The board of the Securities and Exchange Board of India (SEBI) is set to approve a slew of measures at its first meeting under newly-appointed Chairman Tuhin Kanta Pandey on March 24. These include the independence of clearing corporations, introduction of a close auction session in the cash market, and the appointment process for public interest directors (PIDs) and key personnel at market infrastructure institutions (MIIs).
Other key decisions include extending the advance fee collection period for research analysts from one quarter to a year, implementing a SIM-binding mechanism to prevent unauthorised transactions in trading and demat accounts and tightening disclosure norms for REITs and InvITs, according to sources.
The board will also review SEBI’s expenditure and budget allocation for the next financial year 2025-26, a crucial task following Pandey’s appointment on March 2.
Clearing corporations’ independence
Paving the way for the shareholding of the two stock exchanges – National Stock Exchange and BSE – to be diluted in their respective clearing houses, the regulator and industry stakeholders have broadly agreed on the need for independence of clearing corporations (CCs) and diversification of their ownership, said sources.
While replication of the shareholding of the exchange in the CC is a preferred option, the regulator is against exchanges not having any shareholding in CCs. Rather, SEBI will set minimum and maximum shareholding thresholds for exchanges in CCs, said sources.
“The shareholding of exchanges in CCs is expected to be divested through a scheme in the form of “offer for sale”, similar to the corporatisation and demutualisation scheme,” according to a source aware of the discussions.
PID appointments
SEBI is also set to finalise a new framework for the appointment and reappointment of PIDs at MIIs. Of the two options proposed, the regulator is expected to retain the existing process, which does not require shareholder approval. A high-level appointment committee is also unlikely to be formed, as it could make appointments more cumbersome, sources said.
The regulator may also streamline documentation requirements by adopting a two-stage process: first, shortlisting one of two candidates submitted by MIIs and then seeking detailed documents only for the final appointment.
Further, existing PIDs will not be eligible to be a default applicant for reappointment as “it should be the prerogative of the MIIs governing board,” said another source.
Other likely reforms
The board may also ratify changes to the framework for angel funds that will allow only accredited investors to be on-boarded as angel investors and also ease AIF regulations. It may also expand the definition of qualified institutional buyers (QIB) to include accredited investors and remove the 200-investors cap for private placement offers.
Further, the regulator may prescribe a cooling-off period for KMPs and directors of an MII joining a competing MII in consultation with the industry standards forum of MIIs but not mandate an external committee for appointment of KMPs as stakeholders have been against it, said an industry source.
SEBI may also strengthen and provide clarity on the framework for ESG Rating Providers (ERP) to withdraw ratings and disclose the rating rationale. The regulator may also review the revamping of its Business Responsibility and Sustainability Reporting standards to align with internationally recognised environmental, social, and governance norms.
The recently proposed changes to risk monitoring in equity derivatives — such as revised gross and net position limits for intraday and end-of-day trading — are unlikely to be presented at this meeting as industry stakeholders remain divided on their potential impact.