Sebi tweaks delisting, F&O inclusion criteria; restricts finfluencers

The Securities and Exchange Board of India (Sebi) on Thursday eased the delisting framework to allow promoters a fair shot at taking their companies private. It also revised the eligibility criteria for inclusion and removal of stocks from the futures & options segment to ensure liquid stocks were traded in the segment.

Tightening rules for finfluencers and those doling out stock advice, Sebi barred regulated entities and people from having any association with anyone providing direct or indirect recommendations or claiming guaranteed returns. However, Sebi allowed regulated entities to associate with finfluencers dealing in investor education and not providing any advice.

For voluntary delisting, in addition to the reverse book building (RBB) process, Sebi introduced a fixed price process where the promoter could offer to buy back all shares from the public at at least 15 per cent premium to its “fair price”. Sebi cut the threshold under the counter-offer mechanism to 75 per cent from 90 per cent of public shareholders. Under the RBB process, the delisting process is considered successful if the post-offer aggregate shareholding of the promoter or the acquirer reaches 90 per cent.

The RBB framework is considered to be very stringent as the delisting price arrived at using this process is often quite high, making the offer untenable.

Sebi Chairperson Madhabi Puri Buch said as India’s market matured, it was imperative to allow companies to go private if they wished to do so. “This is not Hotel California,” where you can check in anytime you like but you can never leave.

Sebi has revised quantitative parameters, such as median-quarter sigma order size, marketwide position limit, and average daily delivery value for the selection of stocks in the F&O segment. Sebi officials said if the new criteria were applied, the number of stocks in the F&O segment would increase by a small number from the current 182. Also, there could be an addition and deletion of about two dozen stocks.

Buch said there had been an expert group formed to address certain concern areas around F&O trading. She said there were certain concerns, such as people borrowing heavily to trade in the derivatives segment. She also flagged concern about a large amount of India’s household savings being flown into trading, which is an unproductive activity and not leading to any economic or productive gains.

“We as a country should think if we can do anything about this,” said Buch.

Among other decisions cleared by the Sebi board were exempting university funds and university-related endowments from additional disclosure requirements for foreign portfolio investors (FPIs).

Sebi also considerably eased the public issue process for debt securities and non-convertible redeemable preference shares. The regulator also reduced the trading lot for privately placed infrastructure investment trusts (Invits) to Rs 25 lakh.

It also proposed to introduce a new fee-collection mechanism for registered investment advisors (IAs) and research analysts (RAs).

Sebi proposed an independent external evaluation of the performance of stock exchanges and other market infrastructure institutions (MIIs). Such evaluation will take place once every three years.

Sebi also removed the automatic financial disincentive on managing directors and chief technology officers of MIIs on account of technical glitches. This follows industry feedback that the disincentive structure was hampering the attraction and retention of talent.

On alternative investment funds (AIFs), the market regulator approved a proposal to limit the extension of a large-value fund’s tenure to five years, subject to approval from the majority of unit holders.

In a relief to them, the regulator also permitted AIFs to borrow for a period of up to 30 days to meet temporary shortfalls in drawdown.

Sebi also pushed for data classification and localisation by its regulated entities to ensure robust security controls for regulatory data. It also approved a cybersecurity and cyber-resilience framework.