Key Takeaways From SEBI’s First Board Meeting Under New Chief

On March 24, the Securities and Exchange Board of India (SEBI) convened its first meeting under newly appointed Chairman, Tuhin Kanta Pandey, who assumed office earlier this month.

Here are the key highlights from the meeting:

• Relaxations with respect to additional disclosures by FPIs: The Board has approved a proposal to double the investment threshold for foreign portfolio investors (FPI) disclosures from INR 25,000 crore to INR 50,000 crore. Consequently, FPIs holding more than INR 50,000 crore of equity Assets Under Management (AUM) in the Indian markets will now be required to make additional disclosures as described in the circular dated August 24, 2023.

• Review of AIF Regulations for ease of doing business: Investments of Category II Alternative Investment Funds (AIFs) in listed debt securities rated ‘A’ or below will be treated as akin to investments in unlisted securities for the purpose of their compliance with minimum investment conditions in unlisted securities

• Cooling-off period to be decided by the Governing Board of MII: The current regulations prescribe a minimum cooling-off period for Public Interest Directors (PIDs) to move to other Market Infrastructure Institutions (MIIs), but there is none mandated for Managing Directors (MDs), other Directors, and other Key Management Personnel (KMP). To address this anomaly and bring in uniformity, the Board has decided that a) the Governing Board of an MII may prescribe a minimum cooling-off period for its KMPs and Directors, including MD and PIDs, before joining a competing MII, and b) SEBI will no longer prescribe a cooling-off period for PIDs transitioning from one MII to another.

Additionally, the Board decided that the existing process for the appointment of PIDs (which requires prior approval of SEBI but does not mandate shareholder approval) will continue, and also specified certain changes to the process for appointment of specific KMPs in MIIs.

• Allowing IAs and RAs to charge advance fee for up to one year: SEBI has relaxed restrictions on the advance fee that Investment Advisers (IAs) and Research Analysts (RAs) can charge, allowing them to collect fees for up to one year, compared to the previous limit of six months or three months. It is also clarified that compliance with the fee-related provisions (such as fee limit, modes of payment of fees, refund of fees, advance fee, and breakage fees) will only apply in case of individual and HUF clients. In case of non-individual clients, accredited investors, and in case of institutional investors seeking the recommendation of proxy advisers, fee-related terms and conditions shall be governed through bilaterally negotiated contractual terms.

• Alternative ways to be explored for merchant bankers to carry out activities other than permitted activities: In its December 2024 Board meeting, SEBI decided to allow merchant bankers to carry out activities other than the permitted activities (which come within the purview of SEBI) by hiving off such activities to a separate entity. Similar amendments were suggested for debenture trustees and custodians as well. Now, the Board has decided to defer the implementation of these amendments, to allow for further review and evaluation of alternative approaches instead of requiring hiving-off.

• Constitution of High-Level Committee: A High-Level Committee will be formed to review provisions related to conflict of interest, disclosures pertaining to property, investments, liabilities, etc., and related matters in respect of members and officials of the Board. The committee will be tasked with making recommendations to enhance transparency and accountability.