutual fund;
(b) the sponsor’s associates;
(c) the sponsor’s group company; and
(d) the AMC through the schemes of the mutual fund.
Further, any shareholder holding more than 10% stake in any AMCs/trustee company of any mutual fund, is not permitted to have 10% or more stake or have representation on the board of the AMC/ trustee company of any other mutual fund.
However, conflicts with respect to the fund manager do not appear to have been discussed at the Board Meeting.
3. Proposed framework for listing of security receipts issued by asset reconstruction companies under SEBI (Public Offer and Listing of Securitised Debt Instruments) Regulations, 2008.
SEBI has allowed listing and trading of security receipts issued by a securitization company or a reconstruction company on registered stock exchanges. The intent is to enhance capital flows into the securitization industry and to help banks resolve the issue of non-performing assets.
A separate chapter detailing the framework for listing of security receipts will be added to the SEBI (Public Offer and Listing of Securitised Debt Instruments) Regulations, 2008.
4. Amendments to SEBI (Real Estate Investment Trusts) Regulations, 2014.
SEBI has proposed certain amendments to SEBI (Real Estate Investment Trusts) Regulations, 2014:
(a) Allowing real estate investment trusts (REITs) to invest at least 50% stake in holding companies/ special purpose vehicles (SPVs), and allowing holding companies to invest at least 50% stake in SPVs, subject to certain safeguards (such as board representation proportional to shareholding).
(b) Rationalizing the definition of sponsor group in case of REITs.
(c) Enabling investments by REITs in unlisted shares under the 20% investment category.
5. Consultation paper for amendment to the SEBI (Investment Advisers) Regulation, 2013.
SEBI had issued two consultation papers on October 7, 2016 and June 22, 2017 and invited public comments on proposed amendments for regulations governing investment advisors. Based on the feedback received from various stakeholders, SEBI issued another consultation paper dated January 2, 2018 (available here), seeking further comments on the following proposals:
(a) Clear segregation between the investment advisory and investment product distribution verticals.
(b) Individuals, banks, NBFCs, body corporates, LLPs and firms who are willing to be registered as investment advisers shall not provide distribution services in financial products, both directly or through their relatives, associate companies, subsidiaries or their holding company and vice versa.
(c) Persons already registered as investment advisers who are offering product distribution services shall choose between the two before March 31, 2019.
(d) Mutual fund distributors while distributing their mutual fund products can explain the features of products to clients, and ensure that appropriate products are distributed.