Key highlights of SEBI’s Board Meeting held on 28.09.2021

The SEBI Board held its meeting in Mumbai on 28.09.2021 under the chairmanship of Shri Ajay Tyagi. The Part-Time Members joined the meeting through video conferencing. The key decisions taken by the Board include as viz. i) Approval of framework for Gold Exchange and SEBI (Vault Managers) Regulations, 2021, ii) Clearing of the framework for Social Stock Exchange, iii) Review of delisting framework pursuant to open offer, iv) Review of certain provisions related to Superior Voting Rights Share framework, v) Review of regulatory provisions on Related Party Transactions, vi) Introduction of Investor Charter for the securities market and vii) inclusion of practicing Cost Accountant in share reconciliation Audit. This write-up aims to highlight key takeaways of the decisions taken by the SEBI Board as under:

1. SEBI approves of the framework for Gold Exchange

The Market Regulator, SEBI has approved the framework for the establishment of the Gold Exchange. The Gold exchange is surrounded by the entire ecosystem of trading of Electronic Gold Receipt’ (EGR) and physical delivery of gold, which is expected to create a vibrant gold ecosystem as India having a large share of global gold consumption, said SEBI.

Gold exchange is formed to trade the Gold in the form of electronic gold receipts that would be a national platform for buying and selling Electronic Gold Receipt’ (EGR) with underlying standardized gold in India and also created a national pricing structure for gold. Some of the key features of the new framework are as follow:

(a) The instrument representing gold will be called ‘Electronic Gold Receipt’ (EGR) and it will be considered as “securities”.

(b) EGRs will have the trading, clearing, and settlement features just like any other “securities”.

(c) Any recognized stock exchange, existing as well as new, can launch trading in EGRs in a separate segment.

(d) The denomination for the trading of EGR and conversion of EGR into gold can be decided by the recognized stock exchanges, with the approval of SEBI.

(e) The Clearing Corporation will settle the trades, executed on the stock exchange/s, by way of transferring EGRs and funds to the buyer and seller respectively.

(f) The EGR holder can continue to hold the EGR as long as intended since EGRs will have perpetual validity.

(g) The EGR holder, at his discretion, can also withdraw the underlying gold from the vaults, upon surrender of the EGRs.

(h) To lower the costs associated with the withdrawal of gold from the vaults, EGRs will be made “fungible” and “interoperability between Vault Managers” will be allowed.

2. Framework for Vault Managers under the SEBI (Vault Managers) Regulations, 2021.

The SEBI has also come with the framework for Vault Managers as specified under the SEBI (Vault Managers) Regulations, 2021. The code of conduct that while providing vaulting services, the Vault Manager shall adhere to the following:

(a) The Vault Manager should be a body corporate incorporated in India.

(b) The Vault Manager should have a net worth of at least Rs. 50 crores.

(c) Vault Manager will be registered and regulated as a SEBI intermediary, for providing vaulting services meant for gold deposited to create EGRs.

(d) The obligations of the Vault Manager will include accepting deposits, storage and safekeeping of gold, creation of EGR, withdrawal of gold, grievance redressal, and periodic reconciliation of physical gold with the records of the depository.

3. SEBI lays down the framework for Social Stock Exchange

With an aim to help social and voluntary organizations which work for social causes to raise capital as equity or debt or a unit of a mutual fund, the SEBI has approved the creation of the Social Stock Exchange (SSE), under the regulatory ambit of SEBI, for fundraising by social enterprises (SE). The framework for the SSE has been developed based on the recommendations of a working group and a technical group constituted by SEBI.

4. Relaxation in eligibility requirements of Superior Voting Rights Shares Framework

The Board agreed to relax the Superior Voting Rights (SR) Shares framework’s eligibility restrictions. According to the present rules, an SR shareholder cannot be a member of a promoter group with a net worth of more than INR 500 crores. This has been modified to demand that the SR shareholder has a net worth of less than INR 1000 crore as an individual.

In addition to the foregoing, the minimum time between the issuing of SR shares and the filing of the Red Herring Prospectus has been lowered from 6 months to 3 months.

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