SEBI has recently introduced several important circulars aimed at improving transparency and regulation across India’s financial markets. Here’s a concise overview of these changes:
1. Charges by Market Infrastructure Institutions
SEBI is tackling discrepancies in charge structures implemented by Market Infrastructure Institutions (MIIs), including stock exchanges, clearing corporations, and depositories. The current volume-based slab charges have led to inconsistencies between the fees clients are charged and what members pay MIIs.
To address this, SEBI requires MIIs to redesign their charge structures to ensure transparency and uniformity. Effective October 1, 2024, MIIs must align charges with what is received, making the fee structures consistent across all members. They are also tasked with updating their systems, amending regulations, and reporting progress to SEBI.
2. Changes to Denomination for Debt Securities and Preference Shares
The new circular revises the denomination requirements for debt securities and non-convertible redeemable preference shares. Previously set at Rs. 1 lakh, the minimum face value is now reduced to Rs. 10,000 for private placements. This change aims to attract more non-institutional investors and improve market liquidity.
Additionally, it outlines conditions for credit enhancements and mandates Merchant Bankers for such issuances. Outdated clauses on higher minimum face values have been removed, and trading lot requirements updated. These provisions apply to all new private placements from the circular’s effective date.
3. Strengthening Broker Mechanisms for Fraud Prevention
SEBI has introduced new regulations for stockbrokers to enhance their mechanisms for preventing and detecting fraud and market abuse. Under the Stockbrokers (Amendment) Regulations, 2024, brokers are required to implement advanced surveillance systems, internal controls, and whistleblower policies. The Broker’s Industry Standards Forum, in consultation with SEBI, will develop these standards.
Compliance timelines are staggered based on the number of Unique Client Codes (UCCs): brokers with over 50,000 UCCs by January 1, 2025; 2,001 to 50,000 UCCs by April 1, 2025; and up to 2,000 UCCs by April 1, 2026. Qualified Stockbrokers (QSBs) must comply by August 1, 2024. Stock exchanges will oversee the implementation and report to SEBI.
4. Regulation for Credit Rating Agencies and ESG Rating Providers in IFSC
CRAs are now authorized to perform rating activities within the International Financial Services Centre (IFSC) - Gujarat International Finance Tech-city (IFSC-GIFT City), under the International Financial Services Centres Authority (IFSCA). This aims to streamline oversight for CRAs operating in the IFSC.
Similarly, ESG Rating Providers (ERPs) can conduct ESG rating activities in the IFSC-GIFT City. The IFSCA will handle regulatory oversight, issues, and enforcement for these ratings. These updates are effective immediately to ensure proper oversight and operational efficiency in this financial hub.
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