Key Highlights of the SEBI Board Meeting dated 29-03-2022

Introduction

SEBI in its board meeting held on 29-03-2022 has approved of the proposal to amend the SEBI (LODR) Regulations, 2015 to simplify the procedure for transmission of securities. SEBI has also approved an amendment to SEBI (Collective Investment Schemes) Regulations, 1999 with a view to strengthening the regulatory framework for Collective Investment Schemes (CIS) in line with the Mutual Fund regulations to remove regulatory arbitrage. Further, the SEBI (Custodian) Regulations, 1996 have been proposed to be amended to enable custodians to provide custodial services in respect of silver exchange-traded fund schemes of mutual funds. This write-up aims to discuss the key decisions taken by the SEBI in this Board Meeting in detail:

1. An amendment to SEBI (LODR) Regulations, 2015 for simplification of procedure for transmission of securities

The Board (“SEBI”) has approved of an amendment to simplify the process for transmission of securities to ensure that uniform processes are followed by the Registrars to an Issue and Share Transfer Agents (RTAs) / listed companies which would further ease the transmission process for investors.

The threshold limit for simplified documentation for transmission of securities has been revised from Rs. 2 lakhs to Rs. 5 lakhs for securities held in physical mode per listed issuer and from Rs. 5 lakhs to Rs. 15 lakhs for securities held in the dematerialized mode for beneficiary account. A legal Heirship Certificate or its equivalent document issued by a competent Government authority will be acceptable for transmission for securities.

2. An amendment to SEBI (Collective Investment Schemes) Regulations, 1999 to introduce stringent norms

The Board has approved of an amendment to SEBI (Collective Investment Schemes) Regulations, 1999 to strengthen the regulatory framework for Collective Investment Schemes (CIS) in line with Mutual Fund regulations to remove regulatory arbitrage. The proposed amendments are:

(a) Increase in Net worth requirement: SEBI has decided to enhance the net worth and requirement for maintaining a track record by the company as a basic eligibility requirement to register as a Collective Investment Management Company (CIMC). As per the extant norms, the net-worth requirement for an applicant to register as CIS is Rs. 5 crores provided that the applicant shall have a net worth requirement of Rs. 3 crore at the time of making an application.

(b) Shareholding limits of CIMC and its Group: SEBI, in order to avoid conflict of interest among CIMC and its group has proposed to restrict the shareholding of CIMC and its group shareholders to 10% and they shall not have representation on the board of another CIMC.

(c) Mandatory stake of CIMC: SEBI has proposed to introduce skin– in- the game rules for CIS which states that CIMC together with its designated employees should have a mandatory investment in the CIS to align their interest with that of CIS.

(d) Maximum holdings limit and Number of Investors in a CIS: SEBI has proposed to prescribe the mandatory requirement of the minimum number of investors, maximum holdings of a single investor, and minimum subscription amount at the CIS level.

(e) Rationalization of fees: SEBI has announced the rationalization of fees and expenses which is required to be charged to the scheme

(f) Reduction in timelines: SEBI has proposed a reduction in the timeline for the offer period of the scheme, allotment of units, and refund of money to investors. As per extant norms, the collective investment scheme shall not be open for subscription for more than 90 days. Currently, the amount collected from application money under the scheme shall have to be refunded within a period of six weeks from the date of closure of the subscription.

3. An amendment to SEBI (Custodian) Regulations, 1996 to provide services in respect of silver ETFs

The Board has approved an amendment to the SEBI (Custodian) Regulations, 1996 to enable SEBI registered Custodians to provide custodial services in respect of silver or silver related instruments held by Silver Exchange Traded Funds (“ETFs “) of Mutual Funds.

The proposed amendment is in line with the SEBI (Mutual Funds) (Third Amendment) Regulations, 2021 as notified by the SEBI vide. Notification No. SEBI/LAD-NRO/GN/2021/56, DATED 9-11-2021 had amended the SEBI (Mutual Funds) Regulations, 1996 (MF Regulations) whereby it had introduced Silver Exchange Traded Fund Scheme.

Regulations 7(g) of the MF Regulations provided appointment of custodian in order to keep custody of the securities or goods or gold or gold related instruments or silver or silver related instruments or other assets of the mutual fund, and to provide such other custodial services as may be authorised by the trustees.

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