Category Archives: securities laws

overseas investment limits for MFs

SEBI has vide its circular dated 3rd June, 2021 enhanced the overseas investment limits for mutual funds as follows:

  1. they can make overseas investments subject to a maximum of US$1 billion per mutual fund subject to an industry limit of USD$7 billion;
  2. in overseas exchange traded fund, they can make investment of US$ 300 million per mutual fund subject to an industry limit of US$1 billion.

The earlier limits were US$600 million (per mutual fund) and US$200 million (for exchange traded fund) respectively. The overall industry limits are the same.

In respect of investment limits to be disclosed in the scheme documents at the time of NFO as specified in Para 2.2 of the aforesaid circular, and the investment limits on ongoing schemes as specified in Para 2.3 of the aforesaid circular, such limits would henceforth be soft limits for the purpose of reporting only by Mutual Funds on monthly basis in the format prescribed vide SEBI circular dated November 5, 2020.

The aforesaid circular referred to above is the Para 1 of SEBI Circular No. SEBI/HO/IMD/DF3/CIR/P/2020/225 dated
November 05, 2020 which is here i.e.

https://www.sebi.gov.in/legal/circulars/nov-2020/circular-on-enhancement-of-overseas-investment-limits-for-mutual-funds_48090.html

https://www.sebi.gov.in/legal/circulars/jun-2021/circular-on-enhancement-of-overseas-investment-limits_50415.html

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IPOs revised timelines – UPI in ASBA

SEBI has vide its circular dated 2nd June, 2021 revised its timelines for implementation of UPI in ASBA in respect of IPOs. This is after the stakeholders approached SEBI seeking additional time for implementation of system changes especially in view of the covid pandemic. Salient features are as follows:

1. SEBI vide Circular No. SEBI/HO/CFD/DIL2/CIR/P/2021/2480/1/M dated March 16, 2021 (hereinafter referred to as “the circular”), which came into effect from May 01, 2021 had put in place measures to have a uniform policy to further streamline the processing of ASBA applications through UPI process among intermediaries/SCSBs and also provided a mechanism of compensation to investors. 

2. The stakeholders have approached SEBI seeking additional time for implementing the system changes given the prevailing uncertainty due to the Covid-19 pandemic. 

3. In view of the representations received from stakeholders, the implementation timelines for the provisions of “the circular” shall be as under: 

3.1SMS Alerts: Para 9 of “the circular” prescribed the details to be sent by SCSB’s in SMS alerts. While SCSB’s shall continue to send SMS alerts during the actual block/debit/unblock of UPI mandate in the prescribed format, the details of total number of shares applied/allotted/non-allotted etc shall be included in SMS for Public Issues opening on/after January 01, 2022. 

3.2Web Portal for CUG: For ease of doing business, Para 10 of “the circular” prescribed a web portal to be hosted by Sponsor Banks for closed user group (hereinafter referred to as “CUG”) entities. In view of the representations received from the stakeholders, it has been decided that: 

3.2.1 The automated web portal shall be live and operational after due testing and mock trials with the CUG entities for Public Issues opening on or after October 01, 2021. The requisite information on this automated portal shall be updated periodically in intervals not exceeding two hours. 

3.2.2 In the interim, for the Public Issues opening from the date of this circular and till the automated web portal is live and operational, the Sponsor Banks shall send the details prescribed in Para 10 of “the circular” to the e-mail address of CUG entities periodically in intervals not exceeding three hours. In case of exceptional events viz., technical issues with UPI handles/PSPs/TPAPS/SCSB’s etc, the same shall be intimated immediately to the CUG entities so as to facilitate the flow of information in the Public Issue process. 

3.2.3 The Stock Exchanges and Lead Managers shall facilitate providing the requisite data of CUG entities to Sponsor Bank for the development of automated web portal. Such information shall be provided to the Sponsor Bank before opening of the Public Issue. 

3.3Completion of Unblocks by T+4: Para 13 of “the circular” prescribed the process and timeline for ensuring the completion of unblocks pertaining to UPI mandates on T+4 (T: Issue Closing Date). while the process of unblocking shall be completed by T+4, in view of the representations received from stakeholders, the following shall be the revised timelines: 

3.3.1 The Registrar to the Issue shall provide the allotment/ revoke files to the Sponsor Bank by 8:00 PM on T+3 i.e, the day when the Basis of Allotment (BOA) has to be finalized. 

3 3.3.2 The Sponsor Bank shall execute the online mandate revoke file for Non-Allottees/ Partial Allottees and provide pending applications for unblock, if any, to the Registrar to the Issue, not later than 5:00 PM on BOA+1. 

3.3.3 Subsequent to the receipt of the pending applications for unblock from the Sponsor Bank, the Registrar to the Issue shall submit the bank-wise pending UPI applications for unblock to the SCSBs, not later than 6:30 PM on BOA+1. 

3.3.4 To ensure that the unblocking is completed on T+4, the Lead Managers, on a continuous basis and before the opening of the public issue shall take up the matter with the SCSB’s at appropriate level. 

4. This circular comes into force with immediate effect. 

5. The contents of the circular shall be mentioned in the DRHP and RHP filed on or after the date of this circular. 

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foreign portfolio investors

SEBI circular dated 1st June, 2021 allowing a one off, “off-market” transfer of securities by foreign portfolio investors for transferring to IFSC at Gift City, Ahmedabad, which gives substantial tax benefits as per the Finance Act, 2021. Gist of circular follows:

1. The Finance Act, 2021 provides tax incentives for relocating foreign funds to International Financial Services Centre (IFSC) in order to make the IFSC in GIFT City a global financial hub. 

2. In view of the above objective and to further facilitate such ‘relocation’, it has been decided that a FPI (‘original fund’ or its wholly owned special purpose vehicle) may approach its DDP for approval of a one-time ‘off-market’ transfer of its securities to the ‘resultant fund’. The terms ‘original fund’, ‘relocation’ and ‘resultant fund’ will have the same meaning as assigned to them under the Finance Act, 2021. 

3. The DDP after appropriate due diligence may accord its approval for a one-time ‘offmarket’ transfer of securities for such relocation. 

4. Relocation request will imply that the FPI has deemed to have applied for surrender of its registration and the DDP may be guided by the guidelines pertaining to surrender of FPI registration. 

5. The ‘off-market’ transfer shall be allowed without prejudice to any provisions of tax laws and FEMA. 6. Para 3, Part C of SEBI Circular No. IMD/FPI&C/CIR/P/2019/124 dated November 05, 2019 stands modified to the extent of para 2 above. 

https://www.sebi.gov.in/legal/circulars/jun-2021/-off-market-transfer-of-securities-by-fpi_50380.html

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LODR compliances – corp gov.

SEBI has mandated an additional set of compliances for listed entities – under regulation 27 of the Listing Obligations and Disclosure Requirements Regulations 2015. Now disclosures around loans/ guarantees/ letters of comfort/ securities provided by listed entities to their promoter or promoter group entities or any other entity controlled by them, either directly or indirectly has to be made on a half yearly basis from the financial year 2021-22.

The format of the report is given in this circular

https://www.sebi.gov.in/legal/circulars/may-2021/format-of-compliance-report-on-corporate-governance-by-listed-entities_50338.html

Apart from this, there are three other corporate governance reporting to be done in various periods as enumerated under:

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alternative investment funds

SEBI has vide its circular dated 21st May, 2021 enhanced the overseas investment limits for SEBI registered alternative investment funds (AIFs)/ venture capital funds (VCFs) from USD 750 million to USD 1500 million. Details follow.

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Takeover Code – amendments

SEBI has vide its notification dated 5th May, 2021 amended the SEBI (Substantial Acquisition of Shares & Takeovers) Regulations 2011 or the Takeover Code. The following are the amendments carried out.

Regulation 3(1) stipulates that no acquirer shall acquire shares or voting rights in a target company in excess of 25% of the voting rights without making an open offer for acquiring the remaining shares in the target company. Sub Regulation (5) has been added which stipulates that for shares listed in Innovators Growth Platform, the said percentage will be 49%.

Same change has been made in regulation 6, which refers to voluntary offer wherein for 25%, 49% has been stipulated for shares listed in the Innovators Growth Platform.

Regulation 26 pertains to obligations of the target company. Sub regulation (6) specifies that the Board of Directors of the target company shall constitute a committee of independent directors to provide reasoned recommendations on such open offer and the target company shall publish such recommendations. A proviso has been added that while providing reasoned recommendations on the open offer proposal, the committee shall disclose the voting pattern of the meeting in which the open offer proposal was discussed.

Basically it means when the committee of independent directors meet to consider the open offer proposal and draft their reasoned recommendations, the voting pattern of such meeting shall be disclosed.

Regulation 29 pertains to disclosure of acquisition and disposal. It stipulates for disclosure of shareholding and voting rights in the target company aggregating to 5% or more of the shares of such target company. The amendment is that in case of securities listed in the Innovators Growth Platform, this percentage to be read as 10%.

In the case of creeping acquisition, shareholders holding 5% or more shares in a company, shall disclose any change in shareholding exceeding 2% of the total shareholding in the target company. In case of securities listed in Innovators Growth Platform, this percentage to be read as 10% and 5% respectively.

The amendments can be found at sebi site. i.e. http://www.sebi.gov.in

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REITs and InvITs – covid relaxations

SEBI has vide its circular dated 14th May, 2021 given relaxation to Real Estate Investment Trusts (REITs) and Infrastructure Investment Trust (InvITs) allowing them to file their regulatory filings by giving them one month more for the same. Gist of the circular enclosed.

SEBI is in receipt of representations from InvITs and REITs requesting extension of timelines for various regulatory filings and compliances for InvITs and REITs for the period ending March 31, 2021, inter-alia, due to ongoing second wave of the CoVID-19 pandemic and restrictions imposed by various state governments.

  1. After consideration, it has been decided to extend the due date for regulatory filings and compliances for InvITs and REITs for the period ending March 31, 2021 by one month over and above the timelines, prescribed under SEBI (Infrastructure Investment Trusts) Regulations, 2014 (InvIT Regulations) and SEBI (Real Estate Investment Trusts) Regulations, 2014 (REIT Regulations) and circulars issued thereunder.

https://www.sebi.gov.in/legal/circulars/may-2021/relaxation-from-compliance-to-reits-and-invits-due-to-the-covid-19-virus-pandemic_50127.html

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portfolio managers

SEBI has vide its circular dated 12th May, 2021 mandated the registered portfolio managers shall take prior approval when a change in control of the portfolio managers is being considered. SEBI has listed steps that the portfolio managers should take in such circumstances.

Regulation 11(aa) provides that a Portfolio Manager shall obtain prior approval of SEBI in case of change in control in such manner as may be specified by SEBI. Accordingly, it has been decided that all SEBI registered Portfolio Managers shall comply with the following in case they propose a change in control:
a. An online application shall be made to SEBI for prior approval through the SEBI Intermediary Portal (https://siportal.sebi.gov.in).
b. The prior approval granted by SEBI shall be valid for a period of six months from the date of such approval.
c. Applications for fresh registration pursuant to change in control shall be made to SEBI within six months from the date of prior approval.
d. Pursuant to grant of prior approval by SEBI, all the existing investors/ clients shall be informed about the proposed change prior to effecting the same, in order to enable them to take well informed decision regarding their
continuance or otherwise with the changed management.

https://www.sebi.gov.in/legal/circulars/may-2021/procedure-for-seeking-prior-approval-for-change-in-control-of-sebi-registered-portfolio-managers_50116.html

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business responsibility & sustainability reporting

SEBI has mandated vide its circular dated 10th May, 2021 that with effect from financial year 2022-23, top 1000 companies by market capitalization shall report on a new format which incorporates ESG parameters. Gist of circular follows:

In recent times, adapting to and mitigating climate change impact, inclusive growth and transitioning to a sustainable economy have emerged as major issues globally. There is an increased focus of investors and other stakeholders seeking businesses to be responsible and sustainable towards the environment and society. Thus, reporting of company’s performance on sustainability related factors has become as vital as reporting on financial and operational performance.

  1. SEBI vide Circular no. CIR/CFD/CMD/10/2015 dated November 04, 2015 has prescribed the format for the Business Responsibility Report (BRR) in respect of reporting on ESG (Environment, Social and Governance) parameters by listed
    entities.
  2. In terms of amendment to regulation 34 (2) (f) of LODR Regulations vide Gazette notification no. SEBI/LAD-NRO/GN/2021/22 dated May 05, 2021, it has now been decided to introduce new reporting requirements on ESG parameters called the Business Responsibility and Sustainability Report (BRSR). The BRSR is accompanied with a guidance note to enable the companies to interpret the scope of disclosures. The format of the BRSR and the guidance note are detailed in Annexure I and Annexure II respectively.
  3. The BRSR seeks disclosures from listed entities on their performance against the nine principles of the ‘National Guidelines on Responsible Business Conduct’ (NGBRCs) and reporting under each principle is divided into essential and
    leadership indicators. The essential indicators are required to be reported on a mandatory basis while the reporting of leadership indicators is on a voluntary basis. Listed entities should endeavor to report the leadership indictors also.
  4. The BRSR is intended towards having quantitative and standardized disclosures on ESG parameters to enable comparability across companies, sectors and time. Such disclosures will be helpful for investors to make better investment decisions. The BRSR shall also enable companies to engage more meaningfully with their stakeholders, by encouraging them to look beyond financials and towards social and environmental impacts.
  5. The listed entities already preparing and disclosing sustainability reports based on internationally accepted reporting frameworks (such as GRI, SASB, TCFD or Integrated Reporting) may cross-reference the disclosures made under such framework to the disclosures sought under the BRSR.
    Applicability
  6. In terms of the aforesaid amendment, with effect from the financial year 2022-2023, filing of BRSR shall be mandatory for the top 1000 listed companies (by market capitalization) and shall replace the existing BRR. Filing of BRSR is voluntary for the financial year 2021-22.

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covid relaxations – debt listing

SEBI circular dated 29th April, 2021 giving certain relaxations to compliance deadlines in respect of debt listed securities, municipal bonds and commercial paper. Details are given below.

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compliance relaxations for SE intermediaries

SEBI circular dated 29th April, 2021 giving relaxations in deadlines in respect of compliances for trading members, clearing members, depository participants, KYC registration agencies as under:

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debenture trustees – compliance relaxations

SEBI circular dated 3rd May, 2021 giving relaxations in compliance deadlines to debenture trustees in view of the covid 2.0 pandemic for the quarter/ half year ended 31st March, 2021

https://www.sebi.gov.in/legal/circulars/may-2021/relaxation-in-timelines-for-compliance-with-regulatory-requirements-by-debenture-trustees-due-to-the-covid-19-pandemic_50042.html

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securities compliances – relaxations

SEBI has relaxed some compliance deadlines in view the ongoing covid 2.0 pandemic. Details are given below:

Listed entities have been allowed to use their digital signatures for all filings upto 31st December, 2021.

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reporting formats for mutual funds

SEBI circular dated 12th April, 2021 wherein they have revised the reporting format for mutual funds. Read on.

A. Pursuant to regulatory revamp exercise of SEBI (Mutual Funds) Regulations, 1996 (hereinafter called as “MF Regulations”) and various circulars issued thereunder, a circular no. SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021 has been issued. Further, based on the consultation with industry the formats for the following reports i.e. reports to be submitted by AMCs to Trustees, by AMCs to SEBI and by Trustees to SEBI have been reviewed and
revised as under:

  1. Reporting by AMCs to Trustees
    1.1.Bi-monthly Compliance Certificate (BCC)
    In partial modification to the SEBI circular No. MFD/CIR/09/014/2000 dated January 5, 2000, the Compliance Certificate to be submitted by the AMC to the Trustees on a Bi-monthly basis shall be discontinued.
    1.2.Half yearly Compliance Certificate (HYCC) by AMC to Trustees
    In partial modification to the SEBI circular No. MFD/CIR/09/014/2000 dated January 5, 2000, the Compliance Certificate to be submitted by the AMC to the Trustees on an half yearly basis shall be discontinued. The contents of both BCC and HYCC have been suitably incorporated in the Quarterly Report by AMC to Trustees.
    1.3.Quarterly Report by AMC to Trustees (QR)
    The AMC shall submit QR to the trustees, as required in sub-regulation (4) of Regulation 25 of MF Regulations, on its activities and the compliance with MF Regulations and various circulars issued thereunder. The format of QR is prescribed at Annexure I. The same shall be submitted by AMC to Trustees by 21st calendar day of succeeding month for the quarters ending March, June, September and December.
  2. Reporting by AMCs to SEBI
    2.1.Compliance Test Report by AMC to SEBI (CTR)

    To synchronize the frequency of submission of the CTR and QR, SEBI circulars No. MFD/CIR/5/360/2000 dated July 4, 2000, SEBI/ IMD/CIR No. 11 /36222/2005 dated March 16, 2005 and SEBI/IMD/CIR NO 6/98057/07 dated July 5, 2007 have been modified to the extent that, instead of exceptional reporting, complete CTR shall be submitted by
    AMC to SEBI on a quarterly basis, by 21st calendar day of succeeding month for the quarters ending March, June, September and December. The revised format of CTR is prescribed at Annexure II.
  3. Reporting by Trustees to SEBI
    3.1.Half Yearly Trustee Report by Trustees to SEBI (HYTR)
    a) In partial modification to the SEBI circular No. MFD/CIR/09/014/2000 dated January 5, 2000, the HYTR containing the broad coverage of report of trustees to SEBI has been revised & prescribed at Annexure III.
    b) Trustees, shall submit corrective steps taken with respect to the noncompliance reported in the HYTR.
    c) Trustees shall continue to submit HYTR for the half year ending September and March within two month from the end of the half year.
    B. Applicability
  4. For QR and CTR reports, the circular shall come into effect for reporting from the quarter ending June, 2021;
  5. For HYTR report, the circular shall come into effect for reporting from the halfyear ended March, 2021;
  6. BCC and HYCC shall be discontinued subsequent to the effective date of the QR report as mentioned at paragraph B(1) above.

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securities market relaxations – covid

SEBI circular dated 22nd April, 2021 giving certain relaxations in compliances due to ongoing covid pandemic. Read on.

  1. SEBI vide Circular no. SEBI/HO/CFD/DIL2/CIR/P/2020/78 dated May 6, 2020, granted one time relaxations from strict enforcement of certain regulations of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, pertaining to Rights Issue opening upto July 31, 2020.
  2. Based on the representations received from the market participants, the validity of these relaxations was further extended for Rights Issues opening up to December 31, 2020, vide SEBI Circular No. SEBI/ HO/ CFD/ DIL1/ CIR/ P/ 2020/136 dated July 24, 2020.
  3. The relaxation mentioned in point (iv) of the SEBI Circular No. SEBI/HO/CFD/DIL2/CIR/P/2020/78 dated May 6, 2020, was further extended for Rights Issues opening up to March 31, 2021, vide SEBI Circular No. SEBI/ HO/ CFD/ DIL1/ CIR/ P/2021/13 dated January 19, 2021.
  4. To ease and facilitate investors, the relaxation mentioned in point (iv) of the SEBI Circular No. SEBI/ HO/ CFD/ DIL2/ CIR/ P/2020/78 dated May 6, 2020, is further extended and shall be applicable for Rights Issues opening up to September 30, 2021, provided that the issuer along with the Lead Manager(s) shall continue to comply with point (v) of the SEBI Circular No. SEBI/HO/CFD/DIL2/CIR/P/2020/78 dated May 06, 2020.
  5. In respect to mechanism and compliance requirements at point (iv) and (v) of the SEBI Circular No. SEBI/ HO/ CFD/ DIL2/ CIR/P/2020/78 dated May 6, 2020, the issuer along with Lead Manager(s), Registrar, and other recognized intermediaries (as incorporated in the mechanism) shall also ensure the following:
    a. Refund for un-allotted / partial allotted application shall be completed on or before T+1 day (T: Basis of allotment day).
    b. Registrar to the issue, shall ensure that all data with respect to refund instructions is error free to avoid any technical rejections. Further, in case of any technical rejection of refund instruction, same shall be addressed promptly.

https://www.sebi.gov.in/legal/circulars/apr-2021/relaxations-relating-to-procedural-matters-issues-and-listing_49900.html

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