[Analysis] SEBI Board Meeting Highlights [March 2025] – Key Regulatory Amendments to Strengthen Market Governance

On March 24, 2025, the Securities and Exchange Board of India (SEBI) convened its 209th board meeting and approved a broad set of regulatory measures, as outlined in the Press Release (PR No. 15/2025). These developments are part of SEBI's continued efforts to enhance market transparency, reinforce institutional governance, and ensure investor protection amid evolving market dynamics. Key highlights from the board meeting include:
– Higher Disclosure Threshold for FPIs' Equity AUM
– Extended Advance Fee Limit for Investment Advisers and Research Analysts
– Formation of High-Level Committee to Review Conflict of Interest Norms
– Reforms in the Appointment Process for KMPs and Public Interest Directors in MIIs
– Flexibility in AIFs' Investments in Certain Listed Debt Securities
– Deferment of Regulatory Amendments for Intermediaries

Collectively, these decisions aim to balance regulatory rigour with operational flexibility, improve compliance processes, and foster greater investor trust in India's capital markets.

Table of Contents

Introduction

1. Higher Threshold Limit for FPIs to Disclose Equity ‘Assets under Management’
2. Permitting IAs and RAs to Charge Advance Fees from clients for Up to One Year
3. High-Level Committee to Review Conflict of Interest and Disclosure Norms for SEBI Members and Officials
4. Review of Appointment Process for KMPs and Public Interest Directors in Market Infrastructure Institutions
5. Investments by Category II AIFs in Listed Debt Securities Rated ‘A’ or Below to be Treated as Unlisted Securities
6. Deferment of Regulatory Amendments for Merchant Bankers, Debenture Trustees and Custodians
7. Conclusion

Introduction

The Securities and Exchange Board of India (SEBI), in its 209^th board meeting dated March 24, 2025, approved a series of amendments aimed at strengthening the regulatory landscape and promoting market integrity.

The Press Release (PR No. 15/2025), dated March 24, 2025, highlights the key approvals made by the Board. These include:

(a) Higher threshold limit for FPIs to disclose equity ‘Assets under Management’,

(b) Allowing IAs and RAs to charge advance fees from clients for up to one year,

(c) The formation of a High-Level Committee to review ‘Conflict of Interest’ and Disclosure norms for SEBI Members & Officials,

(d) A review of the appointment process and cooling-off period for certain specific KMPs.

The key highlights of the SEBI’s board meeting in detail are as follows:

1. Higher Threshold Limit for FPIs to Disclose Equity ‘Assets under Management’

Currently, Foreign Portfolio Investors (FPIs) that, individually or along with their investor group, hold more than Rs 25,000 crore of equity assets under management (AUM) in Indian markets are required to disclose details of all entities holding any ownership, economic interest, or exercising control over FPI without any thresholds to the Designated Depository Participants (DDPs)[1].

The Board has now approved a proposal to increase the threshold limit for FPIs from Rs. 25,000 crore to Rs. 50,000 crore. As a result, only FPIs holding equity AUM greater than Rs 50,000 crore will now be required to make additional disclosures.

1.1 What is AUM?

“Assets under Management” (AUM) refers to the total market value of all the investments managed by a financial institution, fund manager or advisor on behalf of clients.

2. Permitting IAs and RAs to Charge Advance Fees from clients for Up to One Year

Currently, Investment advisers (IAs) are allowed to charge advance fees for a maximum of six months, while Research analysts (RAs) can charge advance fees for up to three months. The Board has now permitted IAs and RAs to charge advance fees from clients for up to one year.

Additionally, SEBI has clarified that fee-related provisions covering aspects such as fee limits, payment modes, refund policies, advance fees, and breakage fees apply only to individual and Hindu Undivided Family (HUF) clients. For non-individual clients, accredited investors, and institutional investors, the terms will be governed by bilaterally negotiated contractual agreements.

3. High-Level Committee to Review Conflict of Interest and Disclosure Norms for SEBI Members and Officials

In a move to enhance transparency and accountability, the Board has announced the formation of a High-Level Committee (HLC) to review existing provisions related to conflicts of interest, property disclosures, investments, and liabilities of Board Members and Officials.

The HLC must comprise eminent persons and experts with relevant backgrounds and experience in constitutional, statutory, and regulatory bodies, as well as the government, public sector, private sector, and academia.

The primary objectives of the HLC are to –

• Conduct a comprehensive review of the existing framework for managing conflicts of interest, disclosures, and related matters.
• Enhancements are recommended to promote transparency, accountability, and ethical conduct among SEBI members and officials.

Further, the Committee is expected to submit its recommendations within three months of its formation, after which they will be presented to the Board for consideration.

4. Review of Appointment Process for KMPs and Public Interest Directors in Market Infrastructure Institutions

In an effort to improve governance within MIIs, the Board has reviewed the appointment process and cooling-off period for directors and specific key management personnel (KMPs) such as the Compliance Officer (CO), Chief Risk Officer (CRiO), Chief Technology Officer (CTO), and Chief Information Security Officer (CISO).

It is important to note that the review of the appointment process pertains to these specific KMPs, which differ from those covered under the SEBI (LODR) Regulations, 2015.

As per Regulation 2(o) of the SEBI (LODR) Regulations, 2015, ‘key managerial personnel’ refers to the KMP as defined in Section 2(51) of the Companies Act, 2013. However, the KMPs outlined here do not align with the definition of KMPs as specified under the Companies Act 2013.

Further, the Board approved the following proposals regarding the appointment of Public Interest Directors (PIDs) on the Governing Board of MIIs –

4.1 Continuation of the Existing Process for Appointing PIDs Without Shareholder Approval

The current process for appointing Public Interest Directors (PIDs) will remain unchanged. Under this process, the appointment of PIDs requires approval from SEBI, ensuring regulatory oversight and compliance. However, it does not mandate approval from shareholders of the MIIs. This process will continue to ensure regulatory compliance while maintaining the independence of the appointment process.

4.1.1 Meaning of Public Interest Director

As per Regulation 2(m) of SEBI (Depositories and Participants) Regulations, 2018, ‘public interest director’ means an independent director representing the interests of investors in the securities market and who is not having any association, directly or indirectly, which in the opinion of the Board, is in conflict with his role.

4.2 Governing Board to Record and Communicate Rationale for Not Reappointing PIDs to SEBI

If the Governing Board of an MII decides not to reappoint an existing Public Interest Director (PID) after his/her first term, it must record the rationale for this decision and communicate it to SEBI.

4.3 Cooling-Off Period for KMPs and Directors Moving to Competing MIIs

The Governing Board of an MII may prescribe a minimum cooling-off period for its KMPs and Directors, including the Managing Director and PIDs, before joining a competing MII. Further, SEBI will no longer prescribe a cooling-off period for PIDs transitioning from one MII to another.

4.4 Board Approval for Appointment, Re-appointment and Termination of KMPs

The appointment, reappointment, or termination of specific KMPs, such as the Compliance Officer, Chief Risk Officer, Chief Technology Officer, and Chief Information Security Officer, must now require approval from the Governing Board of the MII, which was previously handled by the Nomination and Remuneration Committee (NRC) of the MII.

5. Investments by Category II AIFs in Listed Debt Securities Rated ‘A’ or Below to be Treated as Unlisted Securities

Currently, Category II AIFs are required to hold a majority of their investments in unlisted securities. However, SEBI’s recent amendments to LODR Regulations 2015 now require entities issuing listed debt securities to issue fresh debt only in a listed form.

This amendment could lead to –

• Previously unlisted debt securities being mandatorily listed.
• A potential reduction in the availability of unlisted debt securities makes it difficult for AIFs to meet the minimum investment requirement for unlisted securities.

To address this issue, the Board has decided that Category II AIF investments in listed debt securities rated ‘A’ or below will be treated as investments in unlisted securities, allowing them to comply with the minimum investment conditions.

6. Deferment of Regulatory Amendments for Merchant Bankers, Debenture Trustees and Custodians

SEBI, in its Board meeting on December 18, 2024, approved regulatory amendments that would allow Merchant Bankers, Debenture Trustees, and Custodians to undertake other regulated activities as separate legal entities, subject to obtaining registration or confirmation from the respective regulatory authority.

The board has now approved the deferment of implementation of these regulatory amendments, giving these entities more time to comply and restructure their operations.

7. Conclusion

The amendments approved in the board meeting mark a strategic step towards enhancing the integrity and efficiency of India’s financial markets. By updating disclosure thresholds, refining fee structures, and strengthening governance mechanisms, SEBI has taken significant measures to promote transparency, accountability, and investor confidence across various sectors.

These changes are designed to align regulatory frameworks with the rapid growth of the market, ensuring that larger market participants remain subject to strong disclosure requirements while offering greater flexibility to smaller entities. Ultimately, these decisions aim to create a more stable, transparent, and competitive market environment that supports sustainable growth and enhances the investor experience.

[1] Regulation 22 of SEBI (Foreign Portfolio Investors) Regulations, 2019

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